SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 2-57209
POST-EFFECTIVE AMENDMENT NO. 35
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-2679
AMENDMENT NO. 31
DAVIS SERIES, INC.
(formerly, RETIREMENT PLANNING FUNDS OF AMERICA, INC.)
124 East Marcy Street
Santa Fe, New Mexico 87501
(1-505-983-4335)
Agent for Service: Sheldon R. Stein
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
(l-312-580-2014)
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
_____ ____________, pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
___X_ on May 1, 1996, pursuant to paragraph (a)of Rule 485
Registrant has registered an indefinite number of its shares, under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Registrant's Rule 24f-2 Notice for its fiscal
year ended December 31, 1995 was filed on or about February 27, 1996.
<PAGE>
FORM N-1A
DAVIS SERIES, INC.
POST-EFFECTIVE AMENDMENT NO. 35 TO REGISTRATION STATEMENT NO.
2-57209 UNDER THE SECURITIES ACT OF 1933 AND AMENDMENT NO. 31
UNDER THE INVESTMENT COMPANY ACT OF 1940 TO REGISTRATION
STATEMENT NO. 811-2679.
CROSS REFERENCE SHEET
---------------------
N-1A
Item No. Prospectus Caption or Placement
- ------- -------------------------------
1 Front Cover
2 Summary
3 Financial Highlights
4 Summary; Investment Objectives and Policies; High Yield High
Risk Debt Securities
5 Adviser, Sub-Adviser and Distributor; Distribution Plans;
Purchase of Shares; Summary; Investment Objectives and Policies
6 Summary; Shareholder Inquiries; Dividends and Distributions;
Federal Income Taxes; Company Shares
7 Purchase of Shares; Exchange of Shares; Determining the Price
of Shares; Dividends and Distributions
8 Redemption of Shares; Exchange of Shares
9 (Not Applicable)
Part B Caption or Placement
---------------------------
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Investment Restrictions; High Yield, High Risk Debt
Securities; Hedging of Foreign Currency Risks;
Repurchase Agreements; Writing Covered Call Options;
Additional Information Concerning the Davis Government Bond
Fund; Portfolio Transactions
14 Directors and Officers
15 Certain Shareholders of the Funds
16 Investment Advisory Services; Custodian; Auditors;
Determining the Price of Shares; Distribution of Fund Shares;
Additional Information Regarding the Plans of Distribution
17 Portfolio Transactions
18 *
19 Determining the Price of Shares; Reduction of Class A Sales
Charge
20 Federal Tax Aspects of Certain Mortgage REITS
21 *
22 Performance Data
23 Financial Statements for the Company for the year ended
December 31, 1995, are incorporated by reference from the 1995
Annual Report to Shareholders.
- ----------------------------
* Included in Prospectus
<PAGE>
PROSPECTUS May 1, 1996
DAVIS SERIES, INC.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
Davis Series, Inc. (the "Company") offers a variety of investment
portfolios. See "Investment Objectives" for more information on each
portfolio.
Davis Growth Opportunity Fund seeks to achieve growth of capital. It
invests primarily in common stocks and other equity securities, and may
invest in both domestic and foreign issuers.
Davis Government Bond Fund seeks to achieve current income. It invests
in debt securities which are obligations of, or which are guaranteed by,
the U.S. Government, its agencies or instrumentalities.
Davis Government Money Market Fund ("DGMMF") seeks to achieve as high a
level of current income as is consistent with the principle of preservation
of capital and maintenance of liquidity. It invests in debt securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and repurchase agreements involving such securities.
There is no assurance that the Fund will be able to maintain a stable net
asset value of $1.00 per share.
Davis Financial Fund seeks to achieve growth of capital. It invests
primarily in common stocks and other equity securities, and will
concentrate investments in companies principally engaged in the banking
and financial services industries.
Davis Convertible Securities Fund seeks to achieve total return. The Fund
invests primarily in convertible securities, which combine fixed income
with potential for capital appreciation. It may invest in lower rated
bonds commonly known as "junk bonds." So long as no such investment
would cause 35% or more of the Funds net assets to be so invested.
Davis Real Estate Fund seeks to achieve total return through a combination
of growth and income. It invests primarily in securities of companies
principally engaged in or related to the real estate industry or which own
significant real estate assets or which primarily invest in real estate
financial instruments.
This Prospectus concisely sets forth information about the Funds that
prospective investors should know before investing. It should be read
carefully and retained for future reference. A Statement of Additional
Information dated May 1, 1996, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. A copy of
this Statement and other information about the Funds may be obtained
without charge by writing or calling the Company at the above address or
telephone number.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY
Fund Expenses.The following table is intended to assist you in
understanding the various costs and expenses that an investor in the Funds
will bear directly or indirectly. Except as noted below, the information
for all of the Funds is based on the fiscal year ended Decembre 31, 1995.
The fee information for Davis Government Bond is based on a fee reduction
effective May 1, 1996. You can refer to "Adviser, Sub-Adviser and Distributor"
and "Purchase of Shares" for more information on transaction and operating
expenses of the Funds.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses DGMMF<F1> All Funds other than DGMMF
- -------------------------------- ---------------- --------------------------
Class A, B and C Class A Class B
---------------- ------- -------
<S> <C> <C> <C>
Maximum sales load imposed on purchases................. None 4.75% None
Maximum sales load imposed on reinvested dividends...... None None None
Deferred sales load (a declining percentage of the
lesser of the net asset value of the shares
redeemed or the total cost of such shares)
Redeemed during first year.......................... None None 4.00%
Redeemed during second or third year................ None None 3.00%
Redeemed during fourth or fifth year................ None None 2.00%
Redeemed during sixth year.......................... None None 1.00%
Redeemed after sixth year........................... None None None
Exchange Fee.......................................... $5.00 $5.00 $5.00
<FN>
<F1> Shares received in exchange for DGMMF shares and DGMMF shares received in exchange for shares of other Funds are
generally subject to an initial or deferred sales load. See "Exchange of Shares." DGMMF accounts of less than $1000
are charged a small account maintenance fee of $10. See "Redemption of Shares - Maintenance Fees."
</FN>
</TABLE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (as a percentage of average net assets) Class A Class B
- --------------------------------------------------------------------- ------- -------
<S> <C> <C> <C>
Davis Growth Opportunity Fund:
Management fees.............................................................. 0.75% 0.75%
12b-1 fees<F1>............................................................... 0.19% 0.98%
Other expenses............................................................... 0.57% 0.57%
Total Fund operating expenses................................................ 1.51% 2.30%
Davis Government Bond Fund:
Management fees.............................................................. 0.50% 0.50%
12b-1 fees<F1>............................................................... 0.21% 0.98%
Other expenses............................................................... 0.78% 0.78%
Total Fund operating expenses................................................ 1.49% 2.26%
Davis Government Money Market Fund: Class C
-------
Management fees.............................................................. 0.49% 0.49% 0.49%
12b-1 fees<F1>............................................................... 0.00% 0.00% 0.00%
Other expenses............................................................... 0.24% 0.24% 0.24%
Total Fund operating expenses................................................ 0.73% 0.73% 0.73%
Davis Financial Fund:
Management fees.............................................................. 0.75% 0.75%
12b-1 fees<F1>............................................................... 0.09% 1.00%
Other expenses............................................................... 0.34% 0.34%
Total Fund operating expenses................................................ 1.18% 2.09%
<PAGE>
Davis Convertible Securities Fund:
Management fees.............................................................. 0.75% 0.75%
12b-1 fees<F1>............................................................... 0.03% 0.90%
Other expenses............................................................... 0.36% 0.36%
Total Fund operating expenses................................................ 1.14% 2.01%
Davis Real Estate Fund:
Management fees.............................................................. 0.75% 0.75%
12b-1 fees<F1>............................................................... 0.04% 1.00%
Other expenses............................................................... 0.64% 0.64%
Total Fund operating expenses................................................ 1.43% 2.39%
<FN>
<F1> The effect of a Rule 12b-1 plan is that long-term shareholders may pay more than the maximum front-end sales charge
permitted under applicable rules of the National Association of Securities Dealers, Inc.
Example:
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and (except as provided below)
redemption at the end of each time period:
1 3 5 10
year years years years
---- ----- ----- -----
Davis Growth Opportunity Fund:
Class A................................................. $62 $93 $126 $219
Class B................................................. $53 $92 $133 N/A
Class B (assuming no redemption at end of period)....... $23 $72 $123 N/A
Davis Government Bond Fund*:
Class A................................................. $62 $92 $125 $217
Class B................................................. $53 $91 $131 N/A
Class B (assuming no redemption at end of period)....... $23 $71 $121 N/A
Davis Government Money Market Fund:
Class A............................................. $7 $23 $41 $91
Class B............................................. $7 $23 $41 N/A
Class B (assuming no redemption at end of period)... $7 $23 $41 N/A
Class C............................................. $7 $23 $41 $91
Class C (assuming no redemption at end of period)... $7 $23 $41 $91
Davis Financial Fund:
Class A............................................. $59 $83 $109 $184
Class B............................................. $51 $85 $122 N/A
Class B (assuming no redemption at end of period)... $21 $65 $112 N/A
Davis Convertible Securities Fund:
Class A............................................. $59 $82 $107 $180
Class B............................................. $50 $83 $118 N/A
Class B (assuming no redemption at end of period)... $20 $63 $108 N/A
<PAGE>
Davis Real Estate Fund:
Class A............................................. $61 $91 $122 $211
Class B............................................. $54 $95 $138 N/A
Class B (assuming no redemption at end of period)... $24 $75 $128 N/A
* The expenses have been restated to reflect current fee.
</FN>
</TABLE>
The 5% rate used in the example is only for illustration and is not intended
to be indicative of the future performance of the Funds, which may be
more or less than the assumed rate. Actual expenses and future expenses
may be more or less than those shown.
The Company. Davis Series, Inc. (the "Company"), was incorporated
in Maryland in 1976 and is registered under the Investment Company Act
of 1940. The Company is an open-end diversified management investment
company and was formed primarily to provide a multi-portfolio vehicle of
Funds with different investment objectives for long-term investment,
including the investment of retirement plan assets. There is no assurance
that the investment objective of any Fund will be achieved.
Each fund (other than Davis Government Money Market Fund) offers
investors the choice between two classes of shares. Class A shares may
be purchased at a price equal to their net asset value per share plus a
front-end sales charge ("FESC") imposed at the time of purchase.
Purchases of $1 million or more of Class A shares may be purchased at net
asset value. Class B shares may be purchased at net asset value, with no
FESC but are subject to a contingent deferred sales charge ("CDSC") on
most redemptions made within six years after purchase. These
alternatives permit an investor to choose the method of purchasing shares
that is most beneficial given the amount of the purchase, the length of
time the investor expects to hold the shares, and other circumstances.
The Davis Government Money Market Fund also offers Class C shares in
addition to Classes A and B. These shares are offered by the Davis
Government Money Market Fund for shareholders who may desire in the
future to exchange into the Class C shares of Davis New York Venture
Fund, Inc., the only other Fund which offers Class C shares. Shares of the
Davis Government Money Market Fund are offered at net asset value.
However, in the case of certain exchanges, the Money Market Fund shares
received may be subject to an escrow, pursuant to a Statement of
Intention, or a CDSC. See "Exchange of Shares."
Each Fund's Class A shares (other than Davis Government Money
Market Fund) pay a Rule 12b-1 distribution fee at an annual rate not to
exceed 0.25% of a Fund's aggregate average daily net assets attributable
to the Class A shares. Each Fund's Class B shares (other than Davis
Government Money Market Fund) pay a Rule 12b-1 distribution fee at an
annual rate not to exceed 1.00% of a Fund's aggregate average daily net
assets attributable to the Class B shares. The purpose and function of the
deferred sales charge and distribution fee with respect to the Class B
shares is the same as those of the initial sales charge and distribution
services fee with respect to the Class A shares. Class C shares of Davis
Government Money Market Fund are not subject to any Rule 12b-1
distribution fees.
Each share of a particular Fund represents an identical interest in
the investment portfolio of that Fund. However, shares differ by class in
important respects. For example, Class B shares (except for the Davis
Government Money Market Fund) incur higher distribution services fees and
bear certain other expenses and will thus have a higher expense ratio and
pay correspondingly lower dividends than Class A shares. Class B shares
will automatically convert to Class A shares at the end of eight years
after purchase, in the circumstances and subject to the qualifications
described in this Prospectus. The per share net asset value of the Class B
shares generally will be lower than the per share net asset value of the
Class A shares, reflecting the daily expense accruals of additional
distribution fees and certain other expenses applicable to Class B shares.
It is expected, however, that the per share net asset value of the classes,
except for the Davis Government Money Market Fund, which differ by
approximately the amount of the expense accrual differential among the
classes, will tend to converge immediately on the ex date of the dividends
or distributions. The three classes of shares offered by Davis Government
Money Market Fund are expected to maintain a net asset value of $1 per share.
<PAGE>
The Board of Directors may offer additional funds or classes of
shares of a fund in the future and may at any time discontinue the offering
of any funds or class of shares of a fund. See "Purchase of
Shares--Alternative Purchase Arrangements."
Investment Objectives.
Davis Growth Opportunity Fund. The investment objective of Davis
Growth Opportunity Fund is growth of capital. It invests primarily in
common stocks and other equity securities. These securities are subject
to the risk of price fluctuations reflecting both market evaluations of the
businesses involved and general changes in the equity markets. It may
invest in foreign securities and attempt to reduce currency fluctuation
risks by engaging in related hedging transactions. These investments
involve special risk factors. See "Investment Objectives and Policies -
Davis Growth Opportunity Fund."
Davis Government Bond Fund. The investment objective of Davis
Government Bond Fund is current income. It invests in debt securities
which are obligations of or guaranteed by the U.S. Government, its
agencies and instrumentalities ("U.S. Government Securities"). It also may
invest in repurchase agreements involving such securities. Investments
held by Davis Government Bond Fund generally reflect market fluctuations.
In particular, the value of the Fund's investments usually changes
inversely to interest rate changes. Mortgage related securities (including
collateralized mortgage obligations), which at times may constitute a
large or the largest portion of the Fund's investments, have special
characteristics and risks. See "Investment Objectives and Policies -
Davis Government Bond Fund."
Davis Government Money Market Fund. The investment objective of
Davis Government Money Market Fund is to achieve as high a level of
current income as is consistent with the principle of preservation of
capital and maintenance of liquidity. It invests in U.S. Government
Securities and repurchase agreements involving such securities. It
normally has a stable net asset value with yield fluctuating with
short-term interest rates. See "Investment Objectives and Policies -
Davis Government Money Market Fund."
Davis Financial Fund. The investment objective of Davis Financial
Fund is growth of capital. It invests primarily in common stocks and
other equity securities and will concentrate investments in companies
principally engaged in the banking and financial services industries. The
banking industry includes commercial and industrial banks, savings and
loan associations and their holding companies. The financial services
industry includes consumer and industrial finance companies, diversified
financial services companies, investment banking, securities brokerage
and investment advisory companies, leasing companies, and insurance
companies. Davis Financial Fund generally will invest a minimum of 25%
of its total assets in investments in each of these two industries. As a
result, its portfolio may be affected by economic or regulatory
developments in or related to the identified industries. Davis Financial
Fund invests in securities subject to the risk of price fluctuations
reflecting both market evaluations of the businesses involved and general
changes in the equity markets. See "Investment Objectives and Policies -
Davis Financial Fund."
Davis Convertible Securities Fund. The investment objective of
Davis Convertible Securities Fund is total return. It seeks this objective
through a combination of current income and capital appreciation. It
invests in a portfolio consisting primarily of convertible debt and equity
securities. Normally it will invest at least 65% of its total assets in
convertible securities. It may also invest in other securities, including
common and preferred stock, non-convertible corporate debt securities,
U.S. government securities and short term money market instruments
(including repurchase agreements). The securities in which it invests,
including high yielding securities (commonly known as "junk bonds"),
involve risks. See "Investment Objectives and Policies - Davis
Convertible Securities Fund."
<PAGE>
Davis Real Estate Fund. The investment objective of Davis Real
Estate Fund is total return through a combination of growth and income. It
seeks to achieve this objective by investing primarily in equity securities
of companies principally engaged in, or related to, the real estate industry
or which own significant real estate assets or which primarily invest in
real estate financial instruments. Normally, at least 65% of its total
assets will be so invested. It does not invest directly in real estate. The
securities in which it invests, including high yielding securities, involve
risks. See "Investment Objectives and Policies -Davis Real Estate Fund."
Investment Adviser, Sub-Adviser and Distributor. Davis Selected
Advisers, L.P. (the "Adviser") is the investment adviser and distributor for
the Funds. Tanaka Capital Management, Inc. (the "Sub-Adviser") serves as
investment sub-adviser to the Davis Growth Opportunity Fund and is paid
by the Adviser from its advisory fees. See "Adviser, Sub-Adviser and
Distributor".
Purchases, Exchanges and Redemptions. Class A shares, except
shares of DGMMF, are sold at net asset value plus a sales charge, and are
redeemed at net asset value. Purchases of $1 million or more of Class A
shares of the Funds may be purchased at net asset value. Class B shares,
except shares of DGMMF, are sold at net asset value without a FESC but
may be subject to a CDSC at the time of redemption depending on how long
such shares have been owned. All three classes of shares of DGMMF are
offered for direct investment at net asset value without any FESC or
CDSC. However, exchanges involving DGMMF shares of any class are
subject to a FESC or CDSC as described under "Exchange of Shares." Initial
and subsequent minimum investments may be made in amounts equal to
$1,000 and $25, respectively, except that the minimum initial investment
for retirement plans is $250. Shares may be exchanged under certain
circumstances at net asset value for the same class of shares of the other
funds managed and distributed by the Adviser, with a $5 service fee for
each exchange, payable to the Adviser for each exchange. Accounts with a
market value of less than $250 caused by shareholder redemptions are
redeemable by the Company. To help relieve the high cost of maintaining
small accounts in DGMMF, there is a $10 charge imposed yearly on all
accounts where the net asset value has been reduced to less than $1,000.
See "Purchase of Shares," "Exchange of Shares" and "Redemption of
Shares".
Shareholder Services. Questions regarding the Funds or your account
may be directed to Davis Selected Advisers, L.P. at 1-800-279-0279 or to
your sales representative. Written inquiries may be directed to Davis
Selected Advisers, L.P., P.O. Box 1688, Santa Fe, NM 87504-1688. During
severe market conditions, the Adviser may experience difficulty in
accepting telephone redemptions or exchanges. If you are unable to
contact the Adviser at the above telephone number, you should call
1-505-820-3000 Monday through Friday from 8:00 a.m. to 4:00 p.m.
Mountain Time.
FINANCIAL HIGHLIGHTS
The following tables provide you with information about the
financial history of the Class A shares and Class B shares of Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Government Money
Market Fund, Davis Financial Fund, Davis Convertible Securities Fund and
Davis Real Estate Fund and Class C shares for Davis Government Money
Market Fund. The tables express the information in terms of a single
share for the respective periods presented and are supplementary to the
Company's financial statements which are included in the December 31,
1995 Annual Report to Shareholders. Such Annual Report may be obtained
by writing or calling the Company. The Company's 1995 financial
statements including the financial highlights for the five years ended
December 31, 1995 have been audited by the Company's independent
certified public accountants, whose opinion thereon is contained in the
Annual Report.
<PAGE>
<TABLE>
DAVIS GROWTH OPPORTUNITY FUND - Class A
<CAPTION>
Year One Month
ended ended
December 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Net Asset Value, Beginning of Period............................................... $ 12.83 $ 13.70
-------- --------
Income From Investment Operations
- ----------------------------------
Net Investment Income (Loss)..................................................... (0.11) (0.01)
Commissions paid under
distribution plan............................................................... _ _
Net Gains or Losses on
Securities (both realized and unrealized)....................................... 6.08 (0.29)
-------- --------
Total From Investment Operations.................................................. 5.97 (0.30)
-------- --------
Less Distributions
- ------------------
Dividends (from net investment income)........................................... _ _
Distributions (from capital gains)................................................ (1.55) (0.57)
Distributions (from paid-in capital).............................................. _ _
-------- --------
Total Distributions............................................................. (1.55) (0.57)
-------- --------
Net Asset Value, End of Period...................................................... $ 17.25 $ 12.83
======== ========
Total Return<F1>.................................................................... 46.65% (2.21)%
- ----------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)................................................................... $ 22,890 $ 12,455
Ratio of Expenses to
Average Net Assets.............................................................. 1.51% 1.42%<F2>
Ratio of Net Income to
Average Net Assets.............................................................. (0.71)% (0.08)%<F2>
Portfolio Turnover Rate............................................................. 30.07% 37.31%
<FN>
<F1> Sales Charges Are Not Reflected In Calculation
<F2> Annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS GROWTH OPPORTUNITY FUND - Class B
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------------------------------
1995 1994 1993<F1> 1992<F1> 1991<F1> 1990<F1> 1989<F1> 1988<F1> 1987<F1> 1986<F1>
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.................... $12.82 $ 14.67 $ 13.25 $ 13.73 $ 9.83 $ 10.94 $ 8.74 $ 8.57 $ 9.62 $ 9.56
------ ------- ------- ------- ------ ------- ------ ------ ------ ------
Income From Investment
- ----------------------
Operations
- ----------
Net Investment Income
(Loss).................... (0.26) (0.12) (0.07) (0.07) (0.06) _ 0.27 (0.01) (0.04) 0.03
Commissions paid under
distribution plan<F2>.... _ _ _ _ _ _ _ _ _ (0.13)
Net Gains or Losses on
Securities (both realized
and unrealized).......... 6.07 (1.11) 1.54 (0.32) 4.07 (0.52) 3.19 0.90 0.48 1.31
Total From Investment ------ ------- ------- ------- ------ ------- ------ ------ ------ ------
Operations............... 5.81 (1.23) 1.47 (0.39) 4.01 (0.52) 3.46 0.89 0.44 1.21
------ ------- ------- ------- ------ ------- ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net
investment income)...... - - (0.05) - - - (0.27) - - (0.03)
Distributions (from capital
gains)................... (1.55) (0.62) _ _ _ (0.45) (0.88) (0.59) (1.49) (1.10)
Distributions (from paid-in
capital)................. _ _ _ (0.09) (0.11) (0.14) (0.11) (0.13) _ (0.02)
------ ------- ------- ------- ------ ------- ------ ------ ------ ------
Total Distributions...... (1.55) (0.62) (0.05) (0.09) (0.11) (0.59) (1.26) (0.72) (1.49) (1.15)
------ ------- ------- ------- ------ ------- ------ ------ ------ ------
Net Asset Value, End of
Period..................... $17.08 $ 12.82 $ 14.67 $ 13.25 $13.73 $ 9.83 $10.94 $ 8.74 $ 8.57 $ 9.62
------ ------- ------- ------- ------ ------- ------ ------ ------ ------
------ ------- ------- ------- ------ ------- ------ ------ ------ ------
Total Return<F3>............. 45.44% (8.45)% 11.16% (2.86)% 40.93% (4.72)% 40.06% 10.49% 4.61% 13.19%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)............ $35,326 $36,087 $51,762 $46,958 $43,419 $24,107 $25,689 $19,866 $18,436 $11,122
Ratio of Expenses to
Average Net Assets...... 2.30% 2.15% 2.39% 2.55% 2.49% 2.62% 2.58% 2.57% 2.45% 1.25%
Ratio of Net Income to
Average Net Assets...... (1.50)% (0.81)% (0.55)% (0.54)% (0.45)% (0.04)% 2.29% (0.19)% (0.50)% 0.18%
Portfolio Turnover Rate.... 30.07% 37.31% 38.93% 39.01% 12.16% 40.50% 45.17% 82.90% 56.78% 94.48%
<FN>
<F1> Per share data has been restated to give effect to a 2 for 1 stock split to shareholders of record as of the close of
January 7, 1994.
<F2> Effective January 1, 1987, costs incurred pursuant to Rule 12b-1 are accounted for as an expense. Prior to January 1, 1987,
these costs were charged to capital.
<F3> Sales Charges are not reflected in calculation.
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS GOVERNMENT BOND FUND - Class A
<CAPTION>
Year One Month
ended ended
December 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Net Asset Value, Beginning
of Period................................... $ 5.79 $ 5.78
------ ------
Income From Investment Operations
- ----------------------------------
Net Investment Income....................... 0.39 0.02
Commissions paid under
distribution plan.......................... _ _
Net Gains or Losses on
Securities (both realized and unrealized).. 0.27 (0.01)
Total From Investment ----- ------
Operations................................. 0.66 0.01
----- ------
Less Distributions
- ------------------
Dividends (from net
investment income)......................... (0.36) _
Distributions from
capital gains.............................. _ _
Distributions (from paid-in
capital)................................... (0.09) _
----- ------
Total Distributions........................ (0.45) _
----- ------
Net Asset Value, End
of Period.................................... $ 6.00 $ 5.79
----- ------
----- ------
Total Return<F2>............................... 11.82% 0.17%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted).............................. $ 21,485 $ 20,035
Ratio of Expenses to
Average Net Assets......................... 1.74% 1.64%<F1>
Ratio of Net Income to
Average Net Assets......................... 6.54% 6.22%<F1>
Portfolio Turnover Rate...................... 41.04% 62.17%
<FN>
<F1> Annualized
<F2> Sales Charges are not reflected in Calculation
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS GOVERNMENT BOND FUND - Class B
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------------------
1995 1994 1993<F1> 1992<F1> 1991<F1> 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period...................... $ 5.79 $ 6.33 $ 6.61 $ 6.88 $ 6.64 $ 6.86 $ 6.90 $ 7.19 $ 7.96 $ 7.99
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From Investment
- ----------------------
Operations
- ----------
Net Investment Income........... 0.34 0.31 0.36 0.37 0.43 0.41 0.49 0.50 0.54 0.74
Commissions paid under
distribution plan <F2>........ _ _ _ _ _ _ _ _ _ (0.10)
Net Gains or Losses on
Securities (both realized
and unrealized)............... 0.26 (0.37) (0.12) (0.10) 0.35 (0.02) 0.13 (0.10) (0.53) 0.16
Total From Investment ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operations.................... 0.60 (0.06) 0.24 0.27 0.78 0.39 0.62 0.40 0.01 0.80
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net
investment income)............ (0.33) (0.37) (0.42) (0.27) (0.43) (0.41) (0.49) (0.50) (0.53) (0.74)
Distributions from
capital gains................. _ _ _ _ _ _ _ _ (0.03) (0.09)
Distributions (from paid-in
capital)...................... (0.08) (0.11) (0.10) (0.27) (0.11) (0.20) (0.17) (0.19) (0.22) _
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions........... (0.41) (0.48) (0.52) (0.54) (0.54) (0.61) (0.66) (0.69) (0.78) (0.83)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Period....................... $ 5.98 $ 5.79 $ 6.33 $ 6.61 $ 6.88 $ 6.64 $ 6.86 $ 6.90 $ 7.19 $ 7.96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return<F3>.................. 10.62% (0.97)% 3.69% 4.14% 12.36% 6.11% 9.45% 5.70% 0.26% 10.78%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)................. $15,976 $19,241 $50,080 $54,422 $62,766 $55,489 $64,776 $69,885 $70,373 $62,037
Ratio of Expenses to
Average Net Assets........... 2.51% 2.38% 2.37% 2.51% 2.51% 2.50% 2.48% 2.48% 2.31% 1.14%
Ratio of Net Income to
Average Net Assets........... 5.77% 5.48% 5.52% 5.83% 6.36% 6.58% 7.27% 7.04% 7.01% 8.54%
Portfolio Turnover Rate......... 41.08% 62.17% 42.82% 81.28% 28.14% 72.02% 81.86% _ 20.41% 33.05%
<FN>
<F1> Per share calculations other than distributions were based on
average shares outstanding during the period.
<F2> Effective January 1, 1987, costs incurred pursuant to Rule 12b-1 are
accounted for as an expense. Prior to January 1, 1987, these costs were
charged to capital.
<F3> Sales Charges are not reflected in Calculation.
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS GOVERNMENT MONEY MARKET FUND - Class A
<CAPTION>
Three Months
Year ended ended Year ended
December 31, December 31, September 30,
------------------------------------------------- ------------- ------------------------------------
1995 1994 1993 1992 1991 1990 1989 1989 1988<F1> 1987<F1> 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From Investment
- ----------------------
Operations
- ----------
Net Investment
Income............. .051 .034 .020 .027 .047 .064 .018 .073 .055 .051 .061
Less Distributions
- ------------------
Dividends (from net
investment
income)............ (.051) (.034) (.020) (.027) (.047) (.064) (.018) (.073) (.055) (.051) (.061)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Period........... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return........... 5.25% 3.48% 2.01% 2.70% 4.78% 6.58% 7.09%<F3> 7.51% 5.74% 5.22% 6.28%
- ------------
Ratios/Supplemental
- -------------------
Data
- ----
Net Assets, End
of Period
(000 omitted)...... $357 $239,980 $39,531 $42,410 $50,556 $65,462 $16,082 $16,523 $21,390 $29,815 $26,664
Ratio of Expenses to
Average Net
Assets............. 0.73% 0.64% 1.15% 1.14% 1.25% 1.50% 1.50%<F2> 1.50%<F2> 1.50% 1.10% 0.99%
<F2> <F3>
Ratio of Net Income
to Average Net
Assets............. 5.13% 3.43% 1.98% 2.68% 4.72% 6.28% 7.01%<F2> 7.25%<F2> 5.58% 5.09% 6.09%
<F2> <F3>
<FN>
<F1> From the Fund's inception through September 30, 1987, Clayton Brown
Advisors, Inc. served as investment manager of the Fund. On October 1,
1987. Venture Advisers, Inc. became the investment adviser of the Fund
and on January 1, 1988, Davis Selected Advisers, L.P. succeeded to the
business of Venture Advisers, Inc. and became investment adviser of the
Fund. Venture Advisers, Inc. is the sole general partner of Davis Selected
Advisers, L.P. Effective December 1, 1989 the Fund became a series of the
Davis Series, Inc..
<F2> Reflects the reimbursement of certain expenses by the Fund's
investment manager.
<F3> Annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS GOVERNMENT MONEY MARKET FUND - Class B and C
------------------Class B------------------ ----Class C----
<CAPTION>
December 8, 1994 March 30, 1995
Commencement Commencement
Year of operations) of operations)
ended through through
December 31, December 31, December 31,
1995 1994 1995
---- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period.................................... $ 1.000 $ 1.000 $ 1.000
------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment
Income............................................... .051 .003 .041
Less Distributions
- ------------------
Dividends (from net
investment income)................................... (.051) (.003) (0.41)
------- -------
Net Asset Value, End
of Period............................................. $ 1.000 $ 1.000 $ 1.000
======= ======= =======
Total Return............................................. 5.25% 0.34% 4.21
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End
of Period
(000 omitted)........................................ $ 2,697 $ 747 $475
Ratio of Expenses to
Average Net Asset.................................... 0.73% 0.64%<F1> 0.73%<F1>
Ratio of Net Income
to Average Net Assets................................. 5.13 3.43%<F1> 5.13%<F1>
<FN>
<F1> Annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS FINANCIAL FUND - Class A and B
<CAPTION>
--------------------------CLASS A-------------------- -----------CLASS B-----------
May 1, 1991 December 27, 1994
(Commencement (Commencement
of operations) Year of operations)
Year ended through ended through
December 31, December 31, December 31, December 31,
-----------------------------------
1995 1994 1993<F3> 1992<F3> 1991<F3> 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 10.68 $ 11.70 $ 11.20 $ 8.76 $ 7.15 $ 10.68 $ 11.22
------- ------- ------- ------ ------ ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income...................... 0.07 0.08 0.07 0.05 0.01 0.01 0.03
Net Gains or Losses on Securities
(both realized and unrealized)........... 5.32 (0.61) 1.59 2.79 1.65 5.22 (0.13)
------- ------- ------- ------ ------ ------- -------
Total From Investment Operations...... 5.39 (0.53) 1.66 2.84 1.66 5.23 (0.10)
------- ------- ------- ------ ------ ------- -------
Less Distributions
- ------------------
Dividends (from net investment income)..... (0.07) (0.08) (0.08) (0.05) (0.02) - (0.03)
Distributions (from capital gains)......... (1.50) (0.39) (1.08) (0.35) (0.03) (1.50) (0.39)
Distributions (from paid-in capital)....... _ (0.02) _ _ _ - (0.02)
------- ------- ------- ------ ------ ------- -------
Total Distributions.................... (1.57) (0.49) (1.16) (0.40) (0.05) (1.50) (0.44)
------- ------- ------- ------ ------ ------- -------
Net Asset Value, End of Period............... $ 14.50 $ 10.68 $ 11.70 $11.20 $ 8.76 $ 14.41 $ 10.68
======= ======= ======= ====== ====== ======= =======
Total Return<F1>............................. 50.51% (4.55)% 14.87% 32.67% 34.74% 49.00% (0.90)%
- ------------ <F4><F2>
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)............................ $ 79,874 $ 57,670 $ 50,778 $ 31,660 $ 9,221 1,762 $28
Ratio of Expenses to Average Net
Assets................................... 1.18% 1.24% 1.32% 1.68% 2.49% 2.09% 2.04%<F4>
<F4><F2>
Ratio of Net Income to Average
Net Assets............................... 0.53% 0.67% 0.57% 0.43% 0.51% (0.38)% (0.13)%<F4>
<F4><F2>
Portfolio Turnover Rate.................... 41.89% 43.95% 70.33% 49.64% 39.75% 41.89% 43.95%
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Reflects the reimbursement of certain expenses by the Fund's
investment manager.
<F3> Per share data has been restated to give effect to a 2 for 1 stock
split to shareholders of record as of the close of January 7, 1994.
<F4> Annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS CONVERTIBLE SECURITIES FUND - Class A and B
<CAPTION>
-------------CLASS A----------------- ---------------CLASS B---------------
May 1, 1992 Febriary 3, 1995
Year (Commencement (Commencement
ended of operations) of operations)
December 31, through through
---------------------------------- December 31, December 31,
1995 1994 1993 1992 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 15.57 $ 17.45 $ 15.73 $ 14.29 $ 15.95
------- ------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income.............................. 0.67 0.67 0.67 0.40 0.54
Net Gains or Losses on Securities (both realized
and unrealized).................................. 3.42 (1.83) 2.02 1.44 2.97
------- ------- ------- ------- -------
Total From Investment Operations.............. 4.09 (1.16) 2.69 1.84 3.51
------- ------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income)............. (0.66) (0.67) (0.67) (0.40) (0.54)
Distributions (from capital gains)................. (0.78) (0.05) (0.30) _ (0.78)
------- ------- ------- ------- -------
Total Distributions............................ (1.44) (0.72) (0.97) (0.40) (1.32)
------- ------- ------- ------- -------
Net Asset Value, End of Period....................... $ 18.22 $ 15.57 $ 17.45 $ 15.73 $ 18.14
------- ------- ------- ------- =======
------- ------- ------- -------
Total Return<F1>..................................... 26.68% (6.72)% 17.26% 19.95%<F2> 25.31%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000 omitted)............ $ 59,757 $ 47,844 $ 44,730 $ 24,323 $3.78%
Ratio of Expenses to Average Net Assets............ 1.14% 1.20% 1.21% 1.35%<F2> 2.01%<F2>
Ratio of Net Income to Average Net Assets.......... 3.87% 4.06% 3.89% 4.94%<F2> 3.00%<F2>
Portfolio Turnover Rate............................ 53.58% 45.15% 62.17% 11.51% 53.58%
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
DAVIS REAL ESTATE FUND - Class A and B
<CAPTION>
---------------CLASS A-------------- -------------CLASS B------------
January 3, 1994 December 27, 1994
(Commencement (Commencement
Year of operations) Year of operations)
ended through ended through
December 31, December 31, December 31, December 31,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 14.72 $ 14.29 $ 14.72 $ 14.73
------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income....................................... 0.82 0.62 0.68 0.02
Net Gains on Securities (both realized and unrealized)...... 1.71 0.55 1.70 0.11
------- ------- ------- -------
Total From Investment Operations............................ 2.53 1.17 2.38 0.13
------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income).................... (0.81) (0.62) (0.69) (0.02)
Distributions (from capital gains)........................ - (0.12) - (0.12)
------- ------- ------- -------
Total Distributions..................................... (0.81) (0.74) (0.69) (0.14)
------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 16.44 $ 14.72 $ 16.41 $ 14.72
======= ======= ======= =======
Total Return<F1>............................................ 17.70% 8.25%<F2> 16.59% 0.89%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000 omitted)................... $ 29,320 $ 25,450 $414 $34
Ratio of Expenses to Average Net Asset.................... 1.43% 1.86%<F2> 2.39% 2.64%<F2>
Ratio of Net Income to Average Net Assets................. 5.44% 3.98%<F2> 4.48% 3.20%<F2>
Portfolio Turnover Rate................................... 38.82% 35.80% 38.82% 35.80%
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Annualized
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Davis Growth Opportunity Fund
General. The investment objective of Davis Growth Opportunity Fund
is growth in capital. It invests primarily in common stocks and other
equity securities such as securities convertible into common stock.
Generally, it invests in equity securities of companies that are diversified
across a variety of industries and may be expected to have small and
medium, as well as large market capitalizations. Such investments will
usually consist of issues which the Sub-Adviser believes have capital
growth potential due to factors such as rapid growth in demand in existing
markets, expansion into new markets, new product introductions, reduced
competitive pressures, cost reduction programs and other fundamental
changes which may result in improved earnings growth or increased asset
values.
Other Policies. For information concerning other investment
policies, risks and considerations see "General Fund Policies and Risks"
below.
Davis Government Bond Fund
General. The investment objective of Davis Government Bond Fund is
current income. It invests in debt securities which are obligations of or
guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Securities").
It is not limited as to the maturities of its portfolio investments
and may take full advantage of the entire range of maturities available in
U.S. Government Securities. The Adviser may adjust the average maturity
of it's portfolio from time to time, depending on its assessment of the
relative yields available on securities of different maturities and its
assessment of future interest rate patterns and market risk. Thus, at
various times the average maturity of the portfolio may be relatively
short (from one year to five years, for example) and at other times may be
relatively long (over 10 years, for example). Fluctuations in portfolio
values and therefore fluctuations in the net asset value of its shares are
more likely to be greater when the portfolio average maturity is longer.
The portfolio is likely to be primarily invested in securities with
short-term maturities in periods when the Adviser deems a more
defensive position is advisable. For temporary periods, for defensive
purposes or to accommodate inflows of cash awaiting more permanent
investment, it may also invest in short-term money market instruments,
including repurchase agreements.
There are two basic types of U.S. Government Securities: (1) direct
obligations of the U.S. Treasury, and (2) obligations issued or guaranteed
by an agency or instrumentality of the U.S. Government. Agencies and
instrumentalities include Federal Farm Credit System ("FFCS"), Student
Loan Marketing Association ("SLMA"), Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal Home Loan Banks ("FHLB"), Federal National
Mortgage Association ("FNMA") and Government National Mortgage
Association ("GNMA"). Some obligations issued or guaranteed by agencies
or instrumentalities, such as those issued by GNMA, are fully guaranteed
by the U.S. Government. Others, such as FNMA bonds, rely on the assets and
credit of the instrumentality with limited rights to borrow from the U.S.
Treasury. Still other securities, such as obligations of the FHLB, are
supported by more extensive rights to borrow from the U.S. Treasury.
When the Adviser deems that higher yields are obtainable through
investments in mortgage related securities and that the yield advantage
offsets the uncertainties of the timing of principal payments, the Fund
may be significantly invested in mortgage related securities. GNMA
Certificates are mortgage-backed securities representing part ownership
of a pool of mortgage loans. These loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations are
either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is
<PAGE>
assembled and, after being approved by GNMA, is offered to investors
through securities dealers. Once approved by GNMA, the timely payment of
interest and principal on each mortgage is guaranteed by GNMA and backed
by the full faith and credit of the U.S. Government. GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrower
over the term of the loan rather than returned in a lump sum at maturity.
GNMA Certificates are called "pass-through" securities because both
interest and principal payments (including prepayments) are passed
through to the holder of the Certificate. Upon receipt, principal payments
will be used by the Fund to purchase additional GNMA Certificates or other
U.S. Government Securities.
The Fund may also invest in pools of mortgages which are issued or
guaranteed by other agencies of the U.S. Government. The average life of
pass-through pools varies with the maturities of the underlying mortgage
instruments. In addition, a pool's term may be shortened by unscheduled or
early payment of principal and interest on the underlying mortgages. The
occurrence of mortgage prepayments is affected by the level of interest
rates, general economic conditions, the location and age of the mortgage
and other social and demographic conditions. As prepayment rates of
individual pools vary widely, it is not possible to accurately predict the
average life of a particular pool.
It may also invest in a collateralized mortgage obligation ("CMO"). A
CMO is a debt security issued by a corporation, trust or custodian or by a
U.S. Government agency or instrumentality, that is collateralized by a
portfolio or pool of mortgages, mortgage-backed securities, U.S.
Government securities or corporate debt obligations. The issuer's
obligation to make interest and principal payments is secured by the
underlying pool or portfolio of securities. It invests only in CMOs which
are obligations of or guaranteed by the U.S. Government, its agencies or
instrumentalities such as the FNMA or the FHLMC.
CMOs are most often issued in two or more classes (each of which is
a separate security) with varying maturities and stated rates of interest.
Interest and principal payments from the underlying collateral (generally
a pool of mortgages) are not necessarily passed directly through to the
holders of the CMOs; these payments are typically used to pay interest on
all CMO classes and to retire successive class maturities in a sequence.
Thus, the issuance of CMO classes with varying maturities and interest
rates may result in greater predictability of maturity with one class and
less predictability of maturity with another class than a direct
investment in a mortgage-backed pass-through security (such as a GNMA
Certificate). Classes with shorter maturities typically have lower
volatility and lower yield while those with longer maturities typically
have higher volatility and higher yield. Thus, investments in CMOs provide
greater or lesser control over the investment characteristics than
mortgage pass-through securities and offer more defensive or aggressive
investment alternatives.
Investment by Davis Government Bond Fund in mortgage-related U.S.
Government Securities, such as GNMA Certificates, and CMOs also involves
other risks. The yield on a pass-through security is typically quoted based
on the maturity of the underlying instruments and the associated average
life assumption. Actual prepayment experience may cause the yield to
differ from the assumed average life yield. Accelerated prepayments
adversely impact yields for pass-throughs purchased at a premium; the
opposite is true for pass-throughs purchased at a discount. During periods
of declining interest rates, prepayment of mortgages underlying
pass-through certificates can be expected to accelerate. When the
mortgage obligations are prepaid, the Fund reinvests the prepaid amounts
in securities, the yields of which reflect interest rates prevailing at that
time. Therefore, the Fund's ability to maintain a portfolio of
high-yielding, mortgage-backed securities will be adversely affected to
the extent that prepayments of mortgages must be reinvested in
securities which have lower yields than the prepaid mortgages. Moreover,
prepayments of mortgages which underlie securities purchased at a
premium could result in capital losses.
In selecting CMOs, the Adviser seeks a favorable yield relative to
risk and considers purchase price, interest rates, total rates of return,
prepayment rates, average life, duration and volatility and compares these
with other mortgage-backed investments and U.S. Government Securities.
<PAGE>
The guarantees of the U.S. Government, its agencies and
instrumentalities are guarantees of the timely payment of principal and
interest on the obligations purchased. The value of the shares issued by
the Davis Government Bond Fund is not guaranteed and will fluctuate with
the value of the Fund's portfolio. Generally when the level of interest
rates rise, the value of the Fund's portfolio is likely to decline and when
the level of interest rates decline, the value of the Fund's portfolio is
likely to rise.
The Fund may engage in portfolio trading primarily to take advantage
of yield disparities. Such trading strategies may result in minor
temporary increases or decreases in the Fund's current income and in its
holding of debt securities which sell at substantial premiums or discounts
from face value. If expectations of changes in interest rates or the price
of two securities prove to be incorrect, the Fund's potential income and
capital gain will be reduced or its potential loss will be increased.
Other Policies. For information concerning other investment
policies, risks and considerations see "General Fund Policies and Risks"
below.
Davis Government Money Market Fund.
General. The investment objective of Davis Government Money
Market Fund is to achieve as high a level of current income as is
consistent with the principle of preservation of capital and maintenance
of liquidity. It seeks to achieve its investment objective by investing
exclusively in U.S. Government Securities and repurchase agreements
involving U.S. Government Securities. For a description of these
securities see "Investment Objectives and Policies - Davis Government
Bond Fund."
Maturity. The Fund limits its investments to securities and
repurchase agreements which will mature 397 days or less from the date
of purchase. Such period is calculated pursuant to the provisions of Rule
2a-7 under the Investment Company Act of 1940 which governs the use of
amortized cost valuation. Maturities of securities collateralizing
repurchase agreements are not so limited.
Net Asset Value. It is the policy of the Fund to seek to maintain a
net asset value of $1.00 per share. However, the maintenance of a $1.00
share price is not assured. The U.S. Government and its agencies and
instrumentalities do not guarantee the value of the shares issued by the
Fund. The Fund values its assets on the basis of amortized cost which
permits it to maintain a dollar weighted average portfolio maturity not
exceeding 90 days. See "Determining the Price of Shares."
Portfolio Activity. Generally, the Fund holds its securities until
maturity. However, the Fund may attempt, from time to time, to increase
its yield by trading to take advantage of variations in the markets or
yields for short-term money market instruments. Portfolio securities in
the Fund may also be disposed of prior to maturity if, on the basis of a
revised credit evaluation of the issuer or other financial or investment
considerations, such disposition is deemed advisable by the Adviser. The
policy of investing in securities with short maturities will result in high
portfolio turnover. However, this would not usually affect the Fund since
normally brokerage commissions are not paid in connection with the
purchase or sale of short-term instruments.
Investment Risks. While the Fund intends to invest in high quality
money market instruments, these investments are not entirely without
risk. It may invest in obligations issued or guaranteed by the U.S.
Treasury which include bills, notes and bonds which differ from each
other only in interest rates, maturities and time of issuance: Treasury
bills have maturities of one year or less, Treasury notes have initial
maturities of up to ten years and Treasury bonds have initial maturities of
greater than ten years. The Fund may also invest in obligations issued or
guaranteed by U.S. Government, its agencies or instrumentalities, which
are supported by
<PAGE>
any of the following: (a) the full faith and credit of the U.S. Government
(such as GNMA Certificates); (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Government (such as Federal
Farm Credit Bank-FFCB); (c) discretionary borrowing authority of the U.S.
Government agency or instrumentality (such as SLMA); or (d) the credit of the
instrumentality (such as Financing Corporation-FICO).
Other Policies. For information concerning other investment
policies, risk and considerations, see "General Fund Policies and Risks"
below.
Davis Financial Fund
General. The investment objective of Davis Financial Fund is growth
of capital. It invests primarily in common stocks and other securities
such as securities convertible into common stock. Such investments will
consist of issuers which the Adviser believes have capital growth
potential due to factors such as undervalued assets or earnings potential,
the development and demand of new products and services, favorable
operating ratios, resources for expansion, management abilities, improved
competitive positions and favorable overall business prospects.
Concentrated Area of Investment. Generally, the Fund will
concentrate 25% or more of its total assets in obligations of domestic and
foreign companies in each of the banking and financial services industries.
For purposes of a concentrated area, an issuer will be deemed "principally
engaged" in the area of concentration if operations in the identified areas
comprise more than 50% of the issuer's assets or revenues on a
consolidated basis. Companies in the banking industry include U.S. and
foreign commercial and industrial banking and savings institutions
(including their parent holding companies). Companies in the financial
services industry include commercial and industrial finance companies,
diversified financial services companies, investment banking, securities
brokerage and investment advisory companies, leasing companies and
insurance companies (including multi-line, property, casualty and life
insurance companies) and insurance holding companies. As a result of
such concentration, the Fund's portfolio may be subject to greater risks
than a portfolio without such a concentration, especially with respect to
those risks associated with regulatory developments in or related to such
industries.
The banking and financial services industries are currently
experiencing change as existing distinctions between such industries
become less clear, as new regulations may create new opportunities for
companies in the area, and as some companies may become attractive
acquisition candidates. There are congressional and executive department
proposals that would make significant changes in the federal laws
governing the range of business in which federally regulated banks can
engage. These proposals would allow certain banks and their holding
companies to offer a wide range of financial products and services,
including insurance, mutual fund underwriting, and securities
underwriting and sales. These changes would eliminate many distinctions
between commercial and investment banking.
Investment Considerations and Risks Concerning the Banking
Industry. Commercial banks (including "money center," regional and
community banks), savings and loan associations, and holding companies
of the foregoing are especially subject to adverse effects of volatile
interest rates, concentrations of loans in particular industries (such as
real estate or energy), and significant competition. The profitability of
these businesses is to a significant degree dependent upon the availability
and cost of capital funds. Economic conditions in the real estate market
may have a particularly strong effect on certain banks and savings
associations. Commercial banks and savings associations are subject to
extensive federal and, in many instances, state regulation. Neither such
extensive regulation nor the federal insurance of deposits ensures the
<PAGE>
solvency or profitability of companies in this industry, and there is no
assurance against losses in securities issued by such companies.
Recent legislation, including the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, has significantly altered the
regulatory environment for savings institutions. The number of such
institutions with financial problems, the unsettled economic environment
and poor commercial lending performance has prompted Congress to raise
capital requirements as well as other industry standards. Recent
regulatory action has also increased capital requirements and raised other
standards applicable to banks.
Broadening bank powers including the ability to engage in
multi-state operations, while permitting diversification of operations,
also could expose banks to well-established competitors in new areas of
operations. The broadening of regional and national interstate powers and
the aggressive expansion of larger, publicly held foreign banks may result
in increased competition and a decline in the number of publicly traded
regional banks.
Investment Considerations and Risks Concerning the Financial
Services Industry. Many of the investment considerations discussed in
connection with banks and savings associations also apply to financial
services companies. These companies are all subject to extensive
regulation, rapid business changes, volatile performance dependent upon
the availability and cost of capital and prevailing interest rates, and
significant competition. General economic conditions significantly affect
these companies. Credit and other losses resulting from the financial
difficulty of borrowers or other third parties have a potentially adverse
effect on companies in this industry. Investment banking, securities
brokerage and investment advisory companies are particularly subject to
government regulation and the risks inherent in securities trading and
underwriting activities. Insurance companies are particularly subject to
government regulation and rate setting, potential anti-trust and tax law
changes, and industry-wide pricing and competition cycles. Property and
casualty insurance companies may also be affected by weather and other
catastrophes. Life and health insurance companies may be affected by
mortality and morbidity rates, including the effects of epidemics.
Individual insurance companies may be exposed to reserve inadequacies,
problems in investment portfolios (for example, due to real estate or
"junk" bond holdings) and failures of reinsurance carriers. Several
significant insurance companies have recently reported liquidity or
solvency difficulties and credit rating downgrades.
Other Policies. Regulations of the Securities and Exchange
Commission limit investments in the securities of companies that derive
more than 15% of their gross revenues from the securities or investment
management business. The Competitive Equality Banking Act of 1987
requires that with respect to at least 75% of the total assets of any fund
investing in bank securities, no more than 5% of total assets may be
invested in a single issuer. The Fund intends to comply with these
restrictions. For information concerning other investment policies, risks
and considerations, see "General Fund Policies and Risks."
Davis Convertible Securities Fund
General. The investment objective of Davis Convertible Securities
Fund is total return. It seeks this objective through a combination of
current income and capital appreciation. The Fund will, under normal
circumstances, invest 65% or more of its total assets in convertible
securities. Securities received upon conversion of a convertible security
may be retained by the Fund to permit orderly disposition or to establish
long-term holdings for federal income tax purposes. In the event that less
than 65% of total assets are invested in convertible securities due to the
exercise of conversion rights, the Fund will invest available funds in
additional convertible securities as soon as practicable. The remaining
assets may be invested in other securities, including common and
preferred stock, corporate debt securities, securities of the U.S. Government,
<PAGE>
its agencies and instrumentalities ("U.S. Government Securities") and money
market instruments (including repurchase agreements).
Generally, convertible securities are bonds, debentures, notes,
preferred stocks or other securities that convert or are exchanged into
shares of the underlying common stock at a stated exchange ratio.
Usually, the conversion or exchange is solely at the option of the holder.
However, some convertible securities may be convertible or exchangeable
at the option of the issuer or are automatically converted or exchanged at
a time certain, or upon the occurrence of certain events, or have a
combination of these characteristics. Usually a convertible security
provides a long term call on the issuer's common stock and therefore
tends to appreciate in value as the underlying common stock appreciates
in value. A convertible security may also be subject to redemption by the
issuer after a date certain and under certain circumstances (including a
specified price) established on issue. If a convertible security held by the
Fund is called for redemption, the Fund could be required to tender it for
redemption, convert it into the underlying common stock or sell it.
In selecting convertible securities for the Fund, the Adviser will
seek to achieve a high level of total return and will consider the following
factors, among others: (1) the Adviser's own evaluations of the basic
underlying value of assets and business of the issuers; (2) the interest or
dividend income generated by the securities; (3) the potential for capital
appreciation of the securities and the underlying common stocks; (4) the
prices of the securities relative to the underlying common stocks; (5) the
prices of the securities relative to other comparable securities; (6)
whether the securities are entitled to the benefits of sinking funds or
other protective conditions; (7) the existence of any anti-dilution
protections of the security; and (8) the diversification of the Fund's
portfolio as to issuers. The Fund may convert a convertible security
which it holds (A) when necessary to permit orderly disposition of the
investment when a convertible security approaches maturity or has been
called for redemption; (B) to facilitate a sale of the position; (C) if the
dividend rate on the underlying common stock increases above the yield on
the convertible security; or (D) whenever the Adviser believes it is
otherwise in the best interests of the Fund.
Investment Considerations and Risks Generally. Fixed-income
securities are generally considered to be interest rate sensitive. The
market value of the Fund's investments will change in response to changes
in interest rates. During periods of falling interest rates, the value of
debt securities held by the Fund generally rises. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. Changes by recognized rating services in their ratings of debt
securities and changes in the ability of an issuer to make payments of
interest and principal will also affect the value of these investments.
Due to its conversion feature, the price of a convertible security will
normally vary in some proportion to changes in the price of the underlying
common stock. A convertible security will normally also provide a higher
yield than the underlying common stock (but generally lower than
comparable non-convertible securities). Due to their higher yield,
convertible securities generally sell above their "conversion value," which
is the current market value of the stock to be received upon conversion.
The difference between this conversion value and the price of convertible
securities will vary over time depending on the value of the underlying
common stocks and interest rates. When the underlying common stocks
decline in value, convertible securities will tend not to decline to the
same extent because the yield acts as a price support. When the underlying
common stocks rise in value, the value of convertible securities may also
be expected to increase but will generally not increase to the same extent
as common stocks.
High Yield, High Risk Debt Securities. Convertible securities are
often viewed by the issuer as future common stock subordinated to other
debt and carry a lower rating than the issuer's non-convertible debt
obligations. The debt securities in which the Fund may invest (including
convertible securities) include high yield, high risk debt securities
(including convertible securities) rated BBB or lower by Standard & Poor's
Corporation ("S&P") or Baa or lower by Moody's Investor Services
("Moody's") or unrated securities deemed by management to be of an
equivalent rating. A brief description of the quality ratings of these two
services is
<PAGE>
contained herein under "Portfolio Composition" and a more
complete description is contained in the Appendix. Securities rated BBB
by S&P or Baa by Moody's have speculative characteristics; changes in
economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments. Securities
rated BB or lower by S&P and Ba or lower by Moody's are referred to in the
financial community as "junk bonds" and may include D rated securities of
issuers in default. The Fund intends not to purchase securities rated BB or
Ba or lower if such purchase would then cause 35% or more of the Fund's
net assets to be invested in such securities. While likely to have some
quality and protective characteristics, such securities, whether or not
convertible into common stock, usually involve increased risk as to
payment of principal and interest.
The Adviser considers the ratings assigned by S&P or Moody's as one
of several factors in its independent credit analysis of issuers. Ratings
assigned by credit agencies do not evaluate market risks.
Issuers of high yield, high risk securities may be highly leveraged
and may not have available to them traditional methods of financing.
Therefore, the risks associated with acquiring the securities of such
issuers generally are greater than is the case with higher rated
securities. For example, during an economic downturn or a sustained
period of rising interest rates, issuers of high yield securities may be
more likely to experience financial stress, especially if such issuers are
highly leveraged. During such periods, such issuers may not have
sufficient revenues to meet their principal and interest payment
obligations. The issuer's ability to service its debt obligations also may
be adversely affected by specific issuer developments, or the issuer's
inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss due to default by
the issuer is significantly greater for the holders of high yield securities
because such securities may be unsecured and may be subordinated to
other creditors of the issuer.
Such securities are subject to greater price volatility than higher
rated securities, tend to decline in price more steeply than higher rated
securities in periods of economic difficulty or accelerating interest rates
and are subject to greater risk of payment in adverse economic times.
There may be a thin trading market for such securities. This may have an
adverse impact on market price and the ability of the Funds to dispose of
particular issues and may cause the Funds to incur special securities
registration responsibilities, liabilities and costs and liquidity and
valuation difficulties. Unexpected net redemptions may force the Funds to
sell high yield, high risk debt securities without regard to investment
merit, thereby possibly reducing return rates. Such securities may be
subject to redemptions or call provisions which, if exercised when
investment rates are declining, could result in the replacement of such
securities with lower yielding securities, resulting in a decreased return.
To the extent that the Funds invest in bonds that are original issue
discount, zero coupon, pay-in-kind or deferred interest bonds, the Funds
may have taxable interest income in excess of the cash actually received
on these issues. In order to avoid taxation to the Funds, the Funds may
have to sell portfolio securities to meet taxable distribution
requirements.
See the Statement of Additional Information for more detailed
information on high yield, high risk debt securities.
Portfolio Composition. The table below reflects Davis Convertible
Securities Fund's portfolio quality rating for the year ended December 31,
1995, calculated on the basis of the average weighted ratings of all bonds
held during the year. The table reflects the percentage of total assets
represented by fixed income securities rated by Moody's or S&P, by
unrated fixed income securities and by other assets. The percentages
shown reflect the higher of the Moody's or S&P rating. U.S. Government
securities, whether or not rated, are reflected as Aaa and AAA (highest
quality). Other assets may include money market instruments, repurchase
agreements, equity securities, net payables and receivables and cash. The
allocations in the table are not necessarily representative of the
composition of the Fund's portfolio at other times. Portfolio quality
rating will change over time.
<PAGE>
<TABLE>
Portfolio Composition of the Davis Convertible Securities Fund Portfolio by
Quality Rating As a Percentage of Total Assets at December 31, 1995
<CAPTION>
Moody's S&P Rating Category Percentage Fund's Assessment General Definition
- --------------------------- ---------- of Unrated Securities of Bond Quality
--------------------- ---------------
<S> <C> <C> <C>
Aaa/AAA.............................. _ _ Highest quality
Aa/AA................................ _ _ High quality
A/A.................................. 7.58% _ Upper medium grade
Baa/BBB.............................. 8.87% _ Medium grade
Ba/BB................................ 4.92% 3.42% Some speculative elements
B/B.................................. 4.52% _ Speculative
Caa/CCC.............................. _ _ More speculative
Ca,C/CC,C,D.......................... _ _ Very speculative, may be in default
Not Rated............................ 3.42% _ Not rated by Moody's or S&P
Common and Preferred Stock........... 69.63% _
Short-term Investments............... 1.06% _
------ -----
100.00% 3.42%
</TABLE>
The description of each bond quality category set forth in the table
above is intended to be a general guide and not a definitive statement as
to how Moody's and S&P define such rating category. A more complete
description of the rating categories is set forth in the Appendix. The
ratings of Moody's and S&P represent their opinions as to the quality of
the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute
standards of quality. There is no assurance that a rating assigned
initially will not change. The Fund may retain a security whose rating has
changed or has become unrated.
Other Policies. For information concerning other investment
policies, risks and considerations see "General Fund Policies and Risks"
below.
Davis Real Estate Fund
General. The investment objective of Davis Real Estate Fund is total
return through a combination of growth and income. It invests primarily
in securities of companies principally engaged in or related to the real
estate industry or which own significant real estate assets or which
primarily invest in real estate financial instruments. Normally at least
65% of its total assets will be invested in securities of companies which
have at least 50% of the value of their assets, gross income or net profits
attributable to ownership, financing, construction, management or sale of
real estate, or to products or services that are related to real estate or
the real estate industry. It does not invest directly in real estate. Real
estate companies include real estate investment trusts, or other
securitized real estate investments, brokers, developers, lenders and
companies with substantial real estate holdings such as paper, lumber,
hotel and entertainment companies. It invests in common stocks and other
equity securities and debt securities. In keeping with its primary growth
objective, it will normally invest primarily in equity securities (including
securities convertible into equity securities). It may also invest in fixed
income securities for income or as a defensive strategy when the Adviser
believes that adverse economic or market conditions require such
strategy.
The remaining 35% of the Fund's assets may be invested in
securities of companies in any other industries. These may include
companies which are not primarily involved in real estate operations or
ownership but which have products or services relating to the real estate
industry, such as manufacturers and distributors of building supplies,
financial institutions which make or service real estate loans or
companies which have substantial real estate assets such as some
companies in the energy, retailing or railroad industries.
<PAGE>
There is no limitation on such investments except that the Fund intends to
invest less than 25% of its total assets in the securities of any industry
other than the real estate industry.
The Fund will invest in shares of real estate investment trusts
("REITs"). REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is
not taxed on income distributed to shareholders if it complies with
various requirements relating to its organization, ownership, assets and
income and with the requirement that it distribute to its shareholders at
least 95% of its taxable income (other than net capital gains) for each
taxable year. REITs can generally be classified as Equity REITs, Mortgage
REITs and Hybrid REITs. Equity REITs invest the majority of their assets
directly in real property and derive their income primarily from rents.
Equity REITs can also realize capital gains by selling property that has
appreciated in value. Mortgage REITs invest the majority of their assets
in real estate mortgages and derive their income primarily from interest
payments. Hybrid REITs combine the characteristics of both Equity REITs
and Mortgage REITs.
Investment Considerations and Risks Generally. Because the Fund
invests primarily in the real estate industry, it is subject to risks
associated with the direct ownership of real estate. The Fund could also
be subject to such risks by reason of direct ownership as a result of a
default on a debt security it may own. These risks include declines in the
value of real estate, risks related to general and local economic
conditions, overbuilding and increased competition, increases in property
taxes and operating expenses, changes in zoning laws, casualty or
condemnation losses, fluctuations in rental income, changes in
neighborhood values, the appeal of properties to tenants and increases in
interest rates. If the Fund has rental income or income from the
disposition of real property, the receipt of such income may adversely
affect its ability to retain its tax status as a regulated investment
company.
Equity REITs may be affected by changes in the value of the
underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of credit extended. Equity and Mortgage REITs are
dependent upon management skill, may not be diversified and are subject
to project financing risks. Such trusts are also subject to heavy cash
flow dependency, defaults by borrowers, self-liquidation and the
possibility of failing to qualify for tax-free pass-through of income under
the Internal Revenue Code and failing to maintain exemption from
registration under the Investment Company Act of 1940. Changes in
interest rates may also affect the value of the debt securities in the
Fund's portfolio. By investing in REITs indirectly through the Fund, a
shareholder will bear not only his proportionate share of the expense of
the Fund, but also, indirectly, similar expenses of the REITs, including
compensation of management.
High Yield, High Risk Debt Securities. The Fund may also invest in
the same types of high yield, high risk securities as Davis Convertible
Securities Fund. However, the Fund intends not to purchase securities
rated BB or Ba or lower if such purchase would then cause more than 30%
of the Fund's net assets to be invested in such securities. The Fund,
currently has none of its assets invested in high yield, high risk securities
and does not presently intend to have over 5% of its assets invested in
such securities in the near future.
Other Policies. For information concerning other investment
policies, risks and considerations see "General Fund Policies and Risks"
below.
General Fund Policies and Risks
With respect to this section, the Funds are referred to as follows:
Davis Growth Opportunity Fund as the "Growth Fund"
Davis Government Bond Fund as the "Bond Fund"
Davis Government Money Market Fund as the "Money Market Fund"
<PAGE>
Davis Financial Fund as the "Financial Fund"
Davis Convertible Securities Fund as the "Convertible Fund"
Davis Real Estate Fund as the "Real Estate Fund"
Diversification. The Growth, Bond and Money Market Funds limit
investments in one issuer to 5% of total assets. The Financial,
Convertible and Real Estate Funds have the same limitation, but only as to
75% of their respective total assets. The remaining 25% of each Fund's
total assets may be invested in one to four issuers. This may involve
greater risk than if the 5% limitation is applied to all assets. Note that
no Fund has any limitations on investments in U.S. Government Securities
or repurchase agreements with respect to such securities.
Concentration. No Fund, other than the Financial Fund and Real
Estate Fund, will make any investment which would cause 25% or more of
its total assets to be invested in any one industry. This limitation does
not apply to investments in U.S. Government Securities.
Temporary Investments of Funds other than the Money Market Fund.
The Funds may temporarily invest in high grade money market
instruments, repurchase agreements, or may hold cash or cash equivalents
for defensive purposes or to accommodate inflows of cash awaiting more
permanent investment.
Foreign Investments. Funds other than the Bond and Money Market
Funds may invest in securities of foreign issuers or securities which are
principally traded in foreign markets ("foreign securities"). When foreign
investments are made, the Adviser or Sub-Adviser will attempt to take
advantage of differences between economic trends and the performance of
securities markets in various countries to maximize investment
performance. In most instances, foreign investments will be made in
companies principally based in developed countries.
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")
covering such securities and through U.S. registered investment companies
investing primarily in foreign securities. The Funds, however, may not
invest in the securities of other registered investment companies if more
than 10% of a Fund's total assets would then be so invested. Other
registered investment companies usually have their own management
costs or fees and the Adviser will also earn its regular fee on Fund assets
invested in such other companies. Operating expenses of a Fund investing
in foreign securities are likely to be higher than that of one investing
exclusively in U.S. securities, since management, 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 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.
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
<PAGE>
indexed to foreign securities. 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 in respect to a
different foreign currency than 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, a Fund 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 its 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 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 a Fund 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 a Fund than if it had not entered into such contracts.
When taking a position in an anticipatory hedge, a Fund is required to set
aside cash or high grade liquid securities to fully secure the obligation.
Portfolio Transactions. The Adviser (and Sub-Adviser with respect
to Growth Fund) is responsible for the placement of portfolio
transactions, subject to the supervision of the Board of Directors. It is
the Company's policy to seek to place portfolio transactions with brokers
or dealers who will execute transactions as efficiently as possible and at
the most favorable price. Subject to this policy, research services and
placement of orders by securities firms for shares of the Company may be
taken into account as a factor in placement of portfolio transactions. In
seeking its investment objective, a Fund predominantly investing in equity
securities may trade to some degree in securities for the short term if
the Adviser believes that the growth potential of a security no longer
exists, considers that other securities have more growth potential, or
otherwise believes that such trading is advisable. As discussed above, the
Bond Fund may engage in portfolio trading to take advantage of yield
disparities. Because of differences among investment policies, portfolio
turnover rate will be different for each Fund. At times it could be high,
which could require the payment of larger amounts in brokerage
commissions. However, Bond and Money Market Funds' trades are usually
principal transactions involving no commissions.
Writing Covered Options. For income purposes, the Funds other than
the Money Market Fund may write covered call options on its portfolio
securities. However, the Funds have not done so to any significant extent
and do not currently intend to engage in any such transaction if it would
cause more than 5% of net assets to be subject to options.
Repurchase Agreements. The Funds may enter into repurchase
agreements, but normally do not enter into repurchase agreements
maturing in more than seven days, and may make repurchase agreement
transactions through a joint account with other funds which have the
same investment adviser. A repurchase agreement, as referred to herein,
involves a sale of securities to the Funds, with the concurrent agreement
of the seller (a member bank of the Federal Reserve System or securities
dealer which the Adviser determines to be financially sound at the time of
the transaction) to repurchase the securities at the same price plus an
amount equal to accrued interest at an agreed-upon interest rate, within a
specified time, usually less than one week, but, on occasion, at a later
time. The repurchase obligation of the seller is, in effect, secured by the
<PAGE>
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.
Restricted and Illiquid Securities. Funds, other than the Money
Market Fund, may invest in restricted securities, i.e., securities which, if
sold, would cause the Funds to be deemed "underwriters" under the
Securities Act of 1933 or 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 such Fund's
net assets would then be illiquid. If at any time more than 15% of a Fund's
net assets are illiquid, steps will be taken as soon as practicable to
reduce the percentage of illiquid assets to 15% or less.
The restricted securities which a Fund may purchase include
securities which have not been registered under the 1933 Act but are
eligible for purchase and sale pursuant to Rule 144A ("Rule 144A
Securities"). This Rule permits certain qualified institutional buyers,
such as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. The Adviser, or the
Sub-Adviser, in the case of Growth Fund, under criteria established by the
Company's Board of Directors, will consider whether Rule 144A Securities
being purchased or held by the Fund are illiquid and thus subject to the
Fund's policy limiting investments in illiquid securities. In making this
determination, the Adviser or the 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 or the Sub-Adviser and, if as a result of changed conditions, it is
determined that a Rule 144A Security is no longer liquid, the Fund's
holding of illiquid securities will be reviewed to determine what, if any,
action is appropriate in light of the policy limiting investments in such
securities. There is no limitation on the percentage of the Fund's assets
that can be invested in liquid Rule 144A 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. No Fund will borrow money except from banks for
temporary or emergency purposes (usually to facilitate orderly
redemption of its shares while avoiding untimely disposition of portfolio
holdings.) Except for the Money Market Fund, a Fund may not (i) borrow
money in excess of 10% of the value of its total assets (excluding the
amount borrowed) at the time of the borrowing or (ii) mortgage, pledge or
hypothecate any assets except to secure permitted borrowings and then
only in an amount not in excess of 15% of the value of its total assets
(excluding the amount borrowed) at the time of such borrowings. The
Money Market Fund may not (a) borrow in excess of 25% of the value of its
total assets (including the amounts borrowed) at the time of borrowing or
(b) pledge or hypothecate any of its assets except to secure permitted
borrowing and then in an amount not in excess of 10% of the value of its
net assets (including the amount borrowed) at the time of such borrowing.
No Fund will purchase securities while any borrowing exceeds 5% of net
assets.
Fundamental and Non-Fundamental Policies. The investment
restrictions set forth in the Statement of Additional Information
including those in respect to borrowing, concentration and diversification
as discussed above are fundamental policies. The investment objectives
and policies with respect to eligible investments are fundamental policies
of Money Market Fund and cannot be changed without a shareholder vote.
All other investment objectives and policies of the Company's Funds are
not fundamental and may be changed without shareholder approval. In the
event that a Fund's objective should ever be changed, such change may
result in an objective different from the objective the shareholder
considered appropriate at the time of investment in such Fund. Except for
the restrictions on illiquid securities, any percentage restrictions set
forth in the prospectus or in the Statement of Additional Information
apply as of the time of investment without regard to later increases or
decreases in the values of securities or total or net assets.
<PAGE>
ADVISER, SUB-ADVISER AND DISTRIBUTOR
Davis Selected Advisers, L.P., (the "Adviser") whose principal office
is at 124 East Marcy Street, Santa Fe, New Mexico 87501, serves as the
adviser and distributor for the Funds. Venture Advisers, Inc. is the
Adviser's sole general partner. Shelby M.C. Davis is the controlling
shareholder of the general partner. Subject to the direction and
supervision of the Board of Directors, the Adviser manages the investment
and business operations of the Davis Government Bond Fund, Davis
Government Money Market Fund, Davis Financial Fund, Davis Convertible
Securities Fund and Davis Real Estate Fund, manages the business
operations of the Davis Growth Opportunity Fund and also acts as
distributor of the shares of all the Funds. As discussed below, the
Adviser has hired Tanaka Capital Management, Inc. as the Sub-adviser for
the Growth Opportunity Fund. The Adviser also acts as investment adviser
and distributor for Davis High Income Fund, Davis Tax-Free High Income
Fund, Davis New York Venture Fund and Davis International Series, Inc.,
(collectively with the Funds, the "Davis Funds") and Selected American
Shares, Inc., Selected Special Shares, Inc. and Selected Capital
Preservation Trust (collectively the "Selected Funds").
Effective May 1, 1996, the Davis Governement Bond Fund pays the
Adviser a fee at the annual rate of 0.50% of total net assets. Prior to May
1, 1996, it paid a fee at the annual rate of 0.75% on the first $250 million
of average net assets, 0.65% on the next $250 million of net assets and
0.55% on assets over $500 million. Davis Government Money Market Fund
pays the Adviser a fee at the annual rate of 0.50% on the first $250
million of average net assets, 0.45% on the next $250 million of net
assets and 0.40% on assets over $500 million. The other Funds each pay
the Adviser a fee at the annual rate of 0.75% on the first $250 million of
average net assets, 0.65% on the next $250 million of net assets and
0.55% on assets over $500 million. The fees for these other Funds are
higher than those charged by many mutual funds with similar objectives.
The Company also reimburses the Adviser for its costs of providing
certain accounting and financial reporting, shareholder services and
compliance with state securities laws.
Tanaka Capital Management, Inc. (the "Sub-Adviser"), is the
sub-adviser for the Davis Growth Opportunity Fund. The Sub-Adviser
manages the day to day investment operations for the Davis Growth
Opportunity Fund. The Company pays no fees directly to the Sub-Adviser.
The Sub-Adviser receives from the Adviser a reallowed portion of its
advisory fee equal to 0.30% of the first $100 million of the Davis Growth
Opportunity Fund's annual average net assets and 0.25% of such Fund
assets over $100 million with a minimum annual fee of $100,000.
However, the Sub-Adviser's fees on Fund assets over $100 million may not
exceed one-third of the fees paid to the Adviser from the Davis Growth
Opportunity Fund. The Sub-Adviser also provides investment advisory
services to employee benefit plans, institutions, trusts and individuals.
The Sub-Adviser's offices are located at 230 Park Avenue, Suite 1432,
New York, New York 10169. Graham Y. Tanaka is the owner of the
Sub-Adviser. Since February, 1987, Mr. Tanaka has been the controlling
shareholder, Chief Executive Officer and sole director of the Sub-Adviser.
Prior to December, 1990, he was employed by the Adviser.
Portfolio Management. Carolyn H. Spolidoro is the primary portfolio
manager of the Davis Government Bond Fund. She has been employed by the
Adviser since August 1985. She is Vice President of the Adviser's General
Partner and Vice President of all of the Davis Funds. She is also the
portfolio manager of the Davis Government Money Market Fund, the
Selected Government Income Fund and the Selected Daily Government
Fund.
Graham Y. Tanaka has been the primary portfolio manager of Davis
Growth Opportunity Fund since January, 1987.
Christopher C. Davis is the primary portfolio manager of the Davis
Financial Fund. He was the co-portfolio manager of this Fund, with Shelby
M.C. Davis, from it inception until December 1, 1994. He has been
employed by the Adviser since September, 1989 as an assistant portfolio
manager and research analyst.
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Andrew A. Davis is the primary portfolio manager of the Davis
Convertible Securities Fund and the Davis Real Estate Fund. He was the
co-portfolio manager of these funds, with Shelby M.C. Davis, from their
inception until December 1, 1994. Andrew Davis is a Vice President of the
Company and a Co-President of the Adviser's General Partner. Until
February 1993, he was the Vice President and head of convertible research
at PaineWebber, Incorporated.
Shelby Davis, the Controlling shareholder of the Adviser, was the
primary portfolio manager of the Davis Financial Fund and the co-portfolio
manager of the Davis Convertible Securities Fund and the Davis Real
Estate Fund until December 1, 1994. He will continue to consult with
Andrew Davis and Christopher Davis.
Davis Selected Advisers, L.P., in its capacity as distributor, is
reimbursed by each Fund for some of its distribution expenses through
Distribution Plans which have been adopted with respect to each class of
shares of a Fund and approved by the Company's Board of Directors and the
shareholders of each such class in accordance with Rule 12b-1 under the
Investment Company Act of 1940. See "Distribution Plans" below for more
details.
DISTRIBUTION PLANS
Each Fund, except Davis Government Money Market Fund, bears some
of the costs of selling its shares under Distribution Plans adopted with
respect to its Class A and Class B shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. This rule regulates the manner in
which a mutual fund may assume costs of distributing and promoting the
sale of its shares.
Payments under the Class A Distribution Plan are limited to an
annual rate of 0.25% of the average daily net asset value of the Class A
shares. Such payments are made to reimburse the Adviser for the fees it
pays to its salespersons and other firms for selling Fund shares, servicing
shareholders and maintaining shareholder accounts. Normally, such fees
are at the annual rate of 0.25% of the average net asset value of the
accounts serviced and maintained on the books of the Fund. Payments
under the Class A Distribution Plan may also be used to reimburse the
Adviser for other distribution costs (excluding overhead) not covered in
any year by any portion of the sales charges the Adviser retains. See
"Purchase of Shares."
Payments under the Class B Distribution Plan are limited to an
annual rate of 1% of the average daily net asset value of the Class B
shares. In accordance with current applicable rules, such payments are
also limited to 6.25% of gross sales of Class B shares plus interest at 1%
over the prime rate on any unpaid amounts. Up to 0.75% of the average
daily net assets is used to pay the Adviser a 4% commission on new sales
of Class B Shares. Most or all of such commissions are reallowed to
salespersons and to firms responsible for such sales. No commissions are
paid by the Company with respect to sales by the Adviser to officers,
directors and full-time employees of the Company, the Adviser or the
Adviser's General Partner. Up to 0.25% of average net assets is used to
reimburse the Adviser for the payment of service and maintenance fees to
its salespersons and other firms for shareholder servicing and
maintenance of shareholder accounts.
If, due to the foregoing payment limitations, the Company is unable
to pay the Adviser the 4% commission on new sales of Class B shares, the
Adviser intends, but is not obligated, to accept new orders for shares and
pay commissions in excess of the payments it receives from the Company.
The Adviser intends to seek full payment from the Company of any excess
amounts with interest at 1% over the prime rate at such future date when
and to the extent such payments on new sales would not be in excess of
the limitations. The Company is not obligated to make such payments; the
amount (if any), timing and condition of any such payments are solely
within the discretion of the directors of the Company who are not
interested persons of the Adviser or the Company and have no direct or
indirect financial interest in the Class B Distribution Plan (the
"Independent Directors"). If the Class B Distribution Plan is terminated,
the Adviser will ask the Independent
<PAGE>
Directors to take whatever action they deem appropriate with regard to the
payment of any excess amounts. As of December 31, 1995, the Adviser paid
$295,361, $439,891, $65,749, $13,465 and $10,271, respectively, in
commissions with respect to Davis Growth Opportunity Fund, Davis Government
Bond Fund, Davis Financial Fund, Davis Convertible Securities Fund and Davis
Real Estate Fund, respectively, for which the Adviser had not yet received
reimbursement.
In addition, the Plans provide that the Adviser, in its sole
discretion, may utilize its own resources for distributing and promoting
sales of Fund shares, including any profits from its advisory fees.
With respect to Davis Government Money Market Fund, the
Distribution Plan for each class of shares does not provide for any
amounts to be paid by the Fund directly to the Adviser as either
compensation or reimbursement for distributing shares of the Fund, but
does authorize the use of the advisory fee for distribution to the extent
such fee may be considered to be indirectly financing any activity or
expense which is primarily intended to result in the sale of Fund shares.
Each of the Distribution Plans may be terminated at any time by vote
of the Independent Directors or by vote of a majority of the outstanding
voting shares of the respective class. Payments pursuant to a
Distribution Plan are included in the operating expenses of the class.
As described herein, dealers or others will receive different levels
of compensation depending on which class of shares they sell. The
Adviser may make expense reimbursements for special training of a
dealer's registered representatives, advertising or equipment, or to defray
the expenses of dealer meetings.
Shares of the Funds may also be sold through banks or
bank-affiliated dealers. Any determination that such banks or
bank-affiliated dealers are prohibited from selling shares of the Funds
under the Glass-Steagall Act would have no material adverse effects on
the Company. State securities laws may require such firms to be licensed
as securities dealers in order to sell shares of the Funds.
PURCHASE OF SHARES
General. You can purchase any class of shares of a Davis Fund from
any dealer or other person having a sales agreement with the Adviser.
There are three ways to make an initial investment in the Funds.
One way is to fill out the Application Form included in this Prospectus and
mail it to State Street Bank and Trust Company ("State Street") at the
address on the Form. The dealer must also sign the Form. Your dealer or
sales representative will help you fill out the Form. You should enclose a
check (minimum $1,000, except $250 for retirement plans) payable as
indicated on the Form. Shareholders whose Davis Government Money
Market Fund accounts are established for distributions of earnings or
principal from a unit investment trust sponsored by Clayton Brown &
Associates, Inc. may make initial and subsequent investments of amounts
below the stated minimum.
Another way to make an initial investment is to have your dealer
order and pay for the shares. In this case, you must pay your dealer. The
dealer can order the shares from the Adviser by telephone or wire. You
can also use this method for additional investments of at least $1,000.
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The third way to purchase shares is by wire. Shares may be
purchased at any time by wiring federal funds directly to State Street.
Prior to an initial investment by wire, the shareholder should telephone
Davis Selected Advisers, L.P. at 1-800-279-0279 to advise them of the
investment and class of shares and to obtain an account number and
instructions. A completed Plan Adoption Agreement or Application Form
should be mailed to State Street after the initial wire purchase. To
assure proper credit, the wire instructions should be made as follows:
State Street Bank and Trust Company,
Boston MA 02210
Attn.: Mutual Fund Services
DAVIS SERIES, INC.
(Please specify Fund)
Shareholder Name,
Shareholder Account Number,
Federal Routing Number 011000028,
DDA Number 9904-606-2
After your initial investment, you can make additional investments
of at least $25. Simply mail a check payable to "State Street Bank and
Trust Company," c/o The Davis Funds, P.O. Box 8406, Boston, MA
02266-8406. The check should be accompanied by a form which State
Street will provide after each purchase. If you do not have a form, you
should tell State Street that you want to invest the check in shares of a
Fund. If you know your account number, you should also give it to State
Street.
The Funds do not issue certificates for Class A shares unless you
request a certificate each time you make a purchase. Certificates will
not be issued on Class B shares. In no event, however, will the Davis
Government Money Market Fund issue a certificate since all shares must
be uncertificated to use the check writing or pre-designated account
payment privileges. See "Redemption of Shares." Instead, shares
purchased are automatically credited to an account maintained for you on
the books of the Funds by State Street. You receive a statement showing
the details of the transaction each time you add to or withdraw from your
account.
Alternative Purchase Arrangements. All Davis Funds (other than
Davis Government Money Market Fund) each offer two classes of shares.
With certain exceptions described below, Class A shares of the Davis
Funds are sold with a front-end sales charge at the time of purchase and
are not subject to a sales charge when redeemed. Class B shares are sold
without a sales charge at the time of purchase, but are subject to a
deferred sales charge if they are redeemed within six years after
purchase. Class B shares will automatically convert to Class A shares
eight years after the end of the calendar month in which the shareholder's
order to purchase was accepted. The Davis Government Money Market Fund
offers three classes of shares, A, B and C. The three classes of the Davis
Government Money Market Fund shares are available so as to enable
investors to facilitate exchanges since shares may be exchanged only for
shares of the same class. Davis Government Money Market shares are sold
directly without sales charges; however, front-end or deferred sales
charges may be imposed, in certain cases, upon their exchange into shares
of other Davis Funds (see "Exchange of Shares").
Depending on the amount of the purchase and the anticipated length
of time of investment, investors may choose to purchase one class of
shares rather than the other. Investors who would prefer to pay the entire
cost of distribution at the time of investment, rather than spreading such
cost over time, might consider Class A shares. Other investors might
consider Class B, in which case 100% of the purchase price is invested
immediately. The Funds will not accept any purchase of Class B shares in
the amount of $250,000 or more per investor. Such purchase must be made
in Class A shares. See also "Distribution Plans" for more information.
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Class A Shares. Class A shares of Davis Government Money Market
Fund are sold at net asset value. Class A shares of the other Funds are
sold at their net asset value plus a sales charge. The amounts of the sales
charges are shown in the table below.
<TABLE>
<CAPTION>
Customary
Sales Charge Charge as Concession to
as Approximate Your Dealer as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ------------------ ----- -------- -----
<S> <C> <C> <C>
$ 99,999 or less............. 4-3/4% 5.0% 4%
$ 100,000 to $249,999............. 3-1/2% 3.6% 3%
$ 250,000 to $499,999............. 2-1/2% 2.6% 2%
$ 500,000 to $749,999............. 2% 2.0% 1-3/4%
$ 750,000 to $999,999............. 1% 1.0% 3/4 of 1%
$ 1,000,000 or more............. 0% 0.0% 0%<F1>
<FN>
<F1> On purchases of $1 million or more, the investor pays no initial or
contingent deferred sales charge. However the Adviser may pay the
financial service firm a commission during the first year after purchase
at an annual rate as follows:
Purchase Amount Commission
First $3,000,000................ .75%
Next $2,000,000................ .50%
Over $5,000,000................ .25%
</FN>
</TABLE>
Such commissions will be paid quarterly at the end of each fiscal quarter
for the first year after purchase. When a commission is paid because of
purchases of $1 million or more, such payment will be made from 12b-1
distribution fees received from the Fund and, in cases where the limits of
the Distribution Plan in any one year have been reached, from the
distributor's own profits or resources.
There are a number of ways to reduce the sales charge on the
purchase of Class A shares as set forth below.
(i) Family Purchases: Purchases made by an individual, such
individual's spouse and children under 21 are combined and treated as a
purchase of a single person.
(ii) Group Purchases: The purchases of an organized group, whether
or not incorporated, are combined and treated as the purchase of a single
person. The organization must have been organized for a purpose other
than to purchase shares of mutual funds.
(iii) Purchases for Employee Benefit Plans: Trusteed or other
fiduciary accounts and Individual Retirement Accounts ("IRA") of a single
employer are treated as purchases of a single person. Purchases of and
ownership by an individual and such individual's spouse under an IRA are
combined with their other purchases and ownership.
(iv) Purchases under a Statement of Intention: By executing the
"Statement of Intention" included in the Application Form at the back of
the prospectus, purchases of Class A shares of $100,000 or more made
over a 13-month period may be made at the applicable price for the
aggregate shares actually purchased during the period. Please see "Terms
and Conditions" at the back of prospectus.
<PAGE>
(v) Rights of Accumulation: If you notify your dealer or the Adviser
you may include the Class A shares you already own (valued at maximum
offering price) in calculating the price applicable to your current
purchase.
(vi) Combined Purchases with other Davis Funds: Purchases of Class
A shares of any Fund (other than Davis Government Money Market Fund)
may be combined with your purchases of Class A shares of other Davis
Funds, including Davis New York Venture Fund, Davis High Income Fund,
Davis Tax-Free High Income Fund and Davis International Series, Inc.,
separately or under combined Statements of Intention or rights of
accumulation to determine the price applicable to your purchases of Class
A shares of a Fund.
(vii) Sales at Net Asset Value: The sales charge will not apply to:
(1) Class A shares purchased through the automatic reinvestment of
dividends and distributions (see "Dividends and Distributions"); (2) Class A
shares purchased by directors, officers and employees of any Fund for
which the Adviser or Adviser's general partner, acts as an investment
Adviser or Distributor, including former directors and officers and any
spouse, child, parent, grandparent, brother or sister of all the foregoing,
and any employee benefit or payroll deduction plan established by or for
such persons; (3) Class A shares purchased by any registered
representatives, principals and employees (and any spouse, child, parent,
grandparent, brother or sister) of securities dealers having a sales
agreement with the Adviser; (4) initial purchases of Class A shares
totaling $250,000 or more, made at any one time by banks, trust
companies and other financial institutions (collectively "Institutions") on
behalf of one or more clients for which such Institution acts in a fiduciary
capacity; (5) initial purchases of Class A shares totaling $250,000 or
more by a registered investment adviser on behalf of a client for which
the adviser is authorized to make investment decisions or otherwise acts
in a fiduciary capacity; (6) Class A shares purchased by any single account
covering a minimum of 250 participants and representing a defined
benefit plan, defined contribution plan, cash or deferred plan qualified
under 401(a) or 401(k) of the Internal Revenue Code or a plan established
under section 403(b), 457 or 501(c)(9) of such Code; (7) Class A shares
purchased by persons participating in a "wrap account" or similar
fee-based program sponsored and maintained by a registered
broker-dealer approved by the Fund's Adviser; and (8) Class A shares
purchased by any state, county, city, department, authority or similar
agency prohibited by law from paying a sales charge. The Funds may also
issue Class A shares at net asset value incident to a merger with or
acquisition of assets of an investment company.
Class B Shares. Class B shares are offered at net asset value,
without a front-end sales charge. With certain exceptions described
below, the Company imposes a deferred sales charge on Class B shares of
all the Funds except the Davis Money Market Fund. The charge is 4% on
shares redeemed during the first year after purchase, 3% on shares
redeemed during the second or third year after purchase, 2% on shares
redeemed during the fourth or fifth year after purchase and 1% on shares
redeemed during the sixth year after purchase. However, on Class B
shares of the Company which were (i) purchased prior to December 1,
1994 or (ii) acquired in exchange from Class B shares of other Davis Funds
which were purchased prior to December 1, 1994, the Company will
impose a deferred sales charge of 4% on shares redeemed during the first
calendar year after purchase; 3% on shares redeemed during the second
calendar year after purchase; 2% on shares redeemed during the third
calendar year after purchase; and 1% on shares redeemed during the fourth
calendar year after purchase, and no deferred sales charge is imposed on
amounts redeemed after four calendar years from purchase. Class B
shares will be subject to a maximum Rule 12b-1 fee at the annual rate of
1% of the class' average daily net asset value.
Class B shares that have been outstanding for eight years will
automatically convert to Class A shares without imposition of a front-end
sales charge or exchange fee. (Conversion of pre December 1, 1994 Class
B shares represented by stock certificates will require the return of the
stock certificates to the Funds transfer agent). The Class B shares so
converted will no longer be subject to the higher expenses borne by Class B
<PAGE
shares. Because the net asset value per share of the Class A shares may
be higher or lower than that of the Class B shares at the time of
conversion, although the dollar value will be the same, a shareholder may
receive more or less Class A shares than the number of Class B shares
converted. Under the Funds' private Internal Revenue Service Ruling such a
conversion will not constitute a taxable event under the federal income
tax law. In the event that this ceases to be the case, the Board of
Directors will consider what action, if any, is appropriate and in the best
interests of the Class B shareholders.
Any contingent deferred sales charge imposed upon the redemption
of Class B shares is a percentage of the lesser of (i) the net asset value of
the shares redeemed or (ii) the original cost of such shares. No contingent
deferred sales charge is imposed when you redeem amounts derived from
(a) increases in the value of shares redeemed above the original cost of
such shares or (b) certain shares with respect to which a Fund did not pay a
commission on issuance, including shares acquired through reinvestment
of dividend income and capital gains distributions. Upon request for
redemption, shares not subject to the contingent deferred sales charge
will be redeemed first. Thereafter, shares held the longest will be the
first to be redeemed.
The contingent deferred sales charge will be waived as follows: (1)
on redemptions following a shareholder's death or disability, as defined in
Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"); (2) on taxable periodic distributions from a qualified retirement
plan or IRA upon retirement or attainment of age 59-1/2 (e.g. for the
applicable contingent deferred sales charge, if any, is imposed upon a
lump sum redemption at any age whether or not it is taxable) or
distribution necessary to make a tax-free return of contributions to avoid
tax penalty; (3) on redemptions of shares sold to directors, officers and
employees of the Fund, its Adviser or Adviser's General Partner, including
former directors and officers and immediate family members of all of the
foregoing, and any employee benefit or payroll deduction plan established
by or for such persons; (4) on redemptions made as tax-free returns of
contributions to avoid tax penalty; and (5) on redemptions pursuant to the
right of a Fund to liquidate a shareholder's account if the aggregate net
asset value of the shares held in such account falls below an established
minimum amount.
Class C Shares. Davis Government Money Market Fund offers Class C
shares. These shares are offered to facilitate a change into Class C shares
of Davis New York Venture Fund, Inc. and do not have a conversion feature.
For further information about Davis New York Venture Fund, Inc., see your
dealer or call the Fund to obtain a copy of the prospectus.
Prototype Retirement Plans. The Adviser and certain qualified
dealers have available prototype retirement plans sponsored by the Fund
for corporations and self-employed individuals and prototype Individual
Retirement Account ("IRA") plans for both individuals and employers.
These plans utilize the shares of the funds and other Davis Funds as their
investment vehicle. State Street acts as custodian or trustee for the
plans and charges the participant $10 to establish each account and an
annual maintenance fee of $10 per account. Such fees will be redeemed
automatically at year end from your account, unless you elect to pay the
fee directly.
Automatic Investment Plan. Shareholders may arrange for automatic
monthly investing whereby State Street will be authorized to initiate a
debit to the shareholder's bank account of a specific amount (minimum
$25) each month which will be used to purchase Fund shares. For
institutions that are members of the Automated Clearing House system
("ACH"), such purchases can be processed electronically on any day of the
month between the 3rd and 28th day of each month. After each automatic
investment, the shareholder will receive a transaction confirmation and
the debit should be reflected on the shareholder's next bank statement.
The plan may be terminated at any time by the shareholder. If you desire
to utilize this plan, you may use the appropriate designation on the
Application Form.
<PAGE>
Dividend Diversification Program. You may also establish a dividend
diversification program which allows you to have all dividends and any
other distributions automatically invested in shares of one or more of the
Davis Funds, subject to state securities law requirements and the
minimum investment requirements set forth below. You must receive a
current prospectus for the other fund or funds prior to investment. Shares
will be purchased at the chosen Fund's net asset value on the dividend
payment date. A dividend diversification account must be in the same
registration as the distributing fund account and must be of the same
class of shares. All accounts established or utilized under this program
must have a minimum initial value of at least $250 and all subsequent
investments must be at least $25. This program can be amended or
terminated at any time, upon at least 60 days' notice. If you would like to
participate in this program, you may use the appropriate designation on
the Application Form.
TELEPHONE PRIVILEGE
Unless you have provided in your application that the telephone
privilege is not to be available, the telephone privilege is automatically
available under certain circumstances for exchanging shares and for
redeeming shares. By exercising the telephone privilege to sell or
exchange shares, you agree that the Company shall not be liable for
following telephone instructions reasonably believed to be genuine.
Reasonable procedures will be employed to confirm that such instructions
are genuine and if not employed, the Company may be liable for
unauthorized instructions. Such procedures will include a request for
personal identification (account or social security number) and tape
recording of the instructions. You should be aware that during unusual
market conditions we may have difficulty in accepting telephone requests,
in which case you should contact us by mail. See "Exchange of Shares - By
Telephone", "Redemption of Shares - By Telephone" and "Redemption of
Shares - Expedited Redemption Privilege."
EXCHANGE OF SHARES
General. You may exchange shares of any Fund for shares of the same
class of the other Davis Funds. This exchange privilege is a convenient
way to buy shares in other Davis Funds in order to respond to changes in
your goals or in market conditions. If such goals or market conditions
change, the Davis Funds offer a variety of investment objectives that
includes common stock funds, tax-exempt and corporate bond funds, and a
money market fund. However, each Fund, except the Davis Government
Money Market Fund is intended as a long-term investment and not for the
short-term. All of the Davis Funds offer Class A or Class B shares. Only
Davis Government Money Market Fund and Davis New York Venture Fund
offer Class C shares. The shares to be received upon exchange must be
legally available for sale in your state. The net asset value of the initial
shares being acquired must be at least $1,000 unless such an exchange is
under the Automatic Exchange Program described below. There is a $5
service charge payable to the Adviser for each exchange other than an
exchange under the Automatic Exchange Program.
Generally, shares may be exchanged for the same class of shares of
another Davis Fund at relative net asset value. However, if any Davis Fund
shares being exchanged are subject to an escrow or segregated account
pursuant to the terms of a Statement of Intention or a CDSC, such shares
will be exchanged at relative net asset value, but the escrow or
segregated account will continue with respect to the Davis Fund shares
acquired in the exchange. In addition, the terms of any CDSC to which any
Class B shares are subject at the time of exchange will continue to apply
to any Class B shares acquired upon exchange. Class A shares of the Davis
Government Money Market Fund which are purchased for cash may be
exchanged for any class of any Davis Fund. However, exchanges of Class A
shares of the Davis Government Money Market Fund into Class A shares of
another Davis Fund will be made at the public offering price of the
acquired shares (which includes the applicable front-end sales load)
unless such shares were acquired by exchange of shares on which you have
already paid a sales charge. Exchanges of Class A shares or Class B shares
of the Davis Government Money Market Fund into Class B shares of another
Davis Fund will be made at net asset value and will become subject
<PAGE>
to the CDSC applicable to the acquired shares at the time of the exchange
unless such shares were acquired by exchange of shares already subject to a
CDSC. Class C shares of Davis Government Money Market Fund may be
exchanged for Class C shares of Davis New York Venture Fund, Inc. at
relative net asset values. Class C shares of New York Venture Fund, Inc.
are subject to Rule 12b-1 distribution fees and a redemption fee of 1%
during the first 12 months in which they are outstanding.
Segregation of Davis Government Money Market Fund Shares. In
order to secure the payment of any FESC or CDSC that may be due on
shares exchanged into shares of the Davis Government Money Market Fund,
the number of shares equal in value to the sales charge are segregated and
separately maintained in the Davis Government Money Market Fund. The
purpose of the segregation is to assure that redemptions utilizing the
Davis Government Money Market Fund check writing privilege do not
deplete the account without payment of any applicable sales charge and
therefore no draft will be honored for liquidation of shares in excess of
the shares in the Davis Government Money Market Fund account which are
free of segregation. See "Check Writing Privilege" under "Redemption of
Shares - Davis Government Money Market Fund."
Before you decide to make an exchange, you must obtain the current
prospectus of the desired fund. Call your broker or the Adviser for
information and a prospectus for any of the other Davis Funds registered
in your state. Read the prospectus carefully. If you decide to exchange
your shares, send State Street a written unconditional request for the
exchange and follow the instructions regarding delivery of share
certificates contained in the section on "Redemption of Shares". A
signature guarantee is not required for such an exchange. However, if
shares are also redeemed for cash in connection with the exchange
transaction, a signature guarantee may be required. See "Redemption of
Shares." Your dealer may charge an additional fee for handling an exercise
of the exchange privilege.
By Telephone. You may exchange shares by telephone into accounts
with identical registrations. Please see the discussion of procedures in
respect to telephone instructions in the section entitled "Telephone
Privilege," as such procedures are also applicable to exchanges.
Automatic Exchange Program. The Funds also offer an automatic
monthly exchange program. All accounts established or utilized under this
program must have the same registration and a minimum initial value of
at least $250. All subsequent exchanges must have a value of at least
$25. Each month shares will be simultaneously redeemed and purchased at
the chosen fund's applicable offering price. If you would like to
participate in this program, you may use the appropriate designation on
the Application Form.
An exchange involves both a redemption and a purchase, and normally
both are done on the same day. However, in certain instances such as
where a large redemption is involved, the investment of redemption
proceeds into shares of other Davis Funds may take up to seven days. For
federal income tax purposes, exchanges are treated as a sale and purchase.
Therefore, there will usually be a recognizable capital gain or loss due to
an exchange.
The number of times a shareholder may exchange shares among the
Davis Funds within a specified period of time may be limited at the
discretion of the Adviser. Currently, more than three exchanges out of a
fund during a twelve month period are not permitted without the prior
written approval of the Adviser. The Company reserves the right to
terminate or amend the exchange privilege at any time upon at least 60
days' notice.
REDEMPTION OF SHARES
All Funds Except Davis Government Money Market Fund. You can
redeem, or sell back to the Company, all or part of your shares at any time
at net asset value less any applicable sales charges or
<PAGE>
redemption fees. You can do this by sending a written request to State Street
Bank and Trust Company, c/o The Davis Funds, P.O. Box 8406, Boston, MA
02266-8406, indicating how many of your shares or what dollar amount
you want to redeem. If more than one person owns the shares to be
redeemed, all owners must sign the request. The signatures on the
request must be the same as the way in which the shares are registered.
Sometimes State Street needs more documents to verify authority
to make a redemption. This usually happens when the owner is a
corporation, partnership or fiduciary (such as a trustee or the executor of
an estate) or if the person making the request is not the registered owner
of the shares.
If shares to be redeemed are represented by a certificate, the
certificate, signed by the owner or owners, must be sent to State Street
with the request.
For the protection of all shareholders, the Company also requires
that signatures appearing on a share certificate, stock power or
redemption request where the proceeds would be more than $25,000, must
be guaranteed by a bank, credit union, savings association, securities
exchange, broker, dealer or other guarantor institution. The transfer agent
may reject a request from any of the foregoing eligible guarantors, if such
guarantor does not satisfy the transfer agent's written standards or
procedures or if such guarantor is not a member or participant of a
signature guarantee program. This provision also applies to exchanges
when there is also a redemption for cash. A signature guarantee on
redemption requests where the proceeds would be $25,000 or less is not
required, provided that such proceeds are being sent to the address of
record and, in order to ensure authenticity of an address change, such
address of record has not been changed within the last 30 days.
No signature guarantees are required when payment is to be made to
the shareholder of record at the address of record. Your signature on your
letter must be guaranteed by a commercial bank or member firm of a
domestic stock exchange if the proceeds of the redemption are to be paid
in some other manner or if the shares are to be transferred. A signature
guarantee is also required in the event that any modification to the
Company's application is made after the account is established, including
the selection of the Expedited Redemption Privilege. In some situations
such as where corporations, trusts or estates are involved, additional
documents may be necessary to effect the redemption.
Redemption proceeds are normally paid to you within seven days
after State Street receives your proper redemption request. Payment for
redemptions can be suspended under certain emergency conditions
determined by the Securities and Exchange Commission or if the New York
Stock Exchange is closed for other than customary or holiday closings. If
any of the shares redeemed were just bought by you, payment to you may
be delayed until your purchase check has cleared (which usually takes up
to 15 days from the purchase date). You can avoid any such redemption
delay by paying for your shares with a certified or cashier's check or by
bank wire or federal funds.
Your shares may also be redeemed through participating dealers.
Under this method, the Adviser repurchases the shares from your dealer, if
your dealer is a member of the Adviser's selling group. Your dealer may,
but is not required to, use this method in selling back your shares and may
place any repurchase request by telephone or wire. Your dealer may charge
you a service fee or commission. No charge is payable if you redeem your
own shares through State Street rather than having a dealer arrange for a
repurchase.
Davis Government Money Market Fund. You may request redemption
of part or all of your shares in the Davis Government Money Market Fund by
mail by sending your request to State Street Bank and Trust Company, c/o
Davis Funds, P.O. Box 8406, Boston, MA 02266-8406. You may also redeem
shares through the Check Writing Privilege or by Expedited Redemption
Privilege to a pre-designated bank account.
<PAGE>
Normally, except for payment to a pre-designated bank account, State Street
will send payment for the Davis Government Money Market Fund shares redeemed
within three business days, but in no event, later than seven days, after
receipt of a redemption request in proper form. Redemption of the Davis
Government Money Market Fund shares which were acquired by exchange from
shares subject to a contingent deferred sales charge may be subject to such a
charge. Shares exchanged into Davis Government Money Market Fund are
subject to segregation to assure payment of any sales charges that may be
due upon redemption. See "Exchange of Shares-Segregation of Davis
Government Money Market Fund shares."
Check Writing Privilege. For Davis Government Money Market Fund
accounts other than prototype retirement plans and IRAs, State Street
will provide you, upon request, forms of drafts to be drawn on your regular
account (but not your "segregated" account) that will clear through State
Street. See "Exchange of Shares." These drafts may be made payable to
the order of any person in any amount not less than $500. When a draft is
presented to State Street for payment, State Street will redeem a
sufficient number of full and fractional shares in your account to cover
the amount of the draft. This enables you to continue earning daily income
dividends until the draft has cleared.
If you elect to use this method of redemption, please so signify on
the Check Writing Privilege Form. You will be subject to State Street's
rules and regulations governing such drafts, including the right of State
Street not to honor drafts in amounts exceeding the value of the regular
account at the time they are presented for payment. Drafts in excess of
the value of the Davis Government Money Market Fund regular account
cannot be honored by redemption of any other Fund account. The Company
and State Street reserve the right to modify or terminate this service at
any time.
A shareholder may issue a "Stop Payment" on any draft by calling
State Street at (617) 847-8543. The "Stop Payment" order will become
effective if it is given on a timely basis pursuant to the "Stop Payment"
rules in effect at State Street with respect to their regular checking
accounts.
Expedited Redemption Privilege. Accounts other than prototype
retirement plans and IRAs may designate on the Expedited Redemption
Privilege Form an account with any commercial bank and have the cash
proceeds from the redemption sent, by either wire or electronically
through the ACH, to a pre-designated bank account. For the Davis
Government Money Market Fund the proceeds may be sent by wire if the
amount is $5,000 or more. State Street will accept instructions to
redeem shares and make payment to a pre-designated commercial bank
account by (a) written request signed by the registered shareholder, (b)
telephone request by any Qualified Dealer to Davis Selected Advisers, L.P.
(1-800-279-0279), and (c) by telegraphic request by the shareholder to
State Street. At the time of redemption, the shareholder must request
that federal funds be wired or transferred by ACH to the bank account
designated on the application. The redemption proceeds under this
procedure may not be directed to a savings bank, savings and loan or credit
union account except by arrangement with its correspondent bank or
unless such institution is a member of the Federal Reserve System. The
Adviser, in its discretion, may limit the amount that may be redeemed by
a shareholder in any day under the Expedited Redemption Privilege to
$25,000. There is a $5 charge by State Street for wire service, and
receiving banks may also charge for this service. Payment by ACH will
arrive usually at your bank two banking days after your call. Payments by
ACH is usually credited to your bank account on the next business day
after your call. The Expedited Redemption Privilege may be terminated,
modified or suspended by the Company at any time. See "Telephone
Privilege".
The name of the registered shareholder and corresponding Fund
account number must be supplied. The Expedited Redemption Privilege
Form provides for the appropriate information concerning the commercial
bank and account number. Changes in ownership, account number
(including the identity of your bank) or authorized signatories of the
pre-designated account may be made by written notice to State Street
with your signature and those of new owners or signers on the account
guaranteed by a commercial bank or trust
<PAGE>
company. Additional documentation may be required to change the designated
account when shares are held by a corporation, partnership, executor,
administrator, trustee or guardian.
If a shareholder seeks to use the check writing privilege or
expedited redemption privilege to a pre-designated bank account to
redeem Davis Government Money Market Fund shares recently purchased by
check (whether by regular or expedited method), the fund will refuse to
accept telephone redemption requests when made and to honor redemption
drafts when presented unless it is then reasonably assured of the
collection of the check representing the purchase (normally up to 15 days
after receipt of such check). This result can be avoided by investing by
wire.
Maintenance Fees. To help relieve the Davis Government Money
Market Fund's high cost of maintaining small accounts, there is a $10
charge imposed on all accounts whose net asset value has been reduced to
less than $1,000. This charge is collected by redemption in December of
each year and is paid to the Davis Government Money Market Fund.
By Telephone. You can redeem shares by telephone and receive a
check by mail, but please keep in mind:
The check can only be issued for up to $25,000;
The check can only be issued to the registered owner (who must be an
individual);
The check can only be sent to the address of record; and
Your current address of record must have been on file for 30 days.
Automatic Withdrawals Plan. Under the Automatic Withdrawals
Plan, you can indicate to State Street how many dollars you would like to
receive each month or each quarter. Your account must have a value of at
least $10,000 to start a plan. Shares are redeemed so that you will
receive the payment you have requested approximately in the middle of the
month. Withdrawals involve redemption of shares and may produce gain or
loss for income tax purposes. Shares of a Fund initially acquired by
exchange from any of the other Davis Funds will remain subject to an
escrow or segregated account to which any of the exchanged shares were
subject. If you utilize this program using Class B shares, any applicable
contingent deferred sales charges will be imposed on such Class B shares
redeemed. Purchase of additional shares concurrent with withdrawals
may be disadvantageous to you owing to tax consequences. If the amount
you withdraw exceeds the dividends on your shares, your account will
suffer depletion. Your Automatic Withdrawals Plan may be terminated by
you at any time without charge or penalty. The Company reserves the
right to terminate or modify the Automatic Withdrawals Plan at any time.
Involuntary Redemptions. To relieve the Company of the cost of
maintaining uneconomical accounts, the Company may effect the
redemption of shares at net asset value in any account if the account, due
to shareholder redemptions, has a value of less than $250. At least 60
days prior to such involuntary redemption, the Company will mail a notice
to the shareholder so that an additional purchase may be effected to avoid
such redemption.
Subsequent Repurchases. After some of or all your Class A or Class
B shares are redeemed or repurchased, you may decide to put back all or
part of your proceeds into the same class of the Fund's shares. Any such
shares will be issued without sales charge at the net asset value next
determined after you have returned the amount of your proceeds. In
addition, any CDSC assessed on Class B shares will be returned to the
account. Class B shares will be deemed to have been purchased on the
original purchase date for purposes of calculating the CDSC and conversion
period. This can be done by sending the Company or the Adviser a letter,
together with a check for the reinstatement amount. The letter must be
received, together with the payment, within 30 days after the redemption
or repurchase. You can only use this privilege once.
<PAGE>
Tax Implications. Redemption of shares may result in a gain or loss
for tax purposes. If a loss is realized on shares held for six months or
less, and you received a capital gain dividend during that period, then any
tax loss is treated as a long-term capital loss to the extent of the capital
gain dividend. See "Federal Income Taxes".
DETERMINING THE PRICE OF SHARES
The net asset value of a Fund's shares is the value of the Fund's
assets, minus its liabilities, divided by the total number of shares
outstanding. Valuation of a Fund's portfolio securities (which comprise
most of a Fund's assets) is based upon their market valuation. Securities
traded on a national securities exchange are valued at the last published
sales prices on the principal exchange where listed, or, in the absence of
recorded sales, at the average of closing bid and asked prices on such
exchange. Over-the-counter securities are valued at the average of
closing bid and asked prices. Fixed-income securities may be valued on the
basis of prices provided by a pricing service. If no quotations are
available, the fair value of the investment is determined by or at the
direction of the Board of Directors. Investments in short-term securities
(maturing in sixty days or less) are valued at amortized cost unless the
Board of Directors determines that such cost is not a fair value.
Normally, the share price of the Davis Government Money Market Fund does
not fluctuate. However, if there are unusually rapid changes in interest
rates which in the Board's view cause a material deviation between
amortized cost and market value, the Board will consider whether such
conditions require taking any temporary action to maintain the normal
fixed price or to prevent material dilution or other unfavorable results to
shareholders. Such action could include withholding dividends, paying
dividends out of surplus, realizing gains or losses or using market
valuation.
The net asset value per share is normally determined as of the
earlier of the close of the New York Stock Exchange or 4:00 p.m. Eastern
Time on each day the Exchange is open. The price per share for purchases
or redemptions made directly through State Street normally is such value
next computed after State Street receives the purchase order or
redemption request. If the purchase order or redemption request is placed
with your dealer, then the applicable price is normally computed as of
4:00 p.m. Eastern Time on the day the dealer receives the order, provided
that the dealer receives the order before 4:00 p.m. Eastern Time.
Otherwise, the applicable price is the next determined net asset value. It
is the responsibility of your dealer to promptly forward purchase and
redemption orders to the Adviser. Note that in the case of redemptions
and repurchases of shares owned by corporations, trusts or estates, State
Street may require additional documents to effect the redemption and the
applicable price will be determined as of the close of the next
computation following the receipt of the required documentation. See
"Redemption of Shares".
DIVIDENDS AND DISTRIBUTIONS
Davis Growth Opportunity Fund and Davis Financial Fund. Income
dividends are paid semi-annually. Distributions from any net realized
capital gains are distributed annually.
Davis Government Bond Fund. Income dividends are paid monthly. You
will receive quarterly confirmation statements for dividends declared and
shares purchased through reinvestment of dividends. Distributions from
any net realized capital gain not offset by capital loss carryovers are
distributed annually. The Davis Government Bond Fund declares
distributions based on the Adviser's projections of estimated net
investment income and net realized short-term gains. The amount of each
distribution may differ from actual net investment income and gains
determined in accordance with generally accepted accounting principles.
The Davis Government Bond Fund at times may continue to pay
distributions based on expectations of future investment results and to
provide stable distributions for its shareholders even though, as a result
of temporary market conditions or other factors (including losses realized
later in a fiscal year which have the effect of affecting previously
realized gains), the Davis Government Bond Fund may have failed to
achieve projected
<PAGE>
investment results for a given period. In such cases, the Davis Government
Bond Fund's distributions may include a return of capital to shareholders.
Shareholders who reinvest their distributions are largely unaffected by such
returns of capital. In the case of shareholders who do not reinvest, a
return of capital is equivalent to a partial redemption of the shareholder's
investment.
Davis Government Money Market Fund. Dividends from net income are
declared daily on shares outstanding as of the close of business the
preceding day and are paid monthly. You will receive monthly
confirmation statements for dividends declared and shares purchased
through reinvestment of dividends. Income for Saturdays, Sundays and
holidays are accrued on Fridays. Dividends declared during each calendar
month are paid on the last business day of the month. Shares earn
dividends as of the first business day after the effective purchase date up
through the date of redemption.
Davis Convertible Securities Fund and Davis Real Estate Fund. Income
dividends are normally paid quarterly. Distributions from any net realized
capital gains are made annually.
All Funds. Because Class B shares incur higher distribution service
fees and bear certain other expenses, such class will have a higher
expense ratio and will pay correspondingly lower dividends than Class A
shares. Information concerning distributions will be mailed to
shareholders annually. Shareholders have the option to receive all
dividends and distributions in cash, to have all dividends and distributions
reinvested, or to have income dividends and short-term capital gain
distributions paid in cash and long-term capital gain distributions
reinvested. The reinvestment of dividends and distributions is made at
net asset value (without any sales charge) on the dividend payment date.
For the protection of the shareholder, upon receipt of the second dividend
check which has been returned to the Transfer Agent as undeliverable,
undelivered dividends will be invested in additional shares at the current
net asset value and the account designated as a dividend reinvestment
account.
FEDERAL INCOME TAXES
This section and the additional tax information in the Statement of
Additional Information are not intended to be a full discussion of all the
aspects of the federal income tax law and its effects on shareholders.
Shareholders may be subject to state and local taxes on distributions.
Each investor should consult his or her own tax adviser regarding the
effects of federal, state and local tax laws on investments in the Funds.
Under the Internal Revenue Code (the "Code"), the Funds are treated
as separate entities. The Company intends to continue to qualify the
Funds as regulated investment companies under the Code and, if so
qualified, the Funds will not be liable for federal income tax to the extent
their earnings are distributed. If, for any calendar year, the required
distribution of the Funds exceed the amount distributed, an excise tax
equal to 4% of the excess will be imposed. The Company intends to make
distributions during each calendar year sufficient to prevent imposition of
the excise tax.
Distributions of net investment income and of net realized
short-term capital gains will be taxable to shareholders as ordinary
income. Distributions of net long-term capital gains will be taxable to
shareholders as long-term capital gain regardless of how long the shares
have been held. Distributions will be treated the same for tax purposes
whether received in cash or in additional shares.
A gain or loss for tax purposes may be realized on the redemption of
shares. If the shareholder realizes a loss on the sale or exchange of any
shares held for six months or less and if the shareholder received a
capital gain distribution during such period, then such loss is treated as a
long-term capital loss to the extent of such capital gain distribution.
<PAGE>
Davis Real Estate Fund may invest in real estate investment trust
("REITs") that hold residual interests in real estate mortgage investment
conduits ("REMICs"). Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of the Fund's income from a
REIT that is attributable to the REIT's residual interest in a REMIC
(referred to in the Code as an "excess inclusion") will be subject to
Federal income tax in all events. See "Certain Federal Tax Aspects of
Mortgage REITs" in the Statement of Additional Information.
COMPANY SHARES
The Company's capital stock is currently divided into six series of
common stock. Each series represents one of the Company's Funds. Each
series is divided into classes as described previously. The Board of
Directors may offer additional Funds and classes in the future and may at
any time discontinue the offering of any Fund or class. Each share, when
issued and paid for in accordance with the terms of the offering, is fully
paid and non-assessable. Shares have no preemptive or subscription
rights and are freely transferable. Each share of each Fund represents an
interest in the assets of that Fund and has identical voting, dividend,
liquidation and other rights and the same terms and conditions as any
other shares of that Fund except that (i) each dollar of net asset value per
share is entitled to one vote, (ii) the expenses related to a particular
class, such as those related to the distribution of each class and the
transfer agency expenses of each class are borne solely by each such class
and (iii) each class of shares votes separately with respect to provisions
of the Rule 12b-1 Distribution Plan which pertains to a particular class
and other matters for which separate class voting is appropriate under
applicable law. Each fractional share has the same rights, in proportion,
as a full share. Shares do not have cumulative voting rights; therefore,
the holders of more than 50% of the voting power of the Company can elect
all of the directors of the Company.
In accordance with Maryland law and its Articles of Incorporation,
the Company does not hold regular annual shareholder meetings.
Shareholder meetings are held when they are required under the
Investment Company Act of 1940 or otherwise called for special purposes.
Special meetings may be called upon the written request of holders of at
least 10% of the votes that could be cast at the meeting.
PERFORMANCE DATA
From time to time, quotations of each Funds' performance may be
included in advertisements, sales literature or shareholder reports. All
performance figures are historical, show the performance of a
hypothetical investment and are not intended to indicate future
performance. Performance will consist of quotations of total return and,
in the case of funds with income as the primary objective, yield
quotations.
Total return is the average annual compounded rate of return of an
initial investment for periods of one, five and ten years and may include
such return for shorter or longer periods up to and including the life of the
Fund. Total return is calculated separately for each class. This
calculation assumes reinvestment of all dividends and distributions and
deduction of all charges and expenses, including the maximum front-end or
applicable contingent deferred sales charge. In addition, a table showing
the performance of an assumed investment of $10,000 may be used from
time to time. Each may also quote total return and aggregate total return
performance data for various specified time periods. Such data will be
calculated substantially as described above, except that (1) the rates of
return calculated will not be average annual rates, but rather, actual
annual, annualized or aggregate rates of return and (2) sales charges will
not be included with respect to annual or annualized rates of return
calculations. Aside from the impact on the performance data calculations
of including or excluding the sales charges, actual annual or annualized
total return data generally will be lower than average annual total return
data since the average annual rates of return reflect compounding;
aggregate total return data generally will be higher than average annual
total return data since the aggregate rates of return reflect compounding
over a longer period of time.
<PAGE>
"Yield" when quoted is computed by dividing the net investment
income per share (as defined in applicable SEC regulations) earned during
a 30-day period (or a 7-day period for Davis Government Money Market
Fund) by the maximum offering price per share on the last day of the
period. Yield is an annualized figure, in that it assumes that the same
level of net investment income is generated over a one year period.
"Effective yield" is determined similarly but, when annualized, the income
earned by an investment is assumed to be reinvested. Thus, the effective
yield figure will be slightly higher than the yield figure due to the
compounding effect of the assumed reinvestment.
In reports or in other communications to shareholders and in
advertising material, the performance of each Fund may be compared to
recognized unmanaged indices or averages of the performance of similar
securities. Also, the performance of each Fund may be compared to that of
other funds of similar size and objectives as listed in the rankings
prepared by Lipper Analytical Services, Inc. or similar independent mutual
fund rating services, and each Fund may use evaluations published by
nationally recognized independent ranking services and
publications.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to Davis Selected Advisers,
L.P., by writing to P.O. Box 1688, Santa Fe, NM 87504-1688 or by calling
1-800-279-0279.
APPENDIX
QUALITY RATINGS OF DEBT SECURITIES
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat larger than Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e. they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
<PAGE>
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any longer period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Standard & Poor's Corporation Corporate Bond Ratings
AAA - Debt rated 'AAA' has the highest rating assigned by Standard
and Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB - Debt rated 'BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'BBB-' rating.
B - Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions will
likely impair capacity or willingness to pay interest and repay principal.
The 'B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BB' or 'BB-' rating.
CCC - Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the
<PAGE>
capacity to pay interest and repay principal. The 'CCC' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'B' or 'B-' rating.
CC - The rating 'CC' is typically applied to debt subordinated to
senior debt that is assigned an actual or implied 'CCC' rating.
C - The rating 'C' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC_' debt rating. The 'C'
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
CI - The rating 'CI' is reserved for income bonds on which no interest
is being paid.
D - Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
<PAGE>
DAVIS GOVERNMENT MONEY MARKET FUND
CHECK WRITING PRIVILEGE
/ / If you wish the check writing privilege please check the box to the
left and complete the signature card below.
INFORMATION CONCERNING THE DRAFTS USED FOR THE DAVIS GOVERNMENT
MONEY MARKET FUND CHECK WRITING PRIVILEGE:
1. Your Davis Series, Inc. Davis Government Money Market Fund drafts
are paid from an account of Davis Series, Inc. at State Street Bank and
Trust Company ("State Street").
2. In connection with this account, you will have the same rights and
duties with respect to stop payment orders, "stale" drafts, unauthorized
signatures, alterations, and unauthorized endorsements as bank checking
account customers do under the Massachusetts Uniform Commercial Code.
All notices with regard to those rights and duties must be given to State
Street.
3. Stop payment instructions must be given to State Street, by calling
State Street's service telephone number for Davis Series, Inc.
shareholders: (617) 847-8543. State Street's address is State Street
Bank and Trust Company, c/o The Davis Funds, P. O. Box 8406, Boston, MA.
02266-8406.
4. These rules may be amended from time to time.
- -----------------------------------------------------------------------------
Check Writing Privilege Signature Card (Type or Print)
BY SIGNING THIS SIGNATURE CARD THE UNDERSIGNED AGREE(S) TO BE
SUBJECT TO THE INSTRUCTIONS AND RULES, AS NOW IN EFFECT AND AS
AMENDED FROM TIME TO TIME, OF DAVIS SERIES, INC., THAT PERTAIN TO
THE USE OF REDEMPTION CHECKS. (SOME OF THE CURRENT RULES APPEAR
ABOVE.) EACH SIGNATORY GUARANTEES THE OTHER'S SIGNATURE.
Account Number _____________________________
- ---------------------------------- ----------------------------------
Shareholder Name Co-Shareholder Name
/ / Check here if both signatures / / Check here if only one signature
are required on checks. is required on checks.
If neither box is checked, all checks will require both signatures.
- ---------------------------------- ----------------------------------
Signature Signature
<PAGE>
TERMS AND CONDITIONS FOR A STATEMENT OF INTENTION (CLASS A
SHARES ONLY)
TERMS OF ESCROW:
1. Out of my initial purchase (or subsequent purchases if necessary) 5%
of the dollar amount specified in this Statement will be held in escrow by
State Street in the form of shares (computed to the nearest full share at
the public offering price applicable to the initial purchase hereunder)
registered in my name. For example, if the minimum amount specified
under this statement is $100,000 and the public offering price applicable
to transactions of $100,000 is $10 a share, 500 shares (with a value of
$5,000) would be held in escrow.
2. In the event I should exchange some or all of my shares to those of
another mutual fund for which Davis Selected Advisers, L.P. acts as
adviser, according to the terms of this prospectus, I hereby authorize
State Street to escrow the applicable number of shares of the new fund,
until such time as this Statement is complete.
3. If my total purchases are at least equal to the intended purchases,
the shares in escrow will be delivered to me or to my order.
4. If my total purchases are less than the intended purchases, I will
remit to Davis Selected Advisers, L.P. the difference in the dollar amount
of sales charge actually paid by me and the sales charge which I would
have paid if the total purchase had been made at a single time. If
remittance is not made within 20 days after written request by Davis
Selected Advisers, L.P. or my dealer, State Street will redeem an
appropriate number of the escrowed shares in order to realize such
difference.
5. I hereby irrevocably constitute and appoint State Street
my attorney to surrender for redemption any or all escrowed shares with
full power of substitution in the premises.
6. Shares remaining after the redemption referred to in Paragraph
No. 4 will be credited to my account.
7. The duties of State Street are only such as are herein provided being
purely ministerial in nature, and it shall incur no liability whatever
except for willful misconduct or gross negligence so long as it has acted
in good faith. It shall be under no responsibility other than faithfully to
follow the instructions herein. It may consult with legal counsel and
shall be fully protected in any action taken in good faith in accordance
with advice from such counsel. It shall not be required to defend any legal
proceedings which may be instituted against it in respect of the subject
matter of this Agreement unless requested to do so and indemnified to its
satisfaction against the cost and expense of such defense.
8. If my total purchases are more than the intended purchases and such
total is sufficient to qualify for an additional quantity discount, a
retroactive price adjustment shall be made for all purchases made under
such Statement to reflect the quantity discount applicable to the
aggregate amount of such purchases during the thirteen-month period.
EXPEDITED REDEMPTION PRIVILEGE
/ / If you wish the Expedited Redemption Privilege please check the box
to the left and complete the following information.
I (we) hereby authorize State Street Bank and Trust Company, Davis
Selected Advisers, L. P., and/or the Davis Funds to act upon instructions
received by telephone or telegraph, believed by them to be genuine, and to
redeem shares in my (our) account in any of the Davis Funds and to wire
the proceeds of such redemption to the predesignated bank listed below. I
(we) hereby agree that neither State Street Bank and Trust Company, nor
Davis Selected Advisers, L. P. nor the Davis Funds nor any of their
officers or employees, will be liable for any loss, liability, cost or
expense for acting upon such instructions.
- ---------------------------------- ----------------------------------
Signature of Shareholder Signature of Co-Shareholder
- ---------------------------------- ----------------------------------
Name of Commercial Bank (Title of Account at Bank)
- ---------------------------------- ----------------------------------
(Street) (Account Number at Bank)
- ---------------------------------- ----------------------------------
(City) (State) (Zip) (ABA/Transit Routing Number)
<PAGE>
=============================================================================
TABLE OF CONTENTS
PAGE
Summary.............................................................. 2
Financial Highlights................................................. 6
Investment Objective and Policies.................................... 16
Adviser, Sub-Adviser and Distributor................................. 28
Distribution Plans................................................... 29
Purchase of Shares................................................... 30
Telephone Privilege.................................................. 35
Exchange of Shares................................................... 35
Redemption of Shares................................................. 36
Determining the Price of Shares...................................... 40
Dividends and Distributions.......................................... 40
Federal Income Taxes................................................. 41
Company Shares...................................................... 42
Performance Data..................................................... 42
Shareholder Inquiries................................................ 43
Appendix - Quality Ratings of Debt Securities........................ 43
=============================================================================
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
Davis Series, Inc.
124 East Marcy Street
Santa Fe, New Mexico 87501
1-800-279-0279
TABLE OF CONTENTS
Topic Page
Investment Restrictions.................................................. 2
High Yield, High Risk Debt Securities.................................... 4
Additional Information Concerning Davis Government Bond Fund............. 6
Hedging of Foreign Currency Risks........................................ 6
Repurchase Agreements.................................................... 8
Writing Covered Call Options............................................. 8
Federal Tax Aspects of Certain Mortgage Reits for Davis Real EstateFund.. 8
Portfolio Transactions................................................... 9
Directors and Officers................................................... 10
Directors' Compensation Schedule......................................... 12
Certain Shareholders of the Funds........................................ 12
Investment Advisory Services............................................. 15
Custodian................................................................ 17
Auditors................................................................. 17
Determining the Price of Shares.......................................... 18
Reduction of Class A Sales Charge........................................ 18
Distribution of Fund Shares.............................................. 19
Performance Data......................................................... 20
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus dated May 1, 1996. The
Prospectus may be obtained from the Company.
The Company's December 31, 1995 Annual Report accompanies this
Statement of Additional Information. The Financial Statements appearing
in this report are incorporated herein by reference.
<PAGE>
INVESTMENT RESTRICTIONS
The investment restrictions set forth below may not be changed
with respect to any Fund 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.
Restrictions In General
1. The Funds may not purchase or sell commodities or commodity
contracts, except that the Funds other than the Davis Government Bond
Fund and Davis Government Money Market Fund may invest in contracts in
respect to foreign currencies for hedging (risk reduction) purposes.
2. The Funds other than the Davis Government Money Market Fund may
invest in securities secured by real estate or interests therein or
securities issued by companies which invest in real estate or interests
therein, but will not otherwise invest in real estate. (This does not
prevent a Fund from owning and liquidating real estate or real estate
interests incident to a default on portfolio securities.) The Davis
Government Money Market Fund may not invest in real estate, interests
therein or real estate investment trusts.
3. The Funds other than the Davis Government Money Market Fund may
not purchase more than 10% of any one class of an issuer's securities,
other than securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities ("U.S. Government Securities"), repurchase
agreements relating thereto, certificates of deposit or the like, bankers'
acceptances or bank repurchase agreements. For purposes of this
restriction, all debt securities of an issuer are deemed to comprise a
single class. The Davis Government Money Market Fund, may not purchase
more than 10% of the outstanding debt securities (other than U.S.
Government Securities and repurchase agreements related thereto) of any
one issuer.
4. The Funds may not purchase the securities (other than U.S.
Government Securities or repurchase agreements related thereto) of any
issuer if immediately after such purchase more than 5% of the value of a
Fund's total assets would be invested in such issuer; except that up to 25%
of the value of the total assets of Davis Financial Fund, Convertible
Securities Fund and Davis Real Estate Fund may be invested without regard
to this 5% limitation. This restriction does not apply to the Davis
Government Money Market Fund.
5. The Funds may not invest in or write puts, calls or combinations
thereof ("option transactions"), except that a Fund other than the Davis
Government Money Market Fund may (a) write calls so long as at the time
of so doing the security underlying the call is listed on a national
securities exchange, the call is issued by The Options Clearing Corporation
and is traded on a registered securities exchange, such calls do not exceed
10% of that Fund's total assets and are covered calls, (b) make closing
purchase transactions in order to close out outstanding call options
previously written by a Fund and (c) engage in option transactions in
respect of foreign currencies for hedging purposes. (The convertible
feature of convertible securities are not deemed to be puts, calls or
combinations thereof.) With respect to the Davis Government Money
Market Fund, it may not invest in puts, calls, straddles, spreads or any
combination thereof.
6. The Funds may not buy the securities of companies in continuous
operation for less than three years (including predecessors) if more than
5% of a Fund's total assets would then be invested in such securities. This
does not apply to the Davis Government Bond Fund or the Davis Government
Money Market Fund which both invest in U.S. Government Securities or to
investments made by the Davis Real Estate Fund in real estate investment
trusts ("REITs").
7. The Funds may not buy securities of other registered investment
companies, except that Funds other than Davis Government Bond Fund and
Davis Government Money Market Fund may invest in (i) shares of
investment companies investing primarily in foreign securities provided
that such purchase does not cause a Fund to (a) have more than 5% of the
value of its total assets invested in any one such company, (b) have more
than 10% of the value of its total assets invested in the aggregate of all
such companies, or (c) own more than 3% of the total outstanding voting
stock of any such company. All Funds may acquire securities of other
registered companies as a part of a merger, consolidation, reorganization
or acquisition of assets.
<PAGE>
8. The Funds may not purchase securities on margin, make short sales
of securities or maintain a short position, except that (i) all Funds except
the Davis Growth Opportunity Fund and Davis Government Money Market
Fund may engage in such investments when at the time of sale a Fund has,
by reason of its ownership of other securities, the right to obtain
securities equivalent in kind and amount to the securities sold without
payment of additional consideration and such other securities are retained
so long as the Fund is in a short position and (ii) all Funds except the
Davis Government Bond Fund and Davis Government Money Market Fund may
engage in such transactions where they are in respect to foreign
currencies for hedging purposes. These restrictions do not apply to
transactions in respect to foreign currencies for hedging purposes.
9. The Funds may not invest for the purpose of exercising control or
management of other companies.
10. The Funds, other than the Davis Government Money Market Fund, may
not borrow money except from banks for extraordinary or emergency
purposes in amounts not exceeding 10% of the value of a Fund's total
assets (excluding the amount borrowed) at the time of such borrowing.
The Funds may not pledge or hypothecate any of their assets, except in
connection with permitted borrowing in amounts not exceeding 15% of the
value of a Fund's total assets (excluding the amount borrowed) at the time
of such borrowing. These restrictions do not apply to the use of margin
deposits in connection with transactions in foreign currencies for hedging
purposes. The Davis Government Money Market Fund may not borrow except
from banks for extraordinary emergency purposes in amounts not
exceeding 25% of the value of its total assets (including the amount
borrowed) and may pledge or hypothecate assets not exceeding 10% of the
value of its net assets (including any amount borrowed) in connection with
such borrowing. Both limits are calculated as of the time of such
borrowing.
11. The Funds may not buy or continue to hold securities if any officers
or directors of the Company, the Adviser or the Adviser's General Partner
own too many of the same securities. This would happen if any of these
individuals own 1/2 of 1% or more of the securities and all such
individuals who own that much or more own 5% of such securities.
12. The Funds do not engage in the underwriting of securities; however,
the Funds may technically be considered "underwriters" if they sell
restricted securities.
13. The Funds may not make loans except through the purchase of debt
obligations (including entering into repurchase agreements) in accordance
with the Fund's investment objectives and policies.
Securities received upon conversion or exercise of warrants or
subscription rights and securities remaining upon the breakup of units or
detachment of warrants may be retained to permit advantageous
disposition.
Special Restriction as to Davis Growth Opportunity Fund and Davis Government
Bond Fund
1. Neither Fund may purchase the securities of issuers conducting their
principal business activities in the same industry if immediately after
such purchase the value of a Fund's investments in such industry would
exceed 25% of the value of its total assets, provided that (a) as to utility
companies, the gas, electric, water and telephone businesses will be
considered separate industries and, as to finance companies, personal
credit and business credit will be considered separate industries, and (b)
there is no limitation with respect to or arising out of investments in U.S.
Government Securities and repurchase agreements with respect thereto,
certificates of deposit or the like, bankers' acceptances and bank
repurchase agreements.
2. Neither Fund may engage in arbitrage transactions.
Special Restrictions as to Davis Government Money Market Fund
1. The Fund may not purchase any security which has a maturity date
exceeding that prescribed in Rule 2a-7 under the Investment Company Act
of 1940
2. The Fund may not invest in restricted securities; provided, however,
that this restriction shall not apply to repurchase agreements.
3. The Fund may not invest in oil, gas or other mineral exportations or
development programs.
<PAGE>
Special Restrictions as to Davis Financial Fund
1. The Fund may not invest less than 25% of its total assets (except
investments for temporary defensive periods) in companies principally
engaged in each of the banking and financial services industries.
Companies in the banking industry include U.S. and foreign commercial and
industrial banking and savings institutions (including their parent holding
companies). Companies in the financial services industry include
commercial and industrial finance companies, diversified financial
services companies, investment banking, securities brokerage and
investment advisory companies, leasing companies and insurance and
insurance holding companies.
2. Except for companies in the industries identified above, the Fund
may not purchase the securities of issues conducting their principal
business activities in the same industry if immediately after such
purchase the value of the Fund's investments in such industry would
constitute 25% or more of the value of the Fund's total assets, provided
that (a) as to utility companies, the gas, electric, water and telephone
businesses will be considered separate industries, and (b) there is no
limitation with respect to or arising out of investments in U.S.
Government Securities and repurchase agreements fully collateralized by
such Government Securities.
Special Restrictions as to Davis Convertible Securities Fund
1. Convertible Securities Fund may not purchase the securities of
issuers conducting their principal business activities in the same industry
if immediately after such purchase the value of the Fund's investments in
such industry would constitute 25% or more of the value of the Fund's
total assets, provided that (a) as to utility companies, the gas, electric,
water and telephone businesses will be considered separate industries,
and (b) there is no limitation with respect to or arising out of
investments in U.S. Government Securities and repurchase agreements
fully collateralized by such government securities.
Special Restrictions as to Davis Real Estate Fund
1. Real Estate Securities Fund may not purchase the securities of
issuers conducting their principal business activities in the same industry
if immediately after such purchase the value of the Fund's investments in
such industry would constitute 25% or more of the value of the Fund's
total assets, provided that (a) as to utility companies, the gas, electric,
water and telephone businesses will be considered separate industries,
and (b) there is no limitation with respect to or arising out of
investments in U.S. Government Securities and repurchase agreements
fully collateralized by such government securities or investments in
securities of companies in the real estate industry or which own
significant amounts of real estate or have products or services relating to
the real estate industry.
State Undertakings and Non-Fundamental Policies
As a matter of non-fundamental policy, the Funds have voluntarily
undertaken with various states not to invest in oil, gas or mineral leases.
In addition, also as a matter of non-fundamental policy, all the Funds,
except the Davis Government Money Market Fund, have voluntarily
undertaken with certain states: (1) not to acquire or purchase shares of
other open-end investment companies, (2) not to invest more than 5% of
their respective net assets in warrants valued at the lower of cost or
market (included within that amount, but not to exceed 2% of the value of
their respective net assets, may be warrants which are not listed on the
New York or American Stock Exchange), and (3) not to purchase real
property, including private real estate limited partnership interests, but
this does not prevent the Funds from investing in readily marketable
securities of real estate investment trusts or other companies which own
or invest in real estate. All the Funds, except the Davis Real Estate Fund,
have additionally undertaken with a state to limit their investments in
restricted securities to 10% of their respective total assets, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933. These undertakings and other non-fundamental
policies, including the investment objectives of the Funds, may be changed
without shareholder approval.
HIGH YIELD, HIGH RISK DEBT SECURITIES
As discussed in the prospectus, Davis Convertible Securities Fund
and Davis Real Estate Fund may invest in certain high yield, high risk
securities, commonly referred to as "junk bonds." These lower rated
securities are
<PAGE>
considered speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation and generally will
involve more credit risk than securities in the higher rating categories.
Accordingly, an investment in the Funds may not constitute a complete
investment program and may not be appropriate for all investors, or for short
term investing.
The market values of such securities tend to reflect individual
corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower rated securities also tend to be more sensitive
to economic and industry conditions than are higher rated securities.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis regarding individual lower rated bonds and the high
yield, high risk market may depress the prices for such securities. If the
negative factors such as the aforementioned adversely impact the market
value of high yield, high risk securities, net asset value will be adversely
affected.
The high yield, high risk bond market comprised a small piece of the
general bond market until the middle 1980's when issuance increased
dramatically. Since that time the high yield, high risk bond market has
experienced only one recessionary environment but never has been exposed
to a significant increase in interest rates. During the economic downturn
that was experienced, prices of high yield, high risk bonds declined and
defaults rose. Future economic downturns and/or significant increases in
interest rates are likely to have a negative effect on the high yield, high
risk bond market and consequently on the value of these bonds, as well as
increase the incidence of defaults on such bonds.
High yield, high risk bonds may be issued in a variety of
circumstances. Some of the more common circumstances are issuance by
corporations in the growth stage of their development, in connection with
a corporate reorganization or as part of a corporate takeover. Companies
that issue such high yielding, high risk bonds often are highly leveraged
and may not have available to them more traditional methods of financing.
Therefore, the risk associated with acquiring the bonds of such issuers
generally is greater than is the case with higher rated bonds. For
example, during an economic downturn or recession, highly leveraged
issuers of high yield, high risk bonds may experience financial stress.
During such periods, such issuers may not have sufficient revenues to
meet their principal and interest payment obligations. The issuer's ability
to service its debt obligations may also be adversely affected by specific
corporate developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing.
The risk of loss due to default by the issuer is significantly greater for
the holders of high yielding bonds because such bonds are generally
unsecured and are often subordinated to other creditors of the issuer. The
costs associated with recovering principal and interest once a security
has defaulted may impact the return to holders of the security. If a Fund
experiences unexpectedly large net redemptions, it may be forced to sell
high yield, high risk bonds out of the portfolio without regard to the
investment merits of such sales. This could decrease the Fund's net
assets. Since some of a Fund's expenses are fixed, this could also reduce
the Fund's rate of return.
The Funds may have difficulty disposing of certain high yield, high
risk bonds because there may be a thin trading market for such bonds.
Because not all dealers maintain markets in all high yield, high risk bonds,
the Company anticipates that such bonds could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid
secondary market may have an adverse impact on market price and the
ability to dispose of particular issues and may also make it more difficult
to obtain accurate market quotations or valuations for purposes of valuing
a Fund's assets. Market quotations generally are available on many high
yield issues only from a limited number of dealers and may not
necessarily represent firm bid prices of such dealers or prices for actual
sales. In addition, adverse publicity and investor perceptions may
decrease the values and liquidity of high yield, high risk bonds regardless
of a fundamental analysis of the investment merits of such bonds. To the
extent that a Fund purchases illiquid or restricted bonds, it may incur
special securities registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties relating to such bonds.
Bonds may be subject to redemption or call provisions. If an issuer
exercises these provisions when investment rates are declining, the
Company will be likely to replace such bonds with lower yielding bonds
resulting in a decreased return. Zero coupon, pay-in-kind and deferred
interest bonds involve additional special considerations. Zero coupon
bonds are debt obligations that do not entitle the holder to any periodic
payments of interest prior to maturity or a specified cash payment date
when the securities begin paying current interest (the "cash payment
date") and therefore are issued and traded at a discount from their face
amount or par value. The market prices of zero coupon securities are
generally more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates
to a greater degree than do securities
<PAGE>
paying interest currently having similar maturities and credit quality.
Pay-in-kind bonds pay interest in the form of other securities rather than
cash. Deferred interest bonds defer the payment of interest to a later date.
Zero coupon, pay-in-kind or deferred interest bonds carry additional risk in
that, unlike bonds which pay interest in cash throughout the period to
maturity, a Fund will realize no cash until the cash payment date unless a
portion of such securities are sold. There is no assurance of the value or
the liquidity of securities received from pay-in-kind bonds. If the issuer
defaults, a Fund may obtain no return at all on its investment. To the extent
that a Fund invests in bonds that are original issue discount, zero coupon,
pay-in-kind or deferred interest bonds, the Fund may have taxable interest
income in excess of the cash actually received on these issues. In order to
distribute such income to avoid taxation to a Fund, the Fund may have to
sell portfolio securities to meet its taxable distribution requirements
under circumstances that could be adverse.
Federal tax legislation limits the tax advantages of issuing certain
high yield, high risk bonds. This could have a materially adverse effect on
the market for high yield, high risk bonds.
ADDITIONAL INFORMATION CONCERNING DAVIS GOVERNMENT BOND FUND
Davis Government Bond Fund will invest in debt securities which are
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. For temporary periods, to accommodate inflows of
cash awaiting more permanent investment, it may also invest in
short-term investments eligible for purchase by Davis Government Money
Market Fund. U.S. Government securities include (1) U.S. Treasury
obligations, which differ only in their interest rates, maturities and
times of issuance, U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years); and (2) obligations issued
or guaranteed by U.S. Government agencies and instrumentalities which
are supported by any of the following: (a) the full faith and credit of the
U.S. Government (such as GNMA Certificates), (b) the right of the issuer to
borrow an amount limited to a specific line of credit from the U.S.
Government (such as Federal Farm Credit Bank - FFCB), (c) discretionary
borrowing authority of the U.S. Government agency or instrumentality
(such as Student Loan Marketing Association - SLMA), or (d) the credit of
the instrumentality (such as Financing Corporation - FICO).
The Fund may engage in portfolio trading primarily to take advantage
of yield disparities. Examples of some circumstances in which it may
employ trading are: (1) shortening the average maturity of the portfolio;
(2) lengthening the average maturity of the portfolio; and (3) changing
from one bond to an essentially similar bond when their respective prices
are distorted due to market factors. However, due to the fact that it is
primarily invested in U.S. Government Securities, trading is not an
emphasis of the Fund and portfolio turnover is expected to continue to be
low.
HEDGING OF FOREIGN CURRENCY RISKS
Davis Growth Opportunity Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund, may purchase or
sell forward foreign currency exchange contracts ("forward contracts") to
attempt to minimize the risk to the Funds from adverse changes in the
relationship between the U.S. dollar and foreign currencies. 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 futures position in a negotiated currently non-regulated
market. The Funds 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, for example, when the
Sub-Adviser believes that a foreign currency may suffer a substantial
decline against the U.S. dollar, the Funds may enter into a forward sale
contract to sell an amount of that foreign currency approximating the
value of some or all of its portfolio securities denominated in such
foreign currency, or when the Sub-Adviser believes that the U.S. dollar
may suffer a substantial decline against a foreign currency, the Funds 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 in respect to a different foreign currency
for a fixed U.S. dollar amount ("cross hedge"). This may be done, for
example, where the 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 Funds are denominated.
Davis Growth Opportunity Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund, may purchase and
write put and call options on foreign currencies for the purpose of
protecting against
<PAGE>
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 the Fund's position, the Funds 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.
Davis Growth Opportunity Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund, 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 will not enter into any futures contracts or options on currency
futures contracts if immediately thereafter the aggregate of initial
margin deposits on all the outstanding currency futures contracts and
premiums paid on outstanding options on currency futures contracts would
exceed 5% of the market value of total assets (excluding in such market
value any in-the-money amount of any option).
Davis Growth Opportunity Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund, 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. The Funds will not use leverage. 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 its
obligations under the hedge strategies. The Funds will not enter into a
currency hedging position that exposes it 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 cash and high grade liquid debt securities in a
segregated account with its custodian bank in the amount prescribed. The
Fund's custodian will maintain the value of such segregated account equal
to the prescribed amount by adding or removing additional cash or 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 ability of Davis Growth Opportunity Fund, Davis Financial Fund,
Davis Convertible Securities Fund and Davis Real Estate Fund, to dispose
of its 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 to realize any profit and (ii) the Funds may not be able to sell
currencies covering an option written by it 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.
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 its foreign currency
transactions by tax considerations.
<PAGE>
REPURCHASE AGREEMENTS
All of the Funds may engage in repurchase agreement transactions.
A repurchase agreement involves a sale of securities to a Fund, with the
concurrent agreement of the seller (a member bank of the Federal Reserve
System or securities dealer which the Adviser believes to be financially
sound) to repurchase the securities at the same price plus an amount equal
to accrued interest at an agreed-upon interest rate, within a specified
time, usually less than one week, but, on occasion, at a later time. The
repurchase obligation of the seller is, in effect, secured by the underlying
securities, which are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. 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 will not
enter into a repurchase agreement maturing in more than seven days if it
would cause more than 10% of the value of their total assets to be
invested in such transactions. Repurchase agreements are not deemed
illiquid securities for the purpose of the 10% limitation on illiquid
securities.
WRITING COVERED CALL OPTIONS
The Funds other than the Davis Government Money Market Fund may
each write covered call options on a portion of their portfolio securities
and purchase call options in closing transactions. The investment
restrictions provide that such an option may not be written if thereafter
the market value of a Fund's portfolio securities subject to options would
exceed 10% of the value of such Fund's net assets. The Funds would only
write options on securities in their portfolios and would not write options
on loaned securities. The Funds will limit income derived from the
writing of options that expire in less than three months so as to continue
to meet the requirements for qualification as a regulated investment
company under the Internal Revenue Code. As a matter of non-fundamental
policy, none of the Funds intend to write calls if the market value of
portfolio securities subject to such calls would exceed 5% of the value of
a Fund's total assets.
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 obligation is terminated upon exercise of the call option, its
expiration or when a 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, the 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 the Fund would continue to experience such decline.
FEDERAL TAX ASPECTS OF CERTAIN MORTGAGE REITs FOR DAVIS REAL ESTATE FUND
Davis Real Estate Fund may invest in real estate investment trusts
("REITs") that hold residual interests in real estate mortgage investment
conduits ("REMICs"). Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of the Fund's income from a
REIT that is attributable to the REIT's residual interest in a REMIC
(referred to in the Code as an "excess inclusion") will be subject to
Federal income tax. These regulations are also expected to provide that
excess inclusion income of a regulated investment company, such as the
Fund, will be allocated to shareholders of the regulated investment
company in proportion to the dividends received by such shareholders,
with the same consequences as if the shareholders held the related REMIC
<PAGE>
residual interest directly. In general, excess inclusion income allocated
to shareholders (i) cannot be offset by net operating losses (subject to a
limited exception for certain thrift institutions), (ii) will constitute
unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan
or other tax-exempt entity) subject to tax on unrelated business income,
thereby potentially requiring such an entity that is allocated excess
inclusion income, and otherwise might not be required to file a tax return,
to file a tax return and pay tax on such income, and (iii) in the case of a
foreign shareholder, will not qualify for any reduction in U.S. federal
withholding tax. In addition, if at any time during any taxable year a
"disqualified organization" (as defined in the Code) is a record holder of a
share in a regulated investment company, then the regulated investment
company will be subject to a tax equal to that portion of its excess
inclusion income for the taxable year that is allocable to the disqualified
organization, multiplied by the highest federal income tax rate imposed on
corporations.
PORTFOLIO TRANSACTIONS
Davis Selected Advisers, L.P., (the "Adviser") and Tanaka Capital
Management, Inc., the Sub-Adviser for Davis Growth Opportunity Fund (the
"Sub-Adviser"), make investment decisions and arrange for the placement
of buy and sell orders and the execution of portfolio transactions for the
Company subject to review by the Board of Directors. In this regard, the
Adviser and Sub-Adviser will seek to obtain the most favorable price and
execution for the transaction given the size and risk involved. In placing
executions and paying brokerage commissions, the Adviser and
Sub-Adviser consider the financial responsibility and reputation of the
broker or dealer, the range and quality of the services made available to
the Company and the broker's or dealer's professional services, including
execution, clearance procedures, wire service quotations and ability to
provide supplemental performance, statistical and other research
information for consideration, analysis and evaluation by the Adviser's
and Sub-Adviser's staff. In accordance with this policy, brokerage
transactions may not be executed solely on the basis of the lowest
commission rate available for a particular transaction. Research services
provided to the Adviser and Sub-Adviser by or through brokers who effect
portfolio transactions may be used in servicing other accounts managed by
the Adviser and Sub-Adviser and likewise research services provided by
brokers used for transactions of other accounts may be utilized by the
Adviser and Sub-Adviser in performing services for the Funds. Subject to
the requirements of best execution, the placement of orders by securities
firms for shares of the Funds may be taken into account as a factor in the
placement of portfolio brokerage.
On occasions when the Adviser or Sub-Adviser deem the purchase or
sale of a security to be in the best interests of a Fund as well as other
fiduciary accounts, the Adviser or Sub-Adviser may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for other accounts in order to obtain the best net price and
most favorable execution. In such event, the allocation will be made by
the Adviser or Sub-Adviser in the manner considered to be most equitable
and consistent with its fiduciary obligations to all such fiduciary
accounts, including the Fund. In some instances, this procedure could
adversely affect a Fund but the Company deems that any disadvantage in
the procedure would be outweighed by the increased selection available
and the increased opportunity to engage in volume transactions.
The Adviser and Sub-Adviser believe that research from brokers and
dealers is desirable, although not essential, in carrying out its functions,
in that such outside research supplements the efforts of the Adviser and
Sub-Adviser by corroborating data and enabling them to consider the
views, information and analyses of other research staffs. Such views,
information and analyses include such matters as communicating with
persons having special expertise on certain companies, industries, areas
of the economy and/or securities prices, obtaining written materials on
these or other areas which might affect the economy and/or securities
prices, obtaining quotations on securities prices and obtaining
information on the activities of other institutional investors. The Adviser
and Sub-Adviser research, at their own expense, each security included in,
or being considered for inclusion in, a Fund's portfolio. As any particular
research obtained by the Adviser or Sub-Adviser may be useful to a Fund,
the Board of Directors or its Committee on brokerage, in considering the
reasonableness of the commissions paid by a Fund, will not attempt to
allocate, or require the Adviser or Sub-Adviser to allocate, the relative
costs or benefits of research.
With respect to Davis Growth Opportunity Fund, for the years ended
December 31, 1995, 1994 and 1993 brokerage commissions amounted to
$40,769, $64,495 and $64,039, respectively.
With respect to Davis Financial Fund, for the year ended December
31, 1995, brokerage commissions amounted to $76,406, of which $73,706
was paid to brokers who provided research as well as execution and
$2,700 was paid to brokers who sold shares of the Fund as well as
provided research and execution. During the year ended
<PAGE>
December 31, 1994, brokerage commissions amounted to $109,654 of which
$100,264 was paid to brokers who provided research as well as execution and
$9,390 was paid to brokers who sold shares of the Fund as well as
provided research and execution. During the year ended December 31,
1993, brokerage commissions amounted to $154,656, of which $139,761
was paid to brokers who provided research as well as execution and
$14,895 was paid to brokers who sold shares of the Fund as well as
provided research and execution.
With respect to Davis Convertible Securities Fund, during the year
ended December 31, 1995, brokerage commissions amounted to $71,218,
of which $66,436, was paid to brokers who provided research as well as
execution and $4,782 was paid to brokers who sold shares of the Fund, as
well as provided research and execution. During the year ended December
31, 1994, brokerage commissions amounted to $43,886, of which $36,251,
was paid to brokers who provided research as well as execution and
$7,635 was paid to brokers who sold shares of the Fund, as well as
provided research and execution. For the year ended December 31, 1993,
brokerage commissions amounted to $42,451 of which $28,271 was paid
to brokers who provided research as well as execution and $14,180 was
paid to brokers who sold shares of the Fund as well as provided research
and execution.
With respect to Davis Real Estate Fund, during the year ended
December 31, 1995, brokerage commissions amounted to $54,514, of
which $51,394, was paid to brokers who provided research as well as
execution and $3,120 was paid to brokers who sold shares of the Fund as
well as provided research and execution. During the year ended December
31, 1994, brokerage commissions amounted to $40,471, of which $15,100
was paid to brokers who provided research as well as execution and
$25,371 was paid to brokers who sold shares of the Fund as well as
provided research and execution.
Davis Government Bond Fund and Davis Government Money Market
Fund have not paid brokerage commissions during any of these fiscal
years. Generally, securities for these Funds are purchased from and sold
to securities dealers on a principal basis without commissions. Such
transactions may involve profit to the dealer involved.
DIRECTORS AND OFFICERS
The names and addresses of the directors and officers of the
Company are set forth below, together with their principal business
affiliations and occupations for the last five years. The asterisk following
the names of Martin H. Proyect, Shelby M.C. Davis and Jeremy H. Biggs
indicates that they are considered to be "interested persons" of the
Company, as defined in the Investment Company Act. As indicated below,
certain directors and officers of the Fund hold similar positions with the
following funds that are managed by the Adviser: Davis New York Venture
Fund, Inc., Davis High Income Fund, Inc., Davis Tax-Free High Income Fund,
Inc. and Davis International Series, Inc. (collectively the
"Davis Funds").
Wesley E. Bass, Jr. (8/21/31), 710 Walden Road, Winnetka, IL 60093.
Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; President, Bass & Associates (a financial
consulting firm); formerly, First Deputy City Treasurer, City of Chicago,
and Executive Vice President, Chicago Title and Trust Company.
Jeremy H. Biggs (8/16/35),* Two World Trade Center, 94th Floor, New
York, NY 10048. Director and Chairman of the Company and each of the
Davis Funds; Director of the Van Eck Funds; Consultant to the Adviser.
Vice Chairman, Head of Equity Research Department, Chairman of the U.S.
Investment Policy Committee and member of the International Investment
Committee of Fiduciary Trust Company International.
Marc P. Blum (9/9/42), 233 East Redwood Street, Baltimore, MD 21202.
Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; Chief Executive Officer, World Total Return
Fund, L.P.; Member, Gordon, Feinblatt, Rothman, Hoffberger and Hollander,
LLC (attorneys); Director, Mid-Atlantic Realty Trust.
Shelby M.C. Davis 3/20/37),* P.O. Box 205, Hobe Sound, FL 33455.
Director and President of the Company and each of the Davis Funds;
Director/Trustee and Executive Vice President of Selected American
Shares, Inc., Selected Special Shares, Inc. and Selected Capital
Preservation Trust; Director, Chairman and Chief Executive Officer,
Venture Advisers, Inc. effective August 15, 1995; Employee of Capital
Ideas, Inc. (financial consulting firm); Consultant to Fiduciary Trust
Company International; Director, Shelby Cullom Davis Financial
Consultants, Inc.; formerly, Chairman, Venture Pension Advisers, Inc.
<PAGE>
Eugene M. Feinblatt (10/28/19), 233 East Redwood Street, Baltimore, MD
21202. Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; of Counsel, Gordon, Feinblatt, Rothman,
Hoffberger and Hollander, LLC (attorneys).
Jerry D. Geist (5/23/34), 931 San Pedro Dr. S.E., Albuquerque, NM 87108.
Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; Chairman, Santa Fe Center Enterprises;
President and Chief Executive Officer, Howard Energy International
Utilities; Director, CH2M-Hill, Inc.; Retired Chairman and President, Public
Service Company of New Mexico.
D. James Guzy (3/7/36), 508 Tasman Drive, Sunnyvale, CA 94089.
Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; Chairman, PLX Technology, Inc. (a manufacturer
of semi-conductor circuits); Director, Intel Corp. (a manufacturer
semi-conductor circuits), Cirrus Logic Corp. (a manufacturer of
semi-conductor circuits) and Alliance Technology Fund
(a mutual fund).
G. Bernard Hamilton (3/18/37), Avanti Partners, P.O. Box 1119, Richmond,
VA 23218. Director of the Company and each of the Davis Funds except
Davis International Series, Inc.; Managing General Partner, Avanti
Partners, L.P.
LeRoy E. Hoffberger (6/8/25), The Exchange - Suite 215, 1112 Kenilworth
Drive, Towson, MD 21204. Director of the Company and each of the Davis
Funds except Davis International Series, Inc.; of Counsel to Gordon,
Feinblatt, Rothman, Hoffberger and Hollander, LLC (attorneys); Chairman,
Mid-Atlantic Realty Trust; Director and President, CPC, Inc. (a real estate
company); Director and Vice President, Merchant Terminal Corporation;
formerly, Director of Equitable Bancorporation, Equitable Bank and
Maryland National Bank, and formerly, Director and President, O-W Fund,
Inc. (a private investment fund).
Laurence W. Levine (4/9/31), c/o Bigham Englar Jones & Houston, 14 Wall
Street, 21st, Floor, New York, NY 10005-2140. Director of the Company
and each of the Davis Funds except Davis International Series, Inc.;
Partner, Bigham, Englar, Jones and Houston (attorneys); United States
Counsel to Aerolineas Argentina; Director, various private companies.
Martin H. Proyect (10/24/32),* P.O. Box 80176, Las Vegas, NV
89180-0176. Director of the Company and each of the Davis Funds;
Director/Trustee and President of Selected American Shares, Inc.,
Selected Special Shares, Inc. and Selected Capital Preservation Trust.
Formerly, Chairman of the Company until July 31, 1995 and Director,
Chairman and Treasurer, Venture Advisers, Inc. until
August 15, 1995.
Christian R. Sonne (5/6/30), P.O. Box 777, Tuxedo Park, NY 10987.
Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; General Partner of Tuxedo Park Associates (a
land holding and development firm); President and Chief Executive Officer
of Mulford Securities Corporation (a private investment fund) until 1990;
formerly, Vice President of Goldman Sachs & Company (investment
banker).
Edwin R. Werner (4/1/22), 207 Gosling Hill Drive, Manhasset, NY 11030.
Director of the Company and each of the Davis Funds except Davis
International Series, Inc.; President, The Estates of North Hills New York;
formerly, Chairman and CEO, Empire Blue Cross and Blue Shield of New
York.
Carl R. Luff (4/30/54), 124 East Marcy Street, Santa Fe, NM 87501. Vice
President, Treasurer and Assistant Secretary of the Company and each of
the Davis Funds, Selected American Shares, Inc., Selected Special Shares,
Inc. and Selected Capital Preservation Trust; Director, Co-President and
Treasurer, Venture Advisers, Inc. effective August 15, 1995.
Raymond O. Padilla (2/22/51), 124 East Marcy Street, Santa Fe, NM
87501. Vice President, Secretary and Assistant Treasurer of the Company
and each of the Davis Funds; Vice President and Assistant Secretary of
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Senior Vice President, Venture Advisers, Inc.
Carolyn H. Spolidoro (11/19/52), 124 East Marcy Street, Santa Fe, NM
87501. Vice President of the Company and each of the Davis Funds; Vice
President, Venture Advisers, Inc.
Andrew A. Davis (6/25/63), 124 East Marcy Street, Santa Fe, NM 87501.
Vice President of the Company and each of the Davis Funds; Director and
Co-President, Venture Advisers, Inc. effective August 15, 1995; formerly,
Vice President and head of convertible security research, PaineWebber,
Incorporated.
<PAGE>
Christopher C. Davis (7/13/65), 70 Pine Street, 43rd Floor, New York, NY
10270-0108. Vice President of the Company and each of the Davis Funds
except Davis International Series, Inc.; Director, Venture Advisers, Inc.
Eileen R. Street (3/11/62), 124 East Marcy Street, Santa Fe, NM 87501.
Assistant Treasurer and Assistant Secretary of the Company and each of
the Davis Funds, Selected American Shares, Inc., Selected Special Shares,
Inc. and Selected Capital Preservation Trust; Senior Vice President and
Secretary, Venture Advisers, Inc.
Sheldon R. Stein (11/29/28), 30 North LaSalle Street, Suite 2900,
Chicago, IL 60602, Assistant Secretary of the Company and each of the
Davis Funds, Selected American Shares, Inc., Selected Special Shares, Inc.
and Selected Capital Preservation Trust; Partner D'Ancona & Pflaum, the
Company's legal counsel.
Arthur Don (9/24/53), 30 North LaSalle Street, Suite 2900, Chicago, IL
60602, Assistant Secretary of the Company and each of the Davis Funds,
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust; Partner D'Ancona & Pflaum, the Company's
legal counsel.
The Company does not pay salaries to any of its officers. The
Adviser performs certain services on behalf of the Company and is
reimbursed by the Company for the costs of providing these services. See
"Investment Advisory Services."
DIRECTORS' COMPENSATION SCHEDULE
During the fiscal year ended December 31, 1995, the compensation
paid to the directors who are not considered to be interested persons of
the Company was as follows:
Davis Series, Inc.
Aggregate Company Total
Name Compensation Complex Compensation*
----
Wesley E. Bass.................. 9,250 24,375
Marc P. Blum.................... 9,100 23,600
Eugene M. Feinblatt............. 9,200 23,800
Jerry D. Geist.................. 8,000 20,550
D. James Guzy................... 9,100 23,600
G. Bernard Hamilton............. 9,100 23,300
LeRoy E. Hoffberger............. 9,100 23,550
Laurence W. Levine.............. 9,100 23,550
Christian R. Sonne**............ 6,750 19,250
Edwin R. Werner................. 9,100 23,300
* Complex compensation is the aggregate compensation paid, for services
as a Director, by all mutual funds with the same investment adviser.
** Mr. Sonne became a director of the Fund as of July 31, 1995. Until that
time, he was a Director only of Davis New York Venture Fund.
CERTAIN SHAREHOLDERS OF THE FUNDS
The following information sets forth as of March 29, 1996 the name
and holdings of each person known by the Company to be a record owner of
5% or more of the Class A and Class B shares of Davis Growth Opportunity
Fund, Davis Government Bond Fund, Davis Government Money Market Fund,
Davis Financial Fund, Davis Convertible Securities Fund and Davis Real
Estate Fund and Class C shares of Davis Government Money Market Fund and
the shares of the Funds beneficially owned by the directors and officers of
the Company as a group. As of such date there were 1,348,697.958,
3,622,875.097, 375,315,583.426, 5,581,894.505, 3,231,716.831 and
1,873,595.839 Class A shares, receptively, of Davis Growth Opportunity
Fund, Davis Government Bond Fund, Davis Government Money Market Fund,
Davis Financial Fund, Davis Convertible Securities Fund and Davis Real
Estate Fund, outstanding. As of such date, there were 2,048,249.006,
2,491,146.871, 1,800,309.810, 218,917.692, 42,530.713 and 62,502.905
Class B shares, of Davis Growth Opportunity Fund, Davis Government Bond
Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund, outstanding and
366,209.020 Class C shares of Davis Government Money Market Fund
outstanding.
<PAGE>
On that date, the directors and officers of the Company, as a
group owned 50,950.848 shares or 3.778% of Davis Growth Opportunity
Fund's outstanding Class A shares, 22,267.833 shares 0.615% of Davis
Government Bond Fund's outstanding Class A shares 23,998,473.870
shares 6.394% of Davis Government Money Market Fund's outstanding Class
A shares, owned 608,873.869 shares 10.908% of Davis Financial Fund's
outstanding Class A shares, 146,942.077 shares 4.547% of Davis
Convertible Securities Fund's Class A shares and 106,076.607 shares
5.662% of Davis Real Estate Fund's Class A shares. The directors and
officers of the Funds do not presently own any Class B or Class C shares
of these funds.
Class A Shares
Number of Percent of Class
Name and Address Shares Owned Outstanding
- ---------------- ------------ -----------
Davis Growth Opportunity Fund
ACO 70,794.246 5.25%
A/C 60010800
Attn.: Trust Securities 2-032
300 4th Avenue
Pittsburgh, PA 15278-0001
Davis Government Money Market Fund
The Bank of New York Trs for 300,000,000.000 79.93%
Shelby Cullom Davis
FBO the Bank of New York as Pledgee
One Wall Street
New York, NY 10286-0001
Davis Financial Fund
Shelby Cullom Davis & Co. 2,719,095.962 48.71%
Investment #3
70 Pine Street
New York, NY 10270-0002
Christopher C. Davis 362,105.416 6.49%
609 5th Avenue, 11th Floor
New York, NY 10012-1019
Davis Convertible Securities Fund
Currie and Co. 1,813,983.113 56.13%
C/O Fiduciary Trust Co. Intl.
P.O. Box 3199
Church Street Station
New York, NY 10008
Shelby Cullom Davis & Co. 600,128.100 18.57%
Investment #3
70 Pine Street
New York, NY 10270-0002
Davis Real Estate Fund
Shelby Cullom Davis & Co. 820,166.013 43.77%
Investment #3
70 Pine Street
New York, NY 10270-0002
<PAGE>
Currie and Co. 401,043.855 21.41%
C/O Fiduciary Trust Co. Intl.
P.O. Box 3199
Church Street Station
New York, NY 10008
Sac & Co. 96,726.186 5.16%
100 Wall Street
New York, NY 10005-3701
Class B Shares
Davis Government Money Market Fund
Donaldson Lufkin Jenrette 153,350.030 8.52%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
PaineWebber for the Benefit of 140,195.790 7.79%
James H. & Ellen C. Stewart TTEE
The Stewart Family Trust
James H. & Ellen C. Stewart
DTD 3/4/92
106 Coral Cay Drive
Palm Beach Garden, FL 33418
State Street Bank & Trust Co. 127,519.830 7.08%
Cust for the Rollover IRA of
Michael D. Woodrow
5328 Sandy Trail Ct.
Plano, TX 75023-5646
Gerard Digirolamo 95,155.310 5.29%
Turky Digirolamo Jt. Ten.
2901 203rd St.
Bayside, NY 11360-2365
PaineWebber for the Benefit of 93,625.850 5.20%
Charles L. Carver
P.O. Box 100952
Nashville, TN 37224-0952
Davis Financial Fund
Merrill Lynch Pierce Fenner & 66,935.000 30.58%
Smith
Mutual Fund Operations
Attn.: Book Entry
4800 Deerlake Drive East, 3rd Floor
Jacksonville, FL 32246-6484
Davis Convertible Securities Fund
Dean Witter Reynolds C/F 5,414.651 12.73%
Thomas Orr Sobbe Jr.
IRA STD DTD 9/30/94
12104 Bellmeade Rd.
Des Peres, MO 63131-3801
<PAGE>
Donaldson Lufkin Jenrette 3,203.417 7.53%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
State Street Bank & Trust Co. 2,776.680 6.53%
Cust for the Rollover IRA of
Arthur J. Ferrara
60 Admiral LA
Hicksville, NY 11801-4430
Prudential Securities FBO 2,745.933 6.46%
Phyllis A. Bach TTEE
Phyllis A. Bach Rev. Trust
UA DTD 06/29/93
Traverse City, MI 49686
Dean Witter Reynolds Cust for 2,745.337 6.45%
Charles R. Lucas
IRA Rollover Dated 04/26/94
17 Oak Forest Dr.
Saint Charles, MO 63303-6696
Davis Real Estate Fund
Merrill Lunch Pierce Fenner & 25,896.000 41.37%
Smith
4800 Deerlake Drive East, 3rd Floor
Jacksonville, FL 32246-6484
Class C Shares
Davis Government Money Market Fund
Gregory R. McQueen 242,810.200 66.30%
799 Sixth Street, Apt. A-14
Los Alamos, NM 87544-3932
State Street Bank & Trust Co. 25,114.090 6.86%
Cust for the 403B Plan of
Joan M. Holmes
406 W. Eagle Lake Dr.
Maple Grove, MN 55369-5528
James S. Thie l20,045.270 5.47%
Janice L. Thiel Jt. Ten.
16305 27th Dr. SE
Mill Creek, WA 98012-7815
Brian Mongillo 18,539.530 5.06%
Karen Defazio Jt. Ten.
46 Latisquama Rd.
Southborough, MA 01772-1609
INVESTMENT ADVISORY SERVICES
Davis Selected Advisers, L.P. serves as investment adviser for each
of the Funds pursuant to an Advisory Agreement adopted in accordance
with the requirements of the Investment Company Act. Pursuant to the
Advisory Agreement, the Adviser, subject to the general supervision of
the Company's Board of Directors, provides
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management and investment advice, and furnishes statistical, executive
and clerical personnel, bookkeeping, office space, and equipment necessary
to carry out its investment advisory functions and such corporate managerial
duties as are requested by the Board of Directors. The Funds bear all
expenses other than those specifically assumed by the Adviser under the
Advisory Agreement, including preparation of tax returns, financial reports
to regulatory authorities, dividend determinations and transaction and
accounting matters related to its custodian bank, transfer agency,
custodial and shareholder services, and qualification of its shares under
federal and state laws. Expenses not specifically allocable to a particular
Fund are allocated among the Company's Funds in proportion to their
respective net assets.
Tanaka Capital Management, Inc. serves as the Sub-Adviser of Davis
Growth Opportunity Fund under the Sub-Advisory Agreement. The Company
pays no fees directly to the Sub-Adviser. The Sub-Adviser receives from
the Adviser a reallowed portion of its advisory fee equal to 0.30% of the
first $100 million of the Davis Growth Opportunity Fund's annual average
net asset and 0.25% of such Fund assets over $100 million with a
minimum annual fee of $100,000. However, the Sub-Adviser's fees on
Fund assets over $100 million may not exceed one-third of the fees paid
to the Adviser from the Davis Growth Opportunity Fund.
Effective May 1, 1996, the Davis Government Bond Fund pays the
Adviser a fee at the annual rate of 0.50% of total net assets. Prior to May
1, 1996 it paid 0.75% on the first $250 million of average net assets;
0.65% on the next $250 million of average net assets; and 0.55% on
average net assets in excess of $500 million. For the Adviser's services,
the Funds each pay the Adviser a monthly fee at an annual rate based on
average net assets, as follows: 0.75% on the first $250 million of average
net assets; 0.65% on the next $250 million of average net assets; and
0.55% on average net assets in excess of $500 million. Davis Government
Money Market Fund pays the Adviser 0.50% on the first $250 million of
average net assets; 0.45% on the next $250 million of average net assets;
and 0.40% on average net assets in excess of $500 million. The aggregate
advisory fees paid by Davis Growth Opportunity Fund to the Adviser for the
years ended December 31, 1995, 1994 and 1993 were $413,012, $448,502
and $335,950, respectively. The aggregate advisory fees paid by Davis
Government Bond Fund to the Adviser during the years ended December 31,
1995, 1994 and 1993 were $283,797, $321,705 and $400,730,
respectively. The aggregate advisory fees paid by Davis Government Money
Market Fund to the Adviser during the years ended December 31, 1995,
1994 and 1993 were $1,480,642, $858,821 and $212,952, respectively.
The aggregate advisory fees paid by Davis Financial Fund to the Adviser
for years ended December 31, 1995, 1994 and 1993 were $516,765,
$405,600 and $332,805, respectively. The aggregate advisory fees paid by
Davis Convertible Securities Fund to the Adviser during the years ended
December 31, 1995, 1994 and 1993 were $399,922, $349,226 and
$269,245, respectively. The aggregate amount of advisory fees paid by
Davis Real Estate Fund to the Adviser during the years ended December 31,
1995 and 1994 were $197,296 and $121,236, respectively.
Under the Advisory Agreement, if expenses borne by each of the
Funds in any fiscal year (including the advisory fee, but excluding
interest, taxes, brokerage fees, payments made to the Distributor under a
Rule 12b-1 Distribution Plan and, where permitted, extraordinary
expenses) exceed limitations imposed by applicable state securities laws
or regulations, the Adviser must reimburse the Funds involved for any
such excess at least annually, up to the amount of its advisory fee. These
expense limitations may be raised or lowered from time to time. The
present maximum operating expense limitations are 2.5% of the first $30
million of average net assets, 2.0% of the next $70 million of average net
assets and 1.5% of average net assets over $100 million.
For Davis Growth Opportunity Fund, the reimbursable costs for
certain accounting and administrative services for the years ended
December 31, 1995, 1994 and 1993 were $15,498, $14,004 and $14,004,
respectively. The reimbursable costs for qualifying the Fund's shares for
sale with state agencies for the years ended December 31, 1995, 1994 and
1993 were $8,250, $6,000 and $6,000, respectively. The reimbursable
costs for providing shareholder services for the years ended December 31,
1995, 1994 and 1993 were $8,713, $7,756 and $7,346, respectively.
For Davis Government Bond Fund, the reimbursable costs for certain
accounting and administrative services for the years ended December 31,
1995, 1994 and 1993 were $17,004, $17,004 and $16,416, respectively.
The reimbursable costs for qualifying the Fund's shares for sale with
state agencies for the years ended December 31, 1995, 1994 and 1993
were $8,250, $6,000 and $6,000, respectively. The reimbursable costs for
providing shareholder services for the years ended December 31, 1995,
1994 and 1993 were $7,567, $6,769 and $6,431, respectively.
For Davis Government Money Market Fund, the reimbursable costs for
certain accounting and administrative services for the years ended
December 31, 1995, 1994 and 1993 were $11,499, $9,996 and $9,996,
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respectively. The reimbursable costs for qualifying the Fund's shares for
sale with state agencies for the years ended December 31, 1995, 1994 and
1993 were $8,250, $6,000 and $6,000, respectively. The reimbursable
costs for providing shareholder services for the years ended December 31,
1995, 1994 and 1993 were $11,580, $10,252 and $10,002,
respectively.
For Davis Financial Fund, the reimbursable costs for certain
accounting and administrative service for the years ended December 31,
1995, 1994 and 1993 were $13,998, $8,004 and $6,254, respectively. The
reimbursable costs for qualifying such Fund's shares for sales with state
agencies for the years ended December 31, 1995, 1994 and 1993 were
$8,250, $6,000 and $6,000, respectively. The reimbursable costs for
providing shareholder services for the years ended December 31, 1995,
1994 and 1993 were $3,276, $3,488 and $3,767, respectively.
For Davis Convertible Securities Fund, the reimbursable costs for
certain accounting and administrative services for the years ended
December 31, 1995, 1994 and 1993 were $13,998, $8,004 and $6,254,
respectively. The reimbursable costs for qualifying such Fund's shares for
sale with state agencies for the years ended December 31, 1995, 1994 and
1993 were $8,250, $6,000 and $6,000, respectively. The reimbursable
costs for providing shareholder services for the years ended December 31,
1995, 1994 and 1993 were $1,284, $1,288 and $1,379, respectively.
For Davis Real Estate Fund, the reimbursable costs for certain
accounting and administrative services for the years ended December 31,
1995 and 1994 were $11,001 and $8,004, respectively. The reimbursable
costs for qualifying such Fund's shares for sale with state agencies for
such period were $8,250 and $6,000, respectively and the reimbursable
costs for providing shareholder services for such period were $1,992 and
$2,668, respectively.
The Advisory Agreement also make provisions for portfolio
transactions and brokerage policies of the Funds which are discussed
above under "Portfolio Transactions."
In accordance with the provisions of the Investment Company Act,
the Advisory Agreement will terminate automatically upon assignment
and is subject to cancellation upon 60 days written notice by the
Company's Board of Directors or by vote of the Funds' shareholders or by
the Adviser. The continuance of the Agreement with respect to any Fund
must be approved at least annually by the Company's Board of Directors or
by the vote of holders of a majority of the outstanding shares of that Fund.
In addition, any new agreement or the continuation of the existing
agreement must be approved by a majority of directors who are not
parties to the agreement or interested persons of any such party.
The Adviser and the Sub-Adviser for the Davis Growth Opportunity
Fund have each adopted a Code of Ethics which regulate the personal
securities transactions of the Adviser's and the Sub-Adviser's investment
personnel and other employees and affiliates with access to information
regarding securities transactions of the Funds. Both Codes of Ethics
require investment personnel to disclose personal securities holdings
upon commencement of employment and all subsequent trading activity to
the firm's Compliance Officer. Investment personnel are prohibited from
engaging in any securities transactions, including the purchase of
securities in a private offering, without the prior consent of the
Compliance Officer. Additionally, such personnel are prohibited from
purchasing securities in an initial public offering and are prohibited from
trading in any securities (i) for which a Fund has a pending buy or sell
order, (ii) which a Fund is considering buying or selling, or (iii) which a
Fund purchased or sold within seven calendar days.
CUSTODIAN
The Custodian of the Company's assets is State Street Bank and
Trust Company, Two Heritage Drive, North Quincy, Massachusetts 02171.
The Custodian maintains all of the instruments representing the
investments of the Company and all cash. The Custodian delivers
securities against payment upon sale and pays for securities against
delivery upon purchase. The Custodian also remits Company assets in
payment of Company expenses, pursuant to instructions of officers or
resolutions of the Board of Directors.
AUDITORS
The Company's auditors are Tait, Weller & Baker, Two Penn Center,
Suite 700, Philadelphia, Pennsylvania 19102-1707. The audit includes
examination of annual financial statements furnished to shareholders and
filed with the Securities and Exchange Commission, consultation on
financial accounting and reporting matters, and meeting
<PAGE>
with the Audit Committee of the Board of Directors. In addition, the
auditors review federal and state income tax returns and related forms.
DETERMINING THE PRICE OF SHARES
The Company does not price its shares or accept orders for
purchases or redemptions on days when the New York Stock Exchange is
closed. Such days currently include New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
REDUCTION OF CLASS A SALES CHARGE
There are a number of ways to reduce the sales charge imposed on
the purchase of the Fund's Class A shares, as described below. These
reductions are based upon the fact that there is less sales effort and
expense involved in respect to purchases by affiliated persons and
purchases made in large quantities.
Family or Group Purchases. Certain purchases made by or for more
than one person may be considered to constitute a single purchase,
including (i) purchases for family members, including spouses and children
under 21, (ii) purchases by trust or other fiduciary accounts and purchases
by Individual Retirement Accounts for employees of a single employer and
(iii) purchases made by an organized group of persons, whether
incorporated or not, if the group has a purpose other than buying shares of
mutual funds. For further information on group purchase reductions,
contact the Adviser or your dealer.
Statements of Intention. Another way to reduce the sales charge is
by signing a Statement of Intention. A Statement is included in the
Application Form included in the Prospectus. Please read it carefully
before completing it.
If you enter into a Statement of Intention you (or any "single
purchaser") may state that you intend to invest at least $100,000 in a
Fund's Class A shares over a 13-month period. The amount you say you
intend to invest may include Class A shares which you already own, valued
at the offering price, at the end of the period covered by the Statement. A
Statement may be backdated up to 90 days to include purchases made
during that period, but the total period covered by the Statement may not
exceed 13 months.
Shares having a value of 5% of the amount you state you intend to
invest will be held "in escrow" to make sure that any additional sales
charges are paid. If any Fund's Class A shares are in escrow pursuant to a
Statement and such shares are exchanged for shares of another Davis Fund,
the escrow will continue with respect to the acquired shares.
No additional sales charge will be payable if you invest the amount
you have indicated. Each purchase under a Statement will be made as if
you were buying at one time the total amount indicated. For example, if
you indicate that you intend to invest $100,000, you will pay a sales
charge of 3-1/2% on each purchase.
If you buy additional amounts during the period to qualify for an even
lower sales charge, you will be charged such lower charge. For example,
if you indicate that intend to invest $100,000 and actually invest
$250,000, you will, by retroactive adjustment, pay a sales charge of
2-1/2%.
If during the 13-month period you invest less than the amount you
have indicated, you will pay an additional sales charge. For example, if
you state that you intend to invest $250,000 and actually invest only
$100,000, you will, by retroactive adjustment, pay a sales charge of
3-1/2%. The sales charge you actually pay will be the same as if you had
purchased the shares in a single purchase.
A Statement does not bind you to buy, nor does it bind the Adviser to
sell, the shares covered by the Statement.
Rights of Accumulation. Another way to reduce the sales charge is
under a right of accumulation. This means that the larger purchase
entitled to a lower sales charge need not be in dollars invested at one
time. The larger purchases that you (or any "single purchaser") make at
any one time can be determined by adding to the amount of a current
purchase the value of a Fund's shares (at offering price) already owned by
you.
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For example, if you owned $100,000 worth (at offering price) of
Davis Growth Opportunity Fund's Class A shares and invest $5,000 in new
shares, the sales charge on that $5,000 investment would be 3-1/2%, not
4-3/4%.
If you claim this right of accumulation, you or your dealer must so
notify the Adviser (or State Street, if the investment is mailed to State
Street) when the purchase is made. Enough information must be given to
verify that you are entitled to such right.
Combined Purchases with other Davis Funds. Your ownership or
purchase of Class A shares of other Funds advised and distributed by the
Adviser, including Davis New York Venture Fund, Inc., Davis High Income
Fund, Inc., Davis Tax-Free High Income Fund, Inc. and Davis International
Series, Inc. may also reduce your sales charges in connection with the
purchase of a Fund's Class A shares. This applies to all three situations
for reduction of sales charges discussed above.
If a "single purchaser" decides to buy Class A shares of Davis Growth
Opportunity Fund or Davis Government Bond Fund as well as Class A shares
of any of the other Davis Funds (other than shares of the Company's Davis
Government Money Market Fund) at the same time, these purchases will be
considered a single purchase for the purpose of calculating the sales
charge. For example, a single purchaser can invest at the same time
$100,000 in Davis Growth Opportunity Fund's Class A shares and $150,000
in the Class A shares of Davis High Income Fund, Inc. and pay a sales
charge of 2-1/2%, not 3-1/2%.
Similarly, a Statement of Intention for a Fund's Class A shares and
for the Class A shares of the other Davis Funds (other than the Company's
Davis Government Money Market Fund) may be aggregated. In this
connection, a Fund's Class A shares and the Class A shares of the other
Davis Funds which you already own, valued at the current offering price at
the end of the period covered by your Statement of Intention, may be
included in the amount you have stated you intend to invest pursuant to
your Statement.
Lastly, the right of accumulation applies also to the Class A shares
of the other Davis Funds (other than the Company's Davis Government
Money Market Fund) which you own. Thus, the amount of current purchases
of Class A shares of a Fund which you make may be added to the value of
the Class A shares of the other Davis Funds (valued at their current
offering price) already owned by you in determining the applicable sales
charge. For example, if you owned $100,000 worth of shares of Davis High
Income Fund, Inc. and the Company's Davis Financial Fund and Davis
Convertible Securities Fund (valued at the applicable current offering
price) and invest $5,000 in Class A shares of Davis Growth Opportunity
Fund, the sales charge on your investment would be 3-1/2%, not 4-3/4%.
In all the above instances where you wish to claim this right of
combining the Fund's shares you own of the other Davis Funds you or your
dealer must notify the Adviser (or State Street, if the investment is
mailed to State Street) of the pertinent facts. Enough information must
be given to permit verification as to whether you are entitled to a
reduction in sales charges.
Issuance of Shares at Net Asset Value. There are many situations
where the sales charge will not apply to the purchase of Class A shares,
as discussed in the Prospectus. In addition, the Company occasionally may
be provided with an opportunity to purchase substantially all the assets of
a public or private investment company or to merge another such company
into the Company. This offers the Company the opportunity to obtain
significant assets. No dealer concession is involved. It is industry
practice to effect such transactions at net asset value as it would
adversely affect the Company's ability to do such transactions if the
Company had to impose a sales charge.
DISTRIBUTION OF FUND SHARES
The Adviser acts as principal underwriter of the shares of each of
the Funds on a continuing basis Pursuant to a Distributing Agreement.
Pursuant to the Distribution Agreement, the Adviser, in its capacity as
distributor, pays for all expenses in connection with the preparation,
printing and distribution of advertising and sales literature for use in
offering the Funds' shares to the public, including reports to shareholders
to the extent they are used as sales literature. The Adviser also pays for
prospectuses in excess of those which the Company must file with the
Securities and Exchange Commission or those forwarded to existing
shareholders. The continuation and assignment provisions of the
Distributing Agreement are the same as those of the Advisory Agreement.
The following sales charges (which the Funds do not pay) were paid
to the Adviser, in its capacity as distributor, with respect to Class A
shares. With respect to Davis Financial Fund, during the years ended
December
<PAGE>
31, 1995, 1994 and 1993, the Adviser received total sales charges of
$81,236, $89,932 and $315,133, respectively, of which $68,404, $72,247 and
$265,989, respectively, were reallowed to investment dealers. With respect
to Davis Convertible Securities Fund, during the years ended
December 31, 1995, 1994, and 1993, the Adviser received total sales charges
of $41,669, $120,053 and $114,217, respectively, of which $32,782, $97,691
and $108,171, respectively, were reallowed to investment dealers. With
respect to Davis Real Estate Fund, during the years ended December 31, 1995
and 1994, the Adviser received total sales charges of $16,112 and $234,956,
respectively, of which $13,561 and $234,956 were reallowed to investment
dealers. Also, the year ended December 31, 1995, the Company's Underwriter,
Davis Selected Advisers, L. P. received $33,104 and $11,063 from commissions
earned on sales of Class A shares of Davis Growth Opportunity Fund and Davis
Government Bond Funds of which $27,799 and $9,298, respectively, were
reallowed to investment dealers.
In addition, each of the Funds have Distribution Plans adopted
pursuant to Rule 12b-1 under the Investment Company Act as described in
the prospectus. See "Distribution Plans."
The Distribution Plans continue annually so long as they are
approved in the manner provided by Rule 12b-1 or unless earlier
terminated by vote of the majority of the Fund's Independent Directors or
a majority of the Fund's outstanding shares. The Adviser is required to
furnish quarterly written reports to the Board of Directors detailing the
amounts expended under the Distribution Plans. The Distribution Plans
may be amended provided that all such amendments comply with the
applicable requirements then in effect under Rule 12b-1. Presently, Rule
12b-1 requires, among other procedures, that it be continued only if a
majority of the Independent Directors approve continuation at least
annually and that amendments materially increasing the amount to be
spent for distribution be approved by the Independent Directors and the
shareholders. As long as the Distribution Plans are in effect, the Fund
must commit the selection and nomination of candidates for new
Independent Directors to the sole discretion of the existing Independent
Directors.
The following commissions were paid to the Adviser, in its capacity
as distributor, with respect to Davis Growth Opportunity Fund and Davis
Government Bond Fund under the Class B Distribution Plans. With respect
to Davis Growth Opportunity Fund, during the years ended December 31,
1995, 1994 and 1993, the Adviser received commissions of $270,982,
$575,959 and $472,316, respectively, of which $134,428, $532,815 and
$543,691, respectively, was paid to dealers. With respect to Davis
Government Bond Fund, during the years ended December 31, 1995, 1994
and 1993, respectively, the Adviser received commissions $126,585,
$406,784 and $571,513, respectively, of which $50,420, $128,415 and
$329,628, respectively, was reallowed to dealers. As stated in the
Prospectus, as of the years ended December 31, 1995 and 1994, the
Adviser paid $295,361 and $425,391 and $439,891 and $469,666,
respectively, in commissions with respect to the sale of shares of Davis
Growth Opportunity Fund and Davis Government Bond Fund, respectively,
for which the Adviser had not yet received reimbursement under the
applicable Class B Distribution Plan.
Also, during the year ended December 31, 1995, Class B shares of
the Davis Financial Fund, Davis Convertible Securities Fund and Davis Real
Estate Fund made distribution plan payments which included commissions
of $3,473, $660 and $1,102, respectively.
The Distributor intends to seek payment from Class B shares of the
Davis Financial Fund, Davis Convertible Securities Fund and Davis Real
Estate Fund in the amounts of $65,749, $13,465 and $10,271,
respectively, representing the cumulative commissions earned by the
Distributor on the sale of the Funds' Class B shares reduced by cumulative
commissions paid by the Funds and cumulative contingent deferred sales
charges paid by redeeming shareholders.
With respect to shares of Davis Government Money Market Fund,
during the years ended December 31, 1995 and 1994, the Adviser paid
$11,871 and $12,331, respectively, to qualified dealers out of its own
resources, as provided in the current Distribution Plan.
PERFORMANCE DATA
Average annual total return measures both the net investment
income generated by, and the effect of any realized or unrealized
appreciation or depreciation of, the underlying investments in the Funds'
portfolio. Average annual total return is calculated separately for each
class in accordance with the standardized method prescribed by the
Securities and Exchange Commission by determining the average annual
compounded rates of return over the periods indicated, that would equate
the initial amount invested to the ending redeemable value, according to
the following formula:
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P(1+T)^n = ERV
Where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates and (ii)
deducts (a) the maximum front-end or applicable contingent deferred sales
charge from the hypothetical initial $1,000 investment, and (b) all
recurring fees, such as advisory fees, charged as expenses to all
shareholder accounts.
Davis Growth Opportunity Fund's average annual total return with
respect to Class A shares for the year ended December 31, 1995 and the
period from December 01, 1994 through December 31, 1995 (life of the
Class) were 39.68% and 32.66%, respectively. Davis Growth Opportunity
Fund's average annual total return with respect to its Class B shares for
the one, five and ten year periods ended December 31, 1995 is 42.44%,
15.05% and 13.46%, respectively. Its average annual total return for the
one, five and ten year periods ended December 31, 1994 were (8.45%),
5.83% and 12.71%, respectively.
Davis Financial Fund's average annual total return with respect to
Class A shares for the year ended December 31, 1995 and for the period
from May 1, 1991 through December 31, 1995 (life of the Class) were
43.39% and 22.38%, respectively. Its average annual total return for the
one year ended December 31, 1994 and the period from May 1, 1991
through December 31, 1994 were (9.28%) and 15.72%, respectively. Davis
Financial Fund's average annual total return with respect to Class B
shares for the year ended December 31, 1995 and the period from
December 27, 1994 through December 31, 1995 (life of the Class) were
46.00% and 44.08%, respectively.
Davis Convertible Securities Fund's average annual total return with
respect to Class A shares for the year ended December 31, 1995 and the
period from May 1, 1992 through December 31, 1995 (life of the Class)
were 20.64% and 11.51%, respectively. Its average annual total return for
the one year ended December 31, 1994 and for the period from May 1, 1992
through December 31, 1994 were (11.15)% and 6.30%, respectively. Davis
Convertible Securities Fund's average annual total return with respect to
Class B shares for the period from February 3, 1995 through December 31,
1995 (life of the Class) was 20.39%.
Davis Real Estate Fund's average annual total return with respect to
Class A shares for the year ended December 31, 1995 and for the period
January 3, 1994 through December 31, 1995 (life of the Class) were
12.14% and 10.18%, respectively. Its average annual total return for the
year ended December 31, 1994 was 3.09%. Davis Real Estate Fund's
average annual total return with respect to Class B shares for the year
ended December 31, 1995 and the period from December 27, 1994 through
December 31, 1995 (life of the Class) were 13.59% and 14.45%,
respectively.
Total return is the cumulative rate of investment growth which
assumes that income dividends and capital gains are reinvested. It is
determined by assuming a hypothetical investment at the net asset value
at the beginning of the period, adding in the reinvestment of all income
dividends and capital gains, calculating the ending value of the investment
at the net asset value as of the end of the specified time period and
subtracting the amount of the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100.
Davis Growth Opportunity Fund's total return with respect to its
Class A shares for the one year ended December 31, 1995 and the period
from December 01, 1994 through December 31, 1995 (life of the Class)
were 39.68% and 35.78%, respectively. Davis Growth Opportunity Fund's
total return with respect to its Class B shares for the one, five, and ten
year periods ended December 31, 1995 is 42.44%, 101.66%, and 253.73%,
respectively. Davis Growth Opportunity Fund's total annual return with
respect to its Class B shares for the one, five, and ten year periods ended
December 31, 1994 were (8.45%), 32.77% and 230.95%, respectively.
Davis Financial Fund's total return with respect to Class A shares
for the year ended December 31, 1995 and for the period from May 1, 1992
through December 31, 1995 (life of the Class) were 43.39% and 156.89%,
respectively. Its total return for the one year ended December 31, 1994
and the period from May 1, 1991 through December 31, 1994 were (9.28%)
and 70.91%, respectively. Davis Financial Fund's total return with respect to
<PAGE>
Class B shares for the one year ended December 31, 1995 and the period
from December 27, 1994 through December 31, 1995 (life of the Class)
were 46.00% and 44.66%, respectively.
Davis Convertible Securities Fund's total return with respect to
Class A shares for the year ended December 31, 1995 and the period from
May 1, 1992 through December 31, 1995 (life of the Class) were 20.64%
and 49.14%, respectively. Its total return for the one year ended December
31, 1994 and for the period from May 1, 1992 through December 31, 1994
were (11.15%) and 17.72%, respectively. Davis Convertible Securities
Fund's total return with respect to Class B shares for the period from
February 3, 1995 through December 31, 1995 was 18.33%.
Davis Real Estate Fund's total return with respect to Class A shares
for the year ended December 31, 1995 and for the period January 3, 1994
through December 31, 1995 (life of the Class) were 12.14% and 21.31%,
respectively. Its total return for the year ended December 31, 1994 was
3.09%. Davis Real Estate Fund's total return with respect to Class B
shares for the year ended December 31, 1995 and for the period from
December 27, 1994 through December 31, 1995 (life of the Class) were
13.59% and 14.62%, respectively.
In reports or other communications to shareholders and in
advertising material, Davis Growth Opportunity Fund may compare its
performance to various economic and securities indices or averages such
as the Consumer Price Index, the Dow Jones Industrial Average, the
Standard & Poor's 500 Stock Index and to the performance of mutual fund
indices as reported by Lipper Analytical Services, Inc. ("Lipper") or CDA
Investment Technologies, Inc. ("CDA"), or other widely recognized
independent mutual fund reporting services. Lipper and CDA performance
calculations include reinvestment of all capital gain and income dividends
for the periods covered by the calculations. The Consumer Price Index is
generally considered to be a measure of inflation. Averages and indices
like The Dow Jones Industrial Average and the Standard & Poor's 500
Stock Index are unmanaged indices of common stocks which are considered
to be generally representative of the United States stock market. The
market prices and yields of these stocks will fluctuate.
In reports or other communications to shareholders and in
advertising material, the Company may also include evaluations of Funds
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as Business Week,
Forbes, Kiplinger's, Institutional Investor and Money Magazine. Any given
performance comparison should not be considered representative of the
Fund's performance for any future period.
Davis Government Money Market Fund. The current and effective
yields for Davis Government Money Market Fund's Class A shares for the
seven day period ended December 31, 1995 were 4.95% and 5.08%,
respectively. The current and effective yields for Davis Government
Money Market Fund's Class A shares for the seven day period ended
December 31, 1994 were 4.71% and 4.82%, respectively.
The current and effective yields for Davis Government Money Market
Fund's Class B shares for the seven day period ended December 31, 1995
were 4.95% and 5.08%, respectively. The current and effective yield for
the Davis Government Money Market Fund's Class B shares for the seven
day period ended December 31, 1994 were 4.71% and 4.82%,
respectively.
Yield quotations are calculated in accordance with the following
formulas:
Yield = [(C-D) - BV] x (365/7)
Effective Yield = [ [ [ (C-D) - BV] + 1]365/7] - 1
C = Net change (excluding capital change in value of hypothetical
account with balance of one share at beginning of seven-day
period).
D = Deductions charged to hypothetical account.
BV = Value of hypothetical account at beginning of seven-day period
for which yield is quoted.
The yields of Davis Government Money Market Fund and Davis
Government Bond Fund will fluctuate depending upon prevailing interest
rates, quality, maturities, types of instruments held, and operating
expenses. Thus, any yield quotation should not be considered
representative of future results. If a broker-dealer charges investors for
services related to the purchase or redemption of Fund shares, the yield
will effectively be reduced.
FORM N-1A
DAVIS SERIES, INC
-----------------
(formerly, RETIREMENT PLANNING FUNDS OF AMERICA, INC.)
POST-EFFECTIVE AMENDMENT NO. 35 UNDER THE
SECURITIES ACT OF 1933
REGISTRATION STATEMENT No. 2-57209
AND
AMENDMENT NO. 31 UNDER THE INVESTMENT COMPANY
ACT OF 1940 REGISTRATION NO. 811-2679
PART C
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A:
Financial Highlights
Included in Part B by incorporation by reference:
(i) Schedule of Investments at December 31, 1995.
(ii) Statement of Assets & Liabilities at December 31, 1995.
(iii) Statement of Operations for the year ended December 31, 1995.
(iv) Statement of Changes in Net Asset Value for the years ended
December 31, 1995 and 1994.
(v) Notes to Financial Statements.
(vi) Report of Tait, Weller & Baker.
(b) Exhibits:
(1) Articles of Incorporation.
(2) Amended and Restated Bylaws.
(3) Not applicable.
(4) Specimen Common Stock Certificates for the Growth Fund, the
Bond Fund and the Financial Value Fund (formerly Global
Value Fund), incorporated by reference to Exhibit 4 of
Registrant's Post-Effective Amendment No. 25, File
No. 2-57209.
(5)(a) Investment Advisory Agreement.
<PAGE>
(5)(b) Amendment of Investment Advisory Agreement.
(5)(c) Sub-Advisory Agreement with respect to the Davis Growth
Opportunity Fund.
(6) Distributing Agreement.
(7) Not applicable.
(8)(a) Custodian Contract in respect of the Davis Growth
Opportunity Fund, incorporated by reference to Exhibit
(8)(a) of Registrant's Post-Effective Amendment No. 25,
File No. 2-57029.
(8)(b) Custodian Contract in respect of the Davis Government Bond
Fund, incorporated by reference to Exhibit (8)(b) of
Registrant's Post-Effective Amendment No. 25, File
No. 2-57029.
(8)(c) Custodian Contract in respect of the Davis Government Money
Market Fund, incorporated by reference to Exhibit (8)(c) of
Registrant's Post-Effective Amendment No. 25, File
No. 2-57029.
(8)(d) Transfer Agency and Service Agreement, incorporated by
reference to Exhibit (8)(d) of Registrant's Post-Effective
Amendment No. 25, File No. 2-57029.
(8)(e) Letter Agreement with Custodian and Transfer Agent
Concerning the Davis Financial Fund, incorporated by
reference to Exhibit (8)(e) of Registrant's Post-Effective
Amendment No. 25, File No. 2-57029.
(9) Transfer and Assumption Agreement, incorporated by reference to
Exhibit (9) of Registrant's Post-Effective Amendment No. 25,
File No. 2-57209.
(10) Opinion and Consent of Counsel, incorporated by reference
to Registrant's Registration Statement.
(11) Consent of Auditors.
(12) Financial Statements, included in prospectus and Statement
of Additional Information.
(14)(a) Prototype Money Purchase Pension and Profit Sharing Plan,
Prototype Defined Contribution Trust and Adoption Agreements,
incorporated by reference to Exhibit (14)(a) of Registrant's
Post-Effective Amendment No. 25, File No. 2-57029.
(14)(b) Prototype Defined Contribution Profit Sharing/401(k) Plan,
Prototype Profit Sharing/401(k) Trust and Adoption
Agreements, incorporated by reference to Exhibit (14)(b) of
Registrant's Post-Effective Amendment No. 25, File
No. 2-57029.
(14)(c) 403(b)(7) Retirement Plan Custodial Account, incorporated
by reference to Exhibit (14)(c) of Registrant's
Post-Effective Amendment No. 25, File No. 2-57029.
<PAGE>
(15)(a) Distribution Plan for Class A shares, incorporated by
reference to Exhibit (15)(a) of Registrant's Post-Effective
Amendment No. 32, File No. 2-57029.
(15)(b) Distribution Plan in respect to Davis Government Money
Market, incorporated by reference to Exhibit (15)(b) of
Registrant's Post-Effective Amendment No. 25, File
No. 2-57029.
(15)(c) Distribution Plan for Class B shares, incorporated by reference
to Exhibit (15)(c) of Registrant's Post-Effective Amendment
No. 32, File No. 2-57029.
(16) Sample Computation of Total Return, incorporated by
reference to Exhibit 16 of Registrant's Post-Effective
Amendment No. 15, File No. 2-57209.
(17) Not applicable.
(18)(a) Powers of Attorney, incorporated by reference to Exhibit 18
(a) of Registrant's Post Effective Amendment No. 34, File
No. 2-57209.
(18)(b) Plan pursuant to 18f-3, incorporated by reference to Exhibit
18 (b) of Registrant's Post Effective Amendment No. 34,
File No. 2-57209.
Item 25. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
Not applicable
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Holders
Title of Class as of March 29, 1996
- -------------- --------------------
Common Stock Class A Class B Class C
Shares Shares Shares
------ ------ ------
Growth Opportunity Fund................. 465 4,291
Government Bond Fund.................... 2,296 2,701
Government Money Market Fund............ 5,405 276 36
Financial Fund.......................... 2,009 223
Convertible Securities Fund............. 646 53
Real Estate Fund........................ 596 78
Item 27. Indemnification
---------------
Item 15 of Registrant's registration statement on Form N-14 (No.
33-30571) filed on or about August 17, 1989 is incorporated by reference.
In addition, Registrant's Articles of Incorporation exculpate directors and
officers with respect to monetary damages except to the extent that an
individual actually receives an improper benefit in money, property or
services or to
<PAGE>
the extent that a final adjudication finds that the individual
acted with active or deliberate dishonesty.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The Investment Adviser of the Registrant, Selected/Venture
Advisers, L.P., is also the investment adviser for Davis New York Venture
Fund, Inc. (formerly, New York Venture Fund, Inc.), Davis High Income Fund,
Inc. (formerly, Venture Income (+) Plus, Inc.), Davis Tax-Free High Income
Fund, Inc. (formerly, Venture Muni (+) Plus, Inc.), Selected American
Shares, Inc., Selected Special Shares, Inc., Selected Capital Preservation
Trust and Venture Series, Inc. It also may engage as an investment
adviser for accounts other than mutual funds, although this is not
presently business of a substantial nature.
Shelby M.C. Davis is a Director, Chairman, Chief Executive Officer
and principal owner of Venture Advisers, Inc. (the "General Partner") and
is a Director of Shelby Cullom Davis Financial Consultants, Inc. ("SCDFC"),
70 Pine Street, New York, New York 10270. Carl R. Luff is a Director,
Co-President and Secretary of the General Partner.
Item 29. Principal Underwriter
---------------------
(a) Davis Selected Advisers, L.P. (formerly, Selected/Venture
Advisers, L.P.) the principal underwriter for the Registrant also acts as
principal underwriter for Davis New York Venture Fund, Inc., Davis High
Income Fund, Inc., Davis Tax-Free High Income Fund, Selected American
Shares, Inc., Selected Special Shares, Inc., Selected Capital Preservation
Trust and Davis International Series, Inc.
(b) Management of Principal Underwriters
Positions and Offices Positions and
Name and Principal with general partner Offices with
Business Address of Underwriter Registrant
- ---------------- -------------- ----------
Shelby M.C. Davis Director, Chairman Director and President
P.O. Box 205 and Chief Executive
Hobe Sound, FL 33455 Officer
Carl R. Luff Director, Vice President,
124 East Marcy Street Co-President Treasurer and Assistant
Santa Fe, NM 87501 and Treasurer Secretary
Raymond O. Padilla Senior Vice President Vice President,
124 East Marcy Street Secretary
Santa Fe, NM 87501 & Assistant Treasurer
Carolyn H. Spolidoro Vice President Vice President
124 East Marcy Street
Santa Fe, NM 87501
Andrew A. Davis Co-President Vice President
124 East Marcy Street
Santa Fe, NM 87501
Christopher C. Davis Employee of Vice President
70 Pine Street, 43rd Floor Davis Selected
New York, NY 10270-0108 Advisers, L.P.
<PAGE>
Eileen R. Street Senior Vice President Assistant Treasurer
124 East Marcy Street and Secretary and
Santa Fe, NM 87501 Assistant Secretary
(c) Not applicable.
Item 30. Location of Accounts and Records
Accounts and records are maintained at the offices of Davis
Selected Advisers, L.P., 124 East Marcy Street, Santa Fe, New Mexico
87501; the Registrant's custodian, State Street Bank and Trust Company,
One Heritage Drive, North Quincy, Massachusetts 02171; and the
Registrant's transfer agent State Street Bank and Trust Company, c/o
Service Agent, BFDS, Two Heritage Drive, 7th Floor, North Quincy,
Massachusetts 02171.
Item 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
DAVIS SERIES, 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 Chicago and State of Illinois on
the 15th day of April, 1996.
DAVIS SERIES, INC.
*By: /s/ Sheldon R. Stein
---------------------------
Sheldon R. Stein,
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Shelby M.C. Davis* President April 15, 1996
- ----------------- (Chief Executive
Shelby M.C. Davis Officer) and
Director
Carl R. Luff* Vice President, April 15, 1996
- ------------ Treasurer and
Carl R. Luff Assistant Secretary
*By: /s/ Sheldon R. Stein
-------------------------
Sheldon R. Stein,
Attorney-in-Fact
* Sheldon R. Stein signs this document on behalf of the Registrant
and the foregoing officers pursuant to the powers of attorney filed as
Exhibit (18)(a) to Post-Effective Amendment 34 to Registrant's
Registration Statement.
<PAGE>
DAVIS SERIES, INC.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed on April 15, 1996 by the
following persons in the capacities indicated.
Signature Title
--------- -----
Wesley E. Bass, Jr.* Director
- -----------------------------------
Wesley E. Bass, Jr.
Jeremy H. Biggs* Director
- -----------------------------------
Jeremy H. Biggs
Marc P. Blum* Director
- -----------------------------------
Marc P. Blum
Kirk T. Dornbush* Director
- -----------------------------------
Kirk T. Dornbush
Eugene M. Feinblatt* Director
- -----------------------------------
Eugene M. Feinblatt
Jerry D. Geist* Director
- -----------------------------------
Jerry D. Geist
D. James Guzy* Director
- -----------------------------------
D. James Guzy
G. Bernard Hamilton* Director
- -----------------------------------
G. Bernard Hamilton
LeRoy E. Hoffberger Director
- -----------------------------------
LeRoy E. Hoffberger
Laurence W. Levine* Director
- -----------------------------------
Laurence W. Levine
Christian R. Sonne* Director
- -----------------------------------
Christian R. Sonne
Edwin R. Werner* Director
- -----------------------------------
Edwin R. Werner
* Sheldon R. Stein signs this document on behalf of each of the
foregoing persons pursuant to the powers of attorney filed as Exhibit
18(a) to Post-Effective Amendment 34 to Registrant's Registration
Statement.
/s/Sheldon R. Stein
---------------------------------
Sheldon R. Stein,
Attorney-in-Fact
UNOFFICIAL FORM
ARTICLES OF INCORPORATION
OF
DAVIS SERIES, INC.
(EFFECTIVE AS OFOCTOBER 1, 1995)
FIRST: THE UNDERSIGNED, Cyril R. Murphy, Jr., whose post office
address is 1300 Mercantile Bank and Trust Building, 2 Hopkins Plaza,
Baltimore, Maryland 21201, being at least eighteen years of age, acting as
incorporator under and by virtue of the general laws of the state of
Maryland authorizing the formation of corporations, does hereby form a
corporation (hereinafter called the "Corporation").
SECOND. The name of the Corporation is Davis Series, Inc.
THIRD: The purpose for which the Corporation is formed is to act as
an open-end investment company of the management type registered as
such with the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940 and to exercise and generally to enjoy
all of the powers, rights and privileges granted to, or conferred upon,
corporations by the general laws of the state of Maryland now or hereafter
in force.
FOURTH: The post office address of the principal office of the
Corporation in this state is c/o United States Corporation Company, 300
East Lombard Street, 15th Floor, Baltimore, Maryland 21202 the name of
the resident agent of the Corporation in this state is United States
Corporation Company, a corporation of this state, and the posit office
address of the resident agent is 300 East Lombard Street, 15th Floor,
Baltimore, Maryland 21202.
FIFTH:(a) The total number of shares of stock of all classes
which the Corporation shall have authority to issue is 5,000,000,000
shares. The par value of each share of stock is $.01 and the aggregate par
value of all shares of stock is $50,000,000. Without limiting the power
of the Board of Directors as set forth in paragraph (b) of this Article
FIFTH, 225,000,000 shares are classified as Davis Growth Opportunity
Fund Class A Common Stock, 225,000,000 shares are classified as Davis
Growth Opportunity Fund Class B Common Stock, 50,000,000 shares are
classified as Davis Growth Opportunity Fund Class C Common Stock,
225,000,000 shares are classified as Davis Government Bond Fund Class A
Common Stock, 225,000,000 shares are classified as Davis Government
Bond Fund Class B Common Stock, 50,000,000 shares are classified as
Davis Government Bond Fund Class C Common Stock, 225,000,000 shares
are classified as Davis Financial Fund Class A Common Stock,
225,000,000 shares are classified as Davis Financial Fund Class B
Common Stock, 50,000,000 shares are classified as Davis Financial Fund
Class C Common Stock, 225,000,000 shares are classified as Davis
Convertible Securities Fund Class A Common Stock, 225,000,000 shares
are classified as Davis Convertible Securities Fund Class B Common Stock,
50,000,000 shares are classified as Davis Convertible Securities Fund
Class C Common Stock, 225,000,000 shares are classified as Davis Real
Estate Fund Class A Common Stock, 225,000,000 shares are classified as
Davis Real Estate Fund Class B Common Stock, 50,000,000 shares are
classified as Davis Real Estate Fund Class C Common Stock, 175,000,000
shares are classified as Davis Government Money Market Fund Class A
Common Stock, 175,000,000 shares are classified as Davis Government
Money Market Fund Class B Common Stock and 150,000,000 shares are
classified as Davis Government Money Market Fund Class C Common Stock,
each with $.01 par value per share.
The Class A Common Stock, Class B Common Stock and Class C
Common Stock of each Fund, shall represent investment in the same pool
of assets with respect to each
<PAGE>
such Fund and shall have the same preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption except as set forth in the Articles of
Incorporation of the Corporation and as set forth below:
(i) The Class A Common Stock of all Funds, other than the
Davis Government Money Market Fund, may be subject to a front-end
load and Rule 12b-1 service and distribution fee as determined by
the Board of Directors from time to time prior to issuance of
such stock;
(ii) The Class B Common Stock of all Funds, other than the
Davis Government Money Market Fund, may be subject to a contingent
deferred sales charge and a Rule 12b-1 service and distribution fee
as determined by the Board of Directors from time to time prior to
issuance of such stock and shall be converted to the Class A Common
Stock of its respective Fund at the end of eight (8) years after
purchase or such shorter period as determined by the Board of Directors
giving effect to reciprocal exchange privileges;
(iii) The Davis Government Money Market Fund Class A Common
Stock may be sold without a front-end load and without a Rule 12b-1
service and distribution fee;
(iv) The Davis Government Money Market Fund Class B Common Stock
may be subject to a contingent deferred sales charge, shall be converted
to Davis Government Money Market Fund Class A Common Stock at the end
of eight (8) years after purchase, and may be sold without a Rule 12b-1
service and distribution fee;
(v) The Class C Common Stock of all Funds may be sold without
a front-end sales load or contingent sales charge and may be
subject to a Rule 12b-1 service and distribution fee as determined by
the Board of Directors from time to time prior to issuance of such
stock.
(vi) Nothing herein shall prohibit the imposition of a redemption
fee or exchange fee upon any Class.
(b) For purposes of establishing classes or subclasses of stock with
different investment objectives, types of investments or distribution
methods, costs or charges, the Board of Directors may classify or
reclassify any unissued stock from time to time by setting or changing the
preferences, conversion or other rights, voting powers, restric-tions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of the stock. Without limiting the generality of the foregoing,
the Board of Directors may, from time to time, (i) classify or reclassify
any unissued shares of stock into classes having "assets belonging to"
such class, as described in Paragraph (c)(i) of this Article, (ii) divide any
class having "assets belonging to" such class into subclasses with
different distribution methods, costs or charges and classify or reclassify
any unissued shares of such subclass, and (iii) name and change the name
of any class or subclass of outstanding or unissued stock.
(c) Subject to the authority granted to the Board of Directors of the
Corporation in subparagraph (b) of this Article FIFTH, the classes of stock
of the Corporation now outstanding and each class of stock hereafter
designated by the
<PAGE>
Directors as a class which shall have assets belonging to such class shall
have the following described powers, preferences and rights and the
qualifications, limitations and restrictions thereof shall be as follows:
(i) All consideration received by the Corporation for the
issue or sale of shares of a particular class, together with all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any assets
derived from any reinvestment of such proceeds, in whatever form the
same may be, are herein referred to as "assets belonging to" such class.
(ii) The assets belonging to a particular class of stock shall be
charged with the liabilities (including, in the discretion of the Board
of Directors or its delegate, accrued expenses and reserves) incurred in
respect of such class, and such class shall also be charged with its
share of any general liabilities of the Corporation not incurred in
respect of any particular class, such general liabilities to be allocated
in proportion to the net asset value of the respective classes. The
allocation of such liabilities to any subclass shall be determined by the
Board of Directors or its delegate. The determination of the Board of
Directors or its delegate shall be final and conclusive as to the amount
of assets and liabilities, including accrued expenses and reserves, which
are to be allocated to one or more particular classes or subclasses. The
power to make such determinations may be delegated by the Board of
Directors from time to time to one or more of the directors and officers
of the Corporation, or to an agent of the Corporation appointed for such
purpose.
(iii) In the event of the liquidation or dissolution of the
Corporation (for whatever reason), shareholders of each class shall be
entitled to receive as a class, out of the assets of the Corporation
available for distribution to shareholders the assets belonging to such
class; and the assets so distributable to the shareholders of any class
shall be distributed among such shareholders in proportion to the
relative aggregate net asset values of the shares held by such
shareholders. In the event that there are any general assets available
for distribution not belonging to any par-ticular class, any distribution
thereof shall be made to the holders of all such classes in proportion to
the net asset value of the respective classes.
(iv) The voting rights of the shares of each class shall be as set
forth in subparagraph (d) of this Article FIFTH.
(v) the relative rights of the shares of each class to be redeemed
or repurchased shall be as set forth in Article SEVENTH.
(vi) Distributions from assets belonging to a particular class shall
be distributed only to the holders of shares of such class.
(d) Subject to the requirements of Investment Company act of 1940,
at any meeting of the shareholders, each shareholder shall have one vote
for each dollar of net asset value per share for each share held
irrespective of the class or subclass thereof. On any matter submitted to
a vote of shareholders, all shares of the Corporation then issued and
outstanding and entitled to vote shall be voted in the aggregate and not by
class or subclass except to the extent class or subclass voting is required
as to any matter by the laws of the State of Maryland, the Investment
Company Act of 1940 or any Regulation thereunder or by the Board of
Directors.
<PAGE>
(e) Fractional shares carry proportionately all the rights of a
whole share.
SIXTH. The number of directors of the Corporation shall be two (2),
provided, however, that the number may be increased or decreased in
accordance with the By-Laws of the Corporation so long as the number is
never less than (a) one (1), so long as the Corporation is a close
corporation and (b) three (3), so long as the Corporation is not a close
corporation. The names of the directors who shall act until the first
annual meeting and until their successors are elected and qualify are:
Wesley E. Bass, Jr.
William M. Rice
SEVENTH. Redemption. (a) Each holder of the stock of the
Corporation shall be entitled at any time to require the Corporation, to the
extent that the Corporation shall have any surplus available for such
purpose and out of such surplus, to purchase all or any part of the shares
of the stock standing in the name of such holder on the books of the
Corporation at the net asset value of such shares; provided, however, that
the Corporation may suspend such right of redemption or postpone
payment for such shares pursuant to the 1940 Act or any rule, regulation
or order thereunder. The procedures and requirements for redemption
shall be determined by the Corporation or its duly authorized agent.
(b) Each share of stock is subject to redemption by the corporation
at the redemption price computed in the manner set forth in Paragraph (a)
of this Article SEVENTH at any time if the Board of Directors of the
Corporation determines in its sole discretion that failure to so redeem
may have materially adverse consequences to the holders of the stock, or
any class or subclass thereof, of the Corporation.
EIGHTH: (a) The Board of Directors is empowered to authorize the
issuance from time to time of shares of any class of stock of the
Corporation, whether now or hereafter authorized or created, provided,
however, that the consideration per share to be received by the
Corporation upon the issuance or sale of any shares of any class of stock
shall be the net asset value per share.
(b) No holder of shares of any class of stock, whether now or
hereafter authorized or created, shall have pre-emptive rights, and the
Corporation shall have the right to issue and sell to any person or
persons any shares of any class of stock or any option rights exercisable
for, or securities convertible into, shares of any class of stock,
without first offering such shares, rights or securities to the holder of
any shares of any class of stock.
(c) In furtherance and not in limitation of the powers conferred by
the laws of the state of Maryland, the Board of Directors is expressly
authorized:
(i) To adopt, alter and repeal the By-Laws of the Corporation,
except as otherwise required by the Investment Company Act of 1940.
(ii) To authorize and issue obligations of the Corporation, secured
or unsecured, as the Board of Directors may determine, and to authorize
and cause to be executed mortgages and liens upon the property of the
Corporation, real or personal, but only to the extent permitted by the
fundamental policies of the Corporation recited in its registration
statement filed pursuant to the Investment Company Act of 1940.
(iii) To enter into a written contract or contracts with any person,
including any firm, corporation, trust, trust company or association in
which any officer, other employee, director or stockholder of the
Corporation may be directly or indirectly interested, providing for the
furnishings of management, investment advisory, custodial, stock
transfer, stock distribution and administrative services; provided,
however, that performance under such contracts shall be subject always
to the direction of the Board of Directors. The terms and conditions,
methods of approval, authorization, renewal, amendment, and termination
of the aforesaid contracts shall be as determined by the Board of
Directors, subject, however, to the provisions of these Articles of
Incorporation, the By-Laws of the Corporation, the applicable laws of the
State of Maryland, and Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission (or any succeeding
governmental authority) thereunder. The compensation payable by the
Corporation under each such contract considered in its entirety shall be
such as is deemed fair and equitable to both parties by the Board of
Directors of the Corporation.
(iv) To determine from time to time whether and to what extent
and at what time and place and under what conditions and regulations the
books and accounts of the Corporation, or any of them other than the
stock ledger, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account or book or
document of the Corporation, except as conferred by law or authorized by
resolution of the Board of Directors of the Corporation.
(v) To determine the time, date and manner in which redemption
orders and purchase orders shall be made.
(vi) To determine in accordance with generally accepted accounting
principles what constitutes net profits, earnings, surplus or net assets
in excess of capital, and to determine what accounting periods shall be
used by the Corporation for any purposes, whether annual or any other
period, including daily, to set apart out of any funds of the Corporation
such reserves for such purposes as it shall determine and to abolish the
same; to declare and pay dividends and distributions in cash, securities
or other property from surplus or any funds legally available therefor,
at such intervals (which may be as frequently as daily) or on such other
periodic basis, as it shall determine; to declare such dividends or
distributions by means of a forum or other method of determination, at
meetings held less frequently than the frequency of the effectiveness of
such declaration; to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof; to provide for the
payment of declared dividends on a date earlier or later than the
specified payment date in case of stockholders of the Corporation
redeeming their entire ownership of shares of the Corporation; and to
provide for the automatic reinvestment of declared and paid dividends in
additional shares of the same class of stock of the Corporation.
(vii) In addition to the powers and authorities by these Articles of
Incorporation or by statue expressly conferred upon it, to exercise all
such powers and do all such acts and things as may be exercised or done
by the Corporation, subject, however, to the provisions of these Articles
of Incorporation, the By-Laws of the Corporation, the applicable laws of
the State of Maryland, the Investment Company Act of 1940 and the rules
and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) there-under.
NINTH. Majority Vote. Notwithstanding any provision of the General
Corporation Law of the State of Maryland requiring that any action be
taken or authorized by the affirmative vote of the holders of a designated
proportion greater than a majority of votes entitled to be cast, such
action shall be effective and valid if taken or authorized by the
affirmative vote of the holders of a majority of the total number of votes
entitled to vote thereon. When shares are voted by individual class or
subclass, any such action shall be effective and valid if taken or
authorized by the affirmative vote of the holders of a majority of the
total number of votes entitled to vote thereon.
TENTH: So long as permitted by Maryland law, the books of the
Corporation may be kept outside of the State of Maryland at such place or
places as may be designated from time to time by the Board of Directors
or in the By-Laws of the Corporation.
ELEVENTH: The duration of the Corporation shall be perpetual.
TWELFTH: The Corporation reserves the right from time to time to
make any amendment of these Articles of Incorporation now or hereafter
authorized by law, including amendments which alter any or all rights set
forth in these Articles of Incorporation. All rights conferred upon
stockholders in these Articles of Incorporation are granted subject to this
reservation.
THIRTEENTH: The Corporation shall not be required to hold an annual
meeting of stockholders in any year, unless such a meeting is required
under the Investment Company Act of 1940, as amended, or any regulation
promulgated thereunder.
FOURTEENTH: Exculpation. Subject to the provisions of the
Investment Company Act of 1940, as amended, no director or officer of
the Corporation shall be liable to the Corporation or its stockholders for
money damages, except (i) to the extent that it is provided that such
director or officer actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in
money, property or services actually received, or (ii) to the extent that a
judgment or other final adjudication adverse to such director or officer is
entered in a proceeding based on a finding in the proceeding that such
director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding."
IN WITNESS WHEREOF, I have signed these Articles of Incorporation
of Davis Series, Inc., acknowledging the same to be my act, on September
16, 1976.
/S/ CYRIL R. MURPHY, JR.
Cyril R. Murphy, Jr.
WITNESS:
/S/ DEBORAH GORSCHMIDTH
Deborah Gorschmidth
=============================================================================
AMENDED AND RESTATED BYLAWS OF
RETIREMENT PLANNING FUNDS OF AMERICA, INC.
October 17, 1994
============================================================================
IN EFFECT AS OF
October 17, 1994
AMENDED AND RESTATED BYLAWS OF
RETIREMENT PLANNING FUNDS OF AMERICA, INC.
ARTICLE I
---------
STOCKHOLDERS
------------
SECTION 1. Annual Meetings. Annual meetings shall be held in any
---------------
year in which the election of Directors is required to be acted upon under
the Investment Company Act of 1940. An annual meeting shall be held in
accordance with the Investment Company Act of 1940 in the event that
less than a majority of the Directors then in office were elected by the
vote of stockholders. Any annual meeting may be called (i) by the Board of
Directors, or (ii) if required by the Investment Company Act of 1940, by
the Chief Executive Officer solely for the purposes of electing Directors
and considering the ratification of the independent public accountant
selected by the Board of Directors to audit the financial statements of the
Corporation. Annual meetings called by the Chief Executive Officer may
consider other business which is proposed by the Chief Executive Officer
and properly brought before such meetings; provided, however, that
specific matters other than election of Directors and ratification of
selection of accountants may be placed on the agenda of the meeting
solely with the approval of a majority of the entire Board of Directors.
SECTION 2. Special Meetings. Special meeting of stockholders
----------------
may be called by the Chief Executive Officer or the Board of Directors, and
shall be called upon the written request of stockholders holding at least
ten percent (10%) of the outstanding shares of stock. A request by
stockholders for a meeting shall state the purpose of the meeting and the
matters proposed to be acted upon. Unless requested by stockholders
entitled to cast a majority of all the votes entitled to be cast at the
meeting, a special meeting need not be called to consider any matter
which is substantially the same as a matter voted on at any special
meeting of the stockholders held during the preceding 12 months.
Whenever ten or more stockholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate shares constituting at least one percent (1%) of the outstanding
shares of stock, shall apply to the Directors in writing, stating that they
wish to communicate with other stockholders with a view to obtaining
signatures to a request for a meeting to consider removal of a director
and accompanied by a form of the communication and request that they
wish to transmit, the Directors shall, within five business days after
receipt of such application, inform such applicants as to the approximate
<PAGE>
cost of mailing to the stockholders of record the proposed communication
and form of request. Upon the written request of such applicants,
accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, as determined by the Directors, the
Directors shall, with reasonable promptness, mail such material to all
stockholders of record at their addresses as recorded on the books of the
Corporation. Notwithstanding the foregoing, the Directors may refuse to
mail such material on the basis and in accordance with the procedures for
refusing to mail such material set forth in the last two paragraphs of
Section 16 (c) of the Investment Company Act of 1940, or any substitute
or replacement provision therefor.
SECTION 3. Place of Meeting. All meetings of stockholders shall be
----------------
held at such place in the United States as is set or provided for by the
Board of Directors or, if not so set or provided for, then as stated in the
notice of meeting.
SECTION 4. Notice of Meetings. Written or printed notice of the
------------------
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing such
notice in the mail at least ten (10) days, but not more than ninety (90)
days, prior to the day named for the meeting addressed to each
stockholder at his address appearing on the books of the Corporation or
supplied by him to the Corporation for the purpose of notice. The notice of
every meeting of stockholders may be accompanied by a form of proxy
approved by the Board of Directors in favor of such actions or persons as
the Board of Directors may select.
SECTION 5. Record Date. The Board of Directors may fix a date, not
-----------
less than ten (10) nor more than sixty (60) days preceding the date of any
meeting of stockholders, as a record date for the determination of
stockholders entitled to notice of, or to vote at, any such meeting. The
Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period except as
provided in Section 2 of Article IV.
SECTION 6. Quorum, Adjournment of Meetings. The presence in person or
-------------------------------
by proxy of the holders of record of a majority of the votes entitled to be
cast shall constitute a quorum at all meetings of the stockholders. If at
any meeting of the stockholders there shall be less than a quorum present,
the stockholders present at such meeting may, without further notice,
adjourn the same from time to time until a quorum shall attend, but no
business shall be transacted at any such adjourned meeting except such as
might have been lawfully transacted had the meeting not been adjourned.
<PAGE>
SECTION 7. Voting and Inspectors. At all meetings of stockholders
every stockholder of record entitled to vote shall be entitled to one vote
for each dollar of net asset value per share standing in the stockholder's
name on the books of the Corporation (and such stockholders of record
holding fractional shares, if any, shall have proportionate voting rights).
All elections shall be had and all questions decided by a majority of
the votes cast at a duly constituted meeting, except as otherwise provided
in the Articles of Incorporation or in these Bylaws or by specific
statutory provision superseding the restrictions and limitations contained
in the Articles of Incorporation or in these Bylaws.
At any election of Directors, the Board of Directors prior thereto
may, or if they have not so acted, the Chairman of the meeting may, and
upon the request of the holders of ten percent (10%) of the votes entitled
to be cast at such election shall, appoint at least one inspector of election
who shall first subscribe an oath or affirmation to execute faithfully the
duties of inspector at such election with strict impartiality and according
to the best of their ability, and shall after the election make a certificate
of the result of the vote taken. No candidate for the office of Director
shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken
upon any election or matter, and such vote shall be taken upon the request
of the holders of ten percent (10%) of the votes entitled to be cast on such
election or such matter.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
SECTION 1. Number, Vacancies and Tenure. The Directors may, at any
----------------------------
time when the stockholders are not assembled in meeting, establish,
increase or decrease the number of seats on the Board of Directors by
majority vote of the entire Board of Directors; provided, that the number
of Directors shall never be less than three (3) nor more than fifteen (15).
The number of Directors may not be decreased so as to affect the term of
any incumbent Director. Except as hereinafter provided, (i) if the number
of Directors is increased, the additional Directors to fill the vacancies
thus created may be elected by majority vote of the entire Board of
Directors, and (ii) any vacancy occurring for any other cause may be filled
by a majority of the remaining Directors, even if such majority is less
than a quorum. No vacancy may be filled for any cause whatsoever unless,
immediately after the filling of such vacancy, at least two-thirds of the
entire Board of Directors shall have been elected by the stockholders of
the Corporation. A Director shall hold office until the
<PAGE>
next annual meeting of stockholders and until his successor is elected and
qualified, or until such Director's earlier death, resignation, retirement or
removal; provided, however that if a Director was not elected to office by a
vote of stockholders, the term of such Director shall, in any event, end as of
the date of the next annual meeting of stockholders which is required to be
held pursuant to Article I, Section 1 of these Bylaws following such
Director's election to office. Such a Director may be a candidate for
election to office at such annual meeting and, if elected at such meeting,
shall serve for the indefinite term specified above.
SECTION 2. Mandatory Retirement of Directors. A Director shall
---------------------------------
retire from the Board of Directors and cease being a Director at the close
of business on the last day of the calendar year in which the Director
attains age seventy-two (72), except that any person who was a Director
on July 1, 1994, and on that date was at least sixty-nine (69) years of age
shall continue to serve as a director at the discretion of the Nominating
Committee of the Board of Directors.
SECTION 3. First Regular Meeting. After each meeting of the
---------------------
stockholders at which a Board of Directors shall have been elected, the
Board of Directors so elected shall meet as soon as practicable for the
purpose of organization and the transaction of other business, at such
time and place as may be designated by the Chairman. No notice of such
first meeting shall be necessary if held as herein above provided.
SECTION 4. Additional Regular Meetings. In addition to the first
---------------------------
regular meeting, regular meetings of the Board of Directors shall be held
on such dates as may be fixed, from time to time, by the Board of
Directors.
SECTION 5. Special Meetings. Special meetings of the Board of
----------------
Directors shall be held whenever called by the Chairman or by a majority
of the Directors, either in writing or by vote at a meeting.
SECTION 6. Place of Meetings. Subject to the provisions of Section 2
-----------------
of this Article II, the Board of Directors may hold its regular and special
meetings at such place or places within or without the State of Maryland
as may be designated from time to time by the Board of Directors; in the
absence of such designation such meetings shall be held at such places as
may be designated in the call. Members of the Board of Directors or any
committee thereof may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time and participation by such means shall
constitute presence in person at a meeting.
<PAGE>
SECTION 7. Notice of Meetings. Subject to the provisions of Section 3
------------------
of this Article II, notice of the place, day and hour of every regular and
special meeting shall be given to each Director by mailing at least three
(3) days, or by telegraphing or telephoning or delivering personally the
same at least one (l) day, before the meeting. It shall not be requisite to
the validity of any meeting of the Board of Directors that notice thereof
shall have been given to any Director who is present thereat, or if absent
waives notice thereof in writing filed with the records of the meeting
either before or after the holding thereof. No notice of any adjourned
meeting of the Board of Directors need be given.
SECTION 8. Quorum. A majority of the Board of Directors then in
------
office, but in no case less than two (2) directors, shall be necessary to
constitute a quorum for the transaction of business at every meeting of
the Board of Directors; but if at any meeting there be less than a quorum
present, a majority of those present may adjourn the meeting from time
to time but not for a period over thirty (30) days at any one time, without
notice other than by announcement at the meeting until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the
meeting as originally notified.
SECTION 9. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if a written consent to such action is
signed by all members of the Board or of such committee, as the case may
be, and such written consent is filed with the minutes of the proceedings
of the Board or committee.
SECTION 10. Compensation of Directors. No Director shall receive
-------------------------
any stated salary or fees from the Corporation for his services as such
Director if such Director is, otherwise than by reason of being such
Director, affiliated (as such term is defined by the Investment Company
Act of 1940) with the Corporation or with any investment adviser or
principal underwriter of the Corporation. Except as provided in the
preceding sentence, Directors shall be entitled to receive such
compensation from the Corporation for their services as may from time to
time be voted by the Board of Directors.
SECTION 11. Removal. At any meeting of stockholders, duly called
------
and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
<PAGE>
SECTION 12. Executive Committee. The Board of Directors may, by
-------------------
resolution adopted by a majority of the whole Board, designate two (2) or
more of its members to constitute an Executive Committee which
committee, during intervals between meetings of the Board, shall have and
exercise the authority of the Board of Directors in the management of the
business of the Corporation to the extent permitted by law. In the absence
of any member of the Executive Committee, the member or members
thereof present at any meeting, whether or not he or they constitute a
quorum, may appoint a member of the Board of Directors to act in the
place of the absent member.
SECTION 13. Portfolio Pricing Committee. The Board of Directors
---------------------------
may by resolution adopted by a majority of the whole Board, designate two
(2) or more of its members to constitute a Portfolio Pricing Committee
which Committee, during intervals between meetings of the Board, shall
have and exercise the authority of the Board of Directors to price
portfolio securities. In the absence of any member of the Portfolio
Pricing Committee the member or members thereof present at any meeting
whether or not he or they constitute a quorum may appoint a member of
the Board of Directors to act in the place of the absent member.
ARTICLE III
-----------
OFFICERS
--------
SECTION 1. Officers. The Board of Directors at its first meeting
--------
following each annual meeting of stockholders, shall elect a Chairman, a
President, a Secretary and a Treasurer, and from time to time may appoint
such Assistant Secretaries, Assistant Treasurers and such other officers,
agents, and employees as it may deem proper. If an annual meeting is not
required to be held, such officers shall be chosen by the Board of Directors
as soon as may be practicable after the close of the fiscal year of the
Corporation, or at any other time as the Chairman shall determine. Two or
more offices may be held by the same person. The Chairman and President
shall be chosen from among the Directors. The Board may elect or appoint
such other officers, agents and employees as it shall deem necessary who
shall have such authority and shall perform such duties as from time to
time shall be prescribed by the Board.
SECTION 2. Term. The term of office of all officers shall be one year
----
and until their respective successors are elected and qualify, but any
officer may be removed from office, either with or without cause, at any
time by the affirmative vote of a majority of members of the Board of
Directors then in office. A vacancy in an office arising from any cause may
be filled for the unexpired portion of the term by the Board of Directors.
<PAGE>
SECTION 3. Chairman. The Chairman shall be the chief executive and
--------
administrative officer of the Corporation; he shall preside at all meetings
of the stockholders and Board of Directors, shall have the management of
the business of the Corporation, and shall see that all orders and
resolutions of the board are carried into effect.
SECTION 4. President. The President shall, in the absence or
---------
disability of the Chairman, perform the duties and exercise the powers of
the Chairman.
SECTION 5. Secretary. The Secretary shall give, or cause to be given,
---------
notice of all meetings of the stockholders and meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or Chairman. He shall keep in safe custody the seal of
the Corporation and, when authorized by the Board of Directors, affix the
same to any instrument requiring it, and, when so affixed, it shall be
attested by his signature or by the signature of the Treasurer or Assistant
Secretary.
SECTION 6. Treasurer. The Treasurer shall keep full and accurate
---------
accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all corporate funds and corporate securities
in the name and to the credit of the corporation in such depositories as
may be designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board, taking proper vouchers for
such disbursements, and shall render to the Chairman and Directors at the
regular meetings of the Board, or whenever they may require it, an account
of all his transactions as Treasurer and of the financial condition of the
Corporation.
SECTION 7. Assistant Officers. The Board of Directors may elect one
------------------
or more Assistant Secretaries and one or more Assistant Treasurers.
Unless otherwise provided by the Board of Directors, each Assistant
Secretary, if any, and each Assistant Treasurer, if any, shall at the
request of or in the absence or disability of the Secretary or the
Treasurer, as the case may be, perform the duties and exercise the powers
of the Secretary or the Treasurer, as the case may be. They shall perform
such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE IV
STOCK
SECTION 1. Certificates of Shares. A stockholder of Class A Shares
----------------------
of any series other than a money market fund shall upon request be
entitled to a certificate for full shares of stock in
<PAGE>
such form not inconsistent with law as the Board of Directors shall
determine. No certificates will be issued to evidence ownership of any other
Class of shares.
SECTION 2. Transfer of Shares. Shares of the Corporation shall be
------------------
transferable on the books of the Corporation by the holder thereof in
person or by his duly authorized attorney or legal representative, upon
surrender and cancellation of certificates for the same number of shares,
duly endorsed or accompanied by proper instruments of assignment and
transfer, with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require.
SECTION 3. Stock Ledgers. The stock ledgers of the Corporation,
-------------
containing the names and addresses of the stockholders and the number of
shares held by them respectively, shall be kept at the principal offices of
the Corporation or, if the Corporation employs a transfer agent, at the
offices of the Transfer Agent of the Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Board of
--------------------------------------
Directors or the Executive Committee may determine the conditions upon
which a new certificate of stock of the Corporation of any class may be
issued in place of a certificate which is alleged to have been lost, stolen
or destroyed; and may, in their discretion, require the owner of such
certificate or his legal representative to give bond, with sufficient surety
to the Corporation and each Transfer Agent, if any, to indemnify it and
each Transfer Agent against any and all loss or claims which may arise by
reason of the issue of a new certificate in the place of the one so lost,
stolen or destroyed.
ARTICLE V
---------
SEAL
----
The seal of the Corporation shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VI
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE VII
-----------
SUNDRY PROVISIONS
-----------------
SECTION 1. Amendments. Except as otherwise provided in the
----------
Articles of Incorporation, the laws of Maryland or the Investment Company
Act of 1940, the Bylaws of the Corporation may
<PAGE>
be amended, added to, rescinded or repealed by a majority vote of the stock
entitled to vote present or represented at any annual or special meeting of
the stockholders, provided notice of the proposed change is given in the
notice of meeting. Subject to the power of the stockholders to alter, amend
or repeal any Bylaw made by the Board of Directors, the Board of Directors
at any meeting thereof may make additional Bylaws for the Corporation and
may from time to time alter, amend, add to, rescind or repeal the Bylaws.
SECTION 2. Indemnification. (a) Definitions. As used in this Section
2 of Article VII, any word or words that are defined in Section 2-418 of
the Corporations and Associations Article of the Annotated Code of
Maryland (the "Indemnification Section"), as amended from time to time,
shall have the same meaning as provided in the Indemnification Section.
(b) Indemnification of Directors and Officers. Subject to the provisions of
the Investment Company Act of 1940, as amended, the Corporation shall
indemnify and advance expenses to each director or officer of the
Corporation in connection with any proceeding to the fullest extent
permitted by and in accordance with the Indemnification section, as
amended from time to time.
(c) Indemnification of Other Agents and Employees. Subject to the
provisions of the Investment Company Act of 1940, as amended, with
respect to an employee or agent, other than a director or officer of the
Corporation, the Corporation may, as determined by and in the discretion
of the Board of Directors of the Corporation, indemnify and advance
expenses to such employees or agents in connection with a proceeding to
the extent permitted by and in accordance with the Indemnification
Section.
RETIREMENT PLANNING FUNDS OF AMERICA, INC.
NEW ADVISORY AGREEMENT
December 20, 1993
Selected/Venture Advisers, L.P.
124 East Marcy Street
Santa Fe, NM 87501
Dear Sirs:
We herewith confirm our agreement with you as follows:
1. We desire to employ the capital of Retirement Planning Funds of
America, Inc. (the "Company") by investing and reinvest-ing the same in
securit-ies of the type and in accordance with the limita-tions specified
in the registration statement under the Securi-ties Act of 1933 and the
Investment Company Act of 1940, of which we enclose a copy, and in such
manner and to such extent as may from time to time be approved by our
Board of Directors. We desire to employ you to supervise and assist in the
management of this business for us. You shall for all purposes herein be
deemed an independent contractor, and shall, unless otherwise expressly
provided for or authorized, have no authority to act or represent us.
2. In this connection it is understood that you will from time to
time employ or associate with yourselves such person or persons as you
may believe to be particularly fitted to assist you in the execution of this
Agreement, it being understood that the compensation of such person or
persons shall be paid by you and that no obligation may be incurred on our
behalf in any such respect. This does not apply to such individuals as we
may in due course elect as officers of our corporation, except that no
officer, director, stockholder or employee of your firm shall receive
compensation from us for acting as director, officer or employee of our
corporation, and you agree to pay the compensa-tion of all such persons.
We understand that, during the con-tinuance of this agreement, officers of
your firm will, if elected, serve as directors of our corporation and as its
prin-cipal officers.
3. You are to have complete and exclusive authority to develop and
handle for us any business of the type above men-tioned which you may
consider advantageous for us, subject to the direction and control of our
officers and directors. You will furnish us with such statistical
information with respect to the securities which we may hold or
contemplate purchasing as we may request. We wish to be kept in touch
with important developments affecting our Company and shall expect you
on your own initiative to furnish us from time to time with such
information as you may believe appropriate for this purpose, whether
concerning the individual companies whose securities are included in our
portfo-lio or the industries in which they are engaged. We shall also
expect you of your own motion to advise us whenever in your opinion
conditions are such as to make it desirable that a specific security be
eliminated from our portfolio.
4. We shall expect of you your best judgment in rendering these
services to us, and we agree as an inducement to your undertaking the
same that you shall not be liable hereunder for any mistake of judgment or
in any other event whatsoever, except for lack of good faith, provided that
nothing herein shall be deemed to protect or purport to protect you against
any liability to us or to our security holders to which you would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence
in the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. Except as otherwise provided below in this paragraph, you will
attend to, or arrange for the performance, at your expense, of such
clerical and accounting work related to the investment and reinvestment
of our capital for us as we may specify. We shall, however, bear all costs
and expenses of or attendant upon: (i) preparation of our federal, state and
local tax returns; (ii) preparation of certain documents we must file with
the Securities and Exchange Commission; (iii) determination of the status
and payment of dividends; (iv) reconciling and reviewing output of our
custodian bank, determining the adequacy of various accruals, approving
our expenses, authorizing our bank to receive and disburse money and
securities and verifica-tions related thereto, and interfacing with our
auditors; (v) verifica-tion of our security ledger and preparation and
main-tenance of other corporate books and records; (vi) brokerage fees
and commissions; (vii) stockholders' and Directors' meetings; (viii)
corporate reports and proxy materials, including their prepara-tion,
printing and distribution; (ix) fees of disinter-ested Directors; (x) taxes
and interest expenses; (xi) reports to government authorities including all
expenses and costs relating to such reports and
<PAGE>
to state securities law compliance; (xii) custodian and transfer agent fees;
(xiii) association membership dues; (xiv) premiums on all insurance and
bonds maintained for us or on our behalf; (xv) retention of the transfer
agent and registrar for our shares and the disbursing agent for our
stock-holders, including costs and expenses attendant upon repurchase and
redemption of our shares; (xvi) our counsel; and (xvii) our independent
auditors. We may arrange for you to provide some or all of the services
relating to items (i) to (xvii) above, and any other services not directly
relating to investment and reinvest-ment of our capital, upon such terms and
conditions as we may agree and subject to the approval and review of our
Board of Directors.
6. In consideration of such services, we shall pay you a monthly fee
as of the last day of each month in each year based upon the average daily
value of net assets during a month for which the monthly fee is
calculated, as follows:
VALUE OF AVERAGE DAILY NET ASSETS
MONTHLY RATE OF THE FUND DURING THE MONTH
- ------------ ----------------------------
ALL FUNDS EXCEPT GOVERNMENT MONEY MARKET FUND
1/12 of .75% of............................. First $250 Million
1/12 of .65% of............................. Next $250 Million
1/12 of .55% of............................. Amounts in excess of $500 Million
GOVERNMENT MONEY MARKET FUND
1/12 of .50% of............................. First $250 Million
1/12 of .45% of............................. Next $250 Million
1/12 of .40% of............................. Amounts in excess of $500 Million
provided, however, that such fee for any period which shall not be a full
monthly period shall be prorated according to the proportion which such
period bears to the full month. For this purpose, the value of our net
assets shall be computed in the same manner as the value of such net
assets are computed in connection with the determination of the net asset
value of our shares.
7. (a) You are authorized to place purchase and sale orders for
our portfolio transactions with brokers and/or dealers which, in your best
judgment are able to achieve "best execution" of such orders. "Best
execution" shall mean prompt and reliable execution at the most favorable
security price obtainable, taking into account research and other services
available and the reasonableness of commission charges. Purchases and
sales of securities not listed or traded on a securities exchange shall
ordinarily be executed with primary market makers, acting as principal,
except where, in your judgment, better prices and execution may
otherwise be obtained.
(b) You are authorized to allocate brokerage and principal business
to members of securities exchanges, brokers and dealers (such members,
brokers and dealers being hereinafter referred to as "brokers") who have
provided brokerage and re-search services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act") for
us and/or other accounts, if any, for which you exercise investment
discre-tion (as defined in Section 3(a)(35) of the 1934 Act) and to cause
us to pay a commission for effecting a securities transac-tion in excess
of the amount another broker would have charged for effecting that
transaction if you determine in good faith that such amount of commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that
particular transaction or your overall responsibilities with respect to us
and the other accounts, if any, as to which you exercise investment
discretion.
In reaching such determination, you will not be re-quired to place or
attempt to place a specific dollar value on the research or execution
services of a broker or on the portion of any commission reflecting either
of said services. In demon-strat-ing that such determinations were made
in good faith, you shall be prepared to show that all commissions were
allocated and paid in accordance with this agreement, that commissions
were not allocated or paid for products or services which were readily and
customarily available and offered to the public on a commercial basis and
that the commissions were within a reasonable range shall be based on
any available information as to the level of commissions known to be
charged by qualified brokers on com-parable transactions, but taking into
account (i) the provisions of this agreement relating to obtaining the most
favorable securities price, since it is recognized by our Board of
Direc-tors and shareholders that it usually is more beneficial to us to
obtain a favorable price than to pay the lowest commission; and (ii) that
research from brokers is useful to you in perform-ing your advisory
activities under this Agreement.
<PAGE>
(c) Portfolio transactions may be allocated to any broker or dealer
taking into account the sale by such broker or dealer of our shares. Any
such allocation shall be made in accordance with the provisions of this
agreement relating to obtaining "best execution".
(d) In selecting brokers for our portfolio transac-tions, you shall
make use of a list of a number of brokers which you and we believe, based
on past and current experience, are qualified to execute our portfolio
transactions. The brokers on the list will ordinarily be used for our
portfolio transactions, but other brokers may be used in accordance with
the principles of this agreement. The brokers on the list may be changed
from time to time and will include members of the major and regional
securities exchanges and certain non-member brokers.
8. You may act as investment adviser for any other person, firm or
corporation.
9. All of our expenses shall be paid by us except for those you
specifically agree to assume under this Agreement. If the total expense
payable by us for any fiscal year (inclusive of all fees payable under this
agreement but exclusive of interest, taxes, brokerage fees and payments
under any Rule 12b-1 distribu-tion plan) shall exceed the most
restric-tive applicable expense limitation prescribed by any statute or
regulatory authority of any jurisdiction in which our shares are qualified
for offer and sale, you will pay or refund to us the amount by which such
expenses exceed the amount so computed.
10. This Agreement shall become effective for an initial period of
not more than two years from its effective date, and shall continue in full
force and effect continuously there-after, if its continuance is approved
at least annually as required by the Investment Company Act of 1940. The
effective date of this Agreement shall be the later of (i) April 15, 1993,
or (ii) the date this Agreement has been approved as required by the
Invest-ment Company Act of 1940. As of such effective date, this
Agreement shall supersede all prior investment advisory agree-ments
between the parties. This Agree-ment may be terminated at any time,
without the payment of any penal-ty, by our Board of Directors or by vote
of a majority of our out-standing voting securities (as defined in the 1940
Act) on 60 days' written notice to you, or by you on 60 days' written
notice to us, and it shall be automatically terminated in the event of its
assignment (as defined in said Act).
11. As of the date of this Agreement, the Company has five series of
shares ("Funds"), namely Growth Fund, Bond Fund, Convertible Securities
Fund, Global Value Fund, Real Estate Securities Fund and Government
Money Market Fund. In the event that the Company shall create any
additional Funds, this Agreement shall apply to and be effective as to each
such Fund, provided that the Agreement is approved as required by the
Investment Company Act of 1940. The effective date of the Agreement as
to each such future Fund shall be the date as it is so approved or any later
date as shall be agreed to by the parties.
If the foregoing is in accordance with your understanding, will you
so kindly indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
RETIREMENT PLANNING FUNDS OF AMERICA, INC.
By:______________________________________
Its: ___________Chairman__________________
Accepted as of the day and year first above written.
SELECTED/VENTURE ADVISERS, L.P.
By: VENTURE ADVISERS, INC., General Partner
By: ________________________________________
Its: _________Senior Vice President_________
May 1, 1996
Davis Series, Inc.
Amendment of Investment Advisory Agreement
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, NM 87501
Dear Sirs:
We herewith confirm that, as of the above date, paragraph 6 of our
Investment Advisory Agreement of April 15, 1993 is amended in its
entirety to read as follows:
6. In consideration of such services, we shall pay you a monthly fee as of
the last day of each month in each year based upon the average daily value
of net assets during a month for which the monthly fee is calculated, as
follows:
VALUE OF AVERAGE DAILY NET ASSETS
MONTHLY RATE OF THE FUND DURING THE MONTH
- ------------ ----------------------------
ALL FUNDS EXCEPT GOVERNMENT MONEY MARKET FUND & GOVERNMENT BOND FUND
1/12 of 0.75% of.............................. First $250,000,000
1/12 of 0.65% of.............................. Next $250,000,000
1/12 of 0.55% of.............................. Amount in excess of $500,000,000
GOVERNMENT MONEY MARKET FUND
1/12 of 0.50% of.............................. First $250,000,000
1/12 of 0.45% of.............................. Next $250,000,000
1/12 of 0.40% of.............................. Amount in excess of $500,000,000
GOVERNMENT BOND FUND
1/12 of 0.50%................................. All assets
provided, however, that such fee for any period which shall not be a full
monthly period shall be prorated according to the proportion which such
period bears to the full month. For this purpose, the value of our net
assets shall be computed in the same manner as the value of such net
assets are computed in connection with the determination of the net asset
value of our shares.
In all other respects, the Investment Advisory Agreement of April 15,
1993 remains in full force and effect.
If the foregoing is in accordance with your understanding, please indicate
by signing and returning to us the enclosed copy hereof.
Very truly yours,
Davis Series, Inc.
(f/k/a Retirement Planning Funds of America, Inc.)
By: __________________________________________
Its: __________________________________________
Accepted as of the day and year first above written.
Davis Selected Advisers, L.P.
By: Venture Advisers, Inc., General Partner
By: ______________________________________
Its: ______________________________________
EXHIBIT C
NEW SUB-ADVISORY AGREEMENT
Tanaka Capital Management, Inc.
230 Park Avenue
Suite 1432
New York, NY 10169
Gentlemen:
This is to confirm that the undersigned is retaining you as
investment sub-adviser for the portfolio of the Equity Fund ("Fund") of
Retirement Planning Funds of America, Inc. ("Company").
This letter sets forth the terms and conditions of your retention. If
they are acceptable to you, please acknowledge in the space provided.
Upon your acceptance, the retention and the mutual obligations in respect
thereto shall be effective as provided herein. The terms and conditions
are as follows:
1. You shall act as the investment sub-adviser for Fund and will
manage the investment and reinvestment of the assets of Fund subject to
the supervision of the Board of Directors of Company and to any applicable
provisions as in effect from time to time of (a) the Articles of
Incorporation and Bylaws of Company, (b) the prospectus, statement of
additional information and other information set forth in Fund's
registration documents under the Securities Act of 1933 and the
Investment Company Act of 1940 ("1940 Act"), including any supplements
thereto, and (c) the Investment Advisory Agreement between the
undersigned and the Company bearing the same date (the "Investment
Advisory Agreement") in respect to the Fund and the Company's Code of
Ethics. You acknowledge that you have received copies of the above
documents as in effect on the date of your acceptance of this letter. The
undersigned agrees that it will promptly deliver to you any amendments,
changes or additions of or to these documents. Without limitation, you
agree that all securities transactions will conform to (a) the stated
objectives and policies of Fund, (b) the brokerage policies set forth in the
Investment Advisory Agreement (which are hereby incorporated by
reference herein) and the registration documents, and (c) those
investment and brokerage policies or guidelines directed by the Board of
Directors of Company or any committee thereof. You shall be an
independent contractor. Unless otherwise expressly provided or authorized
hereunder, or by the Board of Directors of Company, you have no authority
to represent Company or Fund in any way or otherwise be an agent of
Company or Fund. You shall also not represent or be the agent of the
undersigned except as expressly provided or authorized hereunder or as
authorized by the undersigned in any other writing.
2. You agree to provide the undersigned with any reasonable
reports, analyses or other documentation we require to carry out the
undersigned's responsibilities under its Investment Advisory Agreement
with Fund including those related to placement of security transactions,
our administrative responsibilities and our responsibility to monitor
compliance with stated investment objectives, policies and limitations
and the investment performance of Fund. You agree, directly or through an
agent, to provide daily information in respect to the portfolio
transactions of Fund to the undersigned. You agree to provide all
documentation reasonably required by the undersigned to maintain Fund's
accounting records in accordance with the 1940 Act and the Investment
Advisers Act of 1940 and the regulations issued thereunder, and to
preserve copies of all documents and records related to asset
transactions, positions and valuations related to Fund in the manner and
for the periods prescribed by such regulations. You agree that all
documents and records you maintain in respect to Fund, exclusively
relating to Fund, are the property of Company and will be surrendered to
the undersigned or Company upon the request of either. You agree to
provide information and to allow inspection of such documents and
records at reasonable times by any authorized representative of the
undersigned, Company's Board of Directors or any committee thereof,
Company's independent public accountants or the Securities and Exchange
Commission.
3. You agree to make your personnel who are engaged in activities
on behalf of Fund available at reasonable times for consultations with
personnel of the undersigned and Company's Board of Directors or any
committee thereof, including attendance at their meetings, wherever
situated in the United States. Travel, meals and lodging expenses shall be
reimbursed.
<PAGE>
4. You agree to provide all office facilities, equipment and
personnel for carrying out your duties hereunder at your own expense
except as specifically provided hereunder.
5. It is agreed that your services are not to be deemed exclusive
and you shall be free to render similar services or other services to
others provided that (i) your services hereunder are not impaired and are
not in violation of federal or state securities laws and (ii) that you shall
not provide services to any registered investment company other than the
Company without our express written permission. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
your obligations or duties hereunder, you shall not be subject to liability
for any act or omission in the cause of, or connected with, rendering
service hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security. In the event of any claim, arbitration, suit,
or administrative proceedings in which you or the undersigned is a party
and in which it is finally determined that there is liability or wrongdoing
by only one of us, the party liable or found to be the wrongdoer shall pay
for all liability and expenses of such claim or proceeding including
reasonable attorneys' fees. If it is determined that there is liability or
wrongdoing by both or none of us, then each of us shall pay their own
liability and expenses. In the event of any settlement of any such claim,
arbitration, suit or proceeding before final determination by a court or
arbitrator(s), the liability and expenses shall be assumed as agreed
between the parties, but if there is no agreement within thirty (30) days
of such settlement, then the assumption of liability and expenses shall be
settled by arbitration, in accordance with the then applicable rules of the
American Arbitration Society. Judgment upon the award rendered by the
arbitrator shall be final and binding and may be entered in any court
having jurisdiction. The parties shall pay for their own costs and expenses
in respect to any such arbitration and may be included in the arbitrator's
award.
6. As investment sub-adviser, you understand that you will be
responsible for complying with all provisions of applicable law, including
the 1940 Act, the Investment Advisers Act of 1940, and the Insider
Trading and Securities Fraud Enforcement Act of 1988 and all rules and
regulations thereunder. You agree to adopt and comply with the "Code of
Ethics of and for Venture Advisers, L.P. and the Companies For Which It
Acts As Investment Adviser" as in effect from time to time (or Tanaka
Management's Code of Ethics if such Code is approved by the Fund's Board
of Directors) and to keep in effect a policy and supervisory procedures
designed to prevent insider trading.
7. The undersigned shall pay to you a portion of the fee it
receives from Company with respect to Fund under the Investment
Advisory Agreement, based on the attached fee schedule and reimburse
expenses expressly approved for reimbursement by the undersigned.
Payment for your services and reimbursement of expenses approved by the
undersigned shall be made monthly. From time to time, with your express
written approval, the undersigned may waive any part or all of the fees
due to it under the Investment Advisory Agreement for the period
specified in such writing. Such approval shall constitute a waiver by you
of your portion of the waived fees.
8. This Agreement shall become effective on the later of April
15, 1993 or the date this Agreement and the Investment Advisory
Agreement are approved in accordance with the 1940 Act. Unless sooner
terminated as hereunder provided, it shall initially remain in effect until
April 14, 1995. Thereafter, subject to the termination provisions herein,
this Agreement shall continue in force from year to year thereafter, but
only as long as such continuance is specifically approved at least annually
in the manner required by the 1940 Act; provided, however, that if the
continuation of this Agreement is not approved, you may continue to serve
in the manner and to the extent permitted by the 1940 Act and the rules
and regulations thereunder.
9. Upon the effective date of this Agreement, it then shall
supersede the prior agreement between the parties. It shall automatically
terminate in the event of its assignment (except as otherwise permitted
by the 1940 Act or rules thereunder) or in the event that the undersigned
is no longer the investment adviser to the Fund. This Agreement may be
terminated without payment of any penalty at any time (a) upon sixty (60)
or more days' written notice to you by the undersigned or upon sixty (60)
days' written notice to you by the Company pursuant to action by the Board
of Directors of the Company or by the vote of a majority of the
outstanding voting securities of the Fund, or (b) upon sixty (60) or more
days' written notice by you to the undersigned and the Company. The
terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth in the 1940 Act and the rules
and regulations thereunder. Termination of this Agreement shall not
affect your right to receive payments on any unpaid balance of the
compensation earned and reimbursable expenses incurred prior to such
termination.
10. This Agreement shall be construed according to the laws of the
State of New Mexico. It may be executed in counterparts each of which
shall be deemed an original and all of which together shall constitute one
and the same agreement.
Yours very truly,
VENTURE ADVISERS, L.P.
By: VENTURE ADVISERS, INC.,
its General Partner
By:_____________________________
Accepted and Approved
this ____ day of ___________, 1993.
TANAKA CAPITAL MANAGEMENT, INC.
By: ______________________________
SUB-ADVISORY FEE SCHEDULE FOR TANAKA CAPITAL MANAGEMENT, INC.
1) Fees as a percentage of annual average net assets
First $100,000,000..................................... 0.30%
Excess of $100,000,000................................. 0.25%
2) Minimum annual fees - $100,000
3) The fees received by Tanaka Capital Management Inc. on assets
in excess of $100,000,000, shall not exceed 33.33% of the total
management fee paid on assets in excess of $100,000,000, by the Company
to Venture Advisers, L. P. with respect to the Retirement Planning Funds
of America, Inc., Equity Fund.
RETIREMENT PLANNING FUNDS OF AMERICA, INC.
DISTRIBUTING AGREEMENT
AGREEMENT dated as of December 20, 1993 between Retirement
Planning Funds of America, Inc., a Maryland corporation, hereinafter called
the "Company", and SELECTED/VENTURE ADVISERS, L.P., a Colorado limited
partnership, hereinafter called the "Distributor".
W I T N E S S E T H:
-------------------
1. Appointment of Fund Distributor. The Company hereby appoints the
-------------------------------
Distributor as the exclusive distributor to sell as principal and not as
agent shares of capital stock of the Company during the term of this
Agreement.
2. Sales of Capital Stock. The Company agrees to sell and deliver to
----------------------
the Distributor, upon the terms set forth herein, such fully-paid and
non-assessable shares of capital stock of the Company ("Shares") then
effectively registered for continuous offering under the Securities Act of
1933 (the "Act") as Distributor shall order from the Company, but only to
the extent that the Distributor shall have received purchase orders
therefor. All orders from the Distributor shall be subject to confirmation
by the Company, and the Company authorizes the Distributor to reject any
purchase order.
The Distributor as principal may sell and distribute any Shares so
purchased, through dealers or otherwise, in such manner not inconsistent
with law and all applicable rules and regulations, including those of any
applicable self-regulatory organizations, and the provisions of this
Agreement, as the Distributor may from time to time determine. The
Distributor agrees to use its best efforts to effect sales of Shares, but
does not undertake to sell any specific number of Shares thereof.
The Distributor may in its discretion sell the Shares to such
registered and qualified retail dealers as it may select. In making
agreements with its dealers or others for sale of the Shares, the
Distributor shall act only as principal and in no sense as agent for the
Company.
3. Sales by Distributor - Offering Price. All Shares, whether
--------------------
purchased from the Company or otherwise, shall be offered for sale and
sold by the Distributor at a price per share (hereinafter called the
"Offering Price") in accordance with the provisions of the current
prospectus applicable to such offer and sale. Any sales charge and any
reduction or elimination thereof shall be determined by the Distributor in
a manner not inconsistent with law and all applicable rules and
regulations and the provisions of this Agreement, and the Company agrees
to amend its current prospectus to the extent necessary from time to time
to reflect any such determination. The Company will cause such net asset
value to be determined with such frequency and as of such times and will
cause the Offering Price to be effective for such periods as are set forth
in the current prospectus of the Company. The Company will cause such
determinations to be furnished to the Distributor as often as they are
made and shall make available to the Distributor upon request the
computations underlying any such determination.
Anything to the contrary herein notwithstanding, the Company may
suspend the Offering Price currently in effect and may decline to accept
or confirm any orders for, or to make any sales of, any Shares to the
Distributor under this Agreement until such time as it shall deem it
advisable to accept and confirm such orders and to make such sales.
During any period during which the Offering Price currently in effect shall
be suspended or during which the Company shall decline to accept or
confirm any such orders or make any such sales, the Company shall be
under no obligation to confirm or accept any such orders or make any such
sales at any price.
<PAGE>
4. Payment. At or prior to the time of delivery by the Company to, or
-------
on the order of the Distributor of any Shares, the Distributor will pay or
cause to be paid to the Company or to its order an amount equal to the
Offering Price of such shares at which such order had been confirmed, less
the sales charge, if any, included thereon as aforesaid. The Distributor
agrees to cause to be remitted to the Company for the benefit of the
Company or to its order all such funds promptly after receipt thereof.
5. Delivery of Share Certificates. Delivery of certificates for Shares
------------------------------
shall be made as promptly as practicable after receipt by the Company of
the purchase price therefor and written request by the Distributor for
such certificates. Such certificates shall be registered in such names and
amounts as the Distributor may specify to the Company in writing.
6. Compensation of Distributor. Any sales charges and any
---------------------------
compensation to be paid the Distributor out of any Distribution Plan
described in 7(e) below shall constitute the entire compensation of the
Distributor. Out of such sales charge the Distributor may allow
concessions to dealers as the Distributor shall from time to time
determine.
7. Allocation of Expenses. The Company shall pay all expenses
----------------------
connected with (i) the organization of the Company or any Fund thereof and
(ii) the offering of Shares, including without limitation all expenses of:
(a) Registering Shares for offer or sale under the federal
securities laws, except for prospectus printing costs as set forth below; and
(b) Reports required by and under the federal securities laws; and
(c) Issuance of Shares, including cost of stock certificates,
issue taxes (if any) and fees of legal counsel and of the transfer agent; and
(d) Registering or qualifying Shares for offer or sale under the
securities laws of any state or other jurisdiction in which the Distributor
may arrange for the sale of the Shares; and
(e) Any Distribution Plan adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act")
providing for any payments by the Company or any Fund thereof.
The Distributor will pay, or promptly reimburse the Company for, all
expenses in connection with:
(a) Preparing, printing and distributing advertising and sales
literature for use in offering the Shares to the public, including the cost
of printing copies of the prospectus and the additional cost of printing
reports to stockholders other than copies thereof required for distribution
to stockholders or for filing with any securities authorities; and
(b) The registration or qualification of the Distributor as a
dealer or broker under state or federal laws.
Transfer taxes, if any, which may be payable in connection with the
issue and delivery of certificates in a name or names other than the name
of the Distributor will not be borne by the Company and the Distributor
agrees to indemnify and hold the Company harmless against any such
transfer taxes. Any other taxes in connection with the sale of Shares
pursuant to this Agreement will be borne by the Company.
<PAGE>
8. Company to Furnish Information. The Company shall furnish the
------------------------------
Distributor for use in connection with the sale of the Shares such
information with respect to the Company and the Shares as the Distributor
may reasonably request, including copies of documents filed with or
furnished to any federal or state securities authorities or sent to its
stockholders.
9. Representations and Agreements with Respect to Registration
-----------------------------------------------------------
Statement and Prospectus.
- ------------------------
(a) As used in this Agreement, the term "registration
statement" shall include any registration statement with respect to the
Shares which is effective under the Act including any amendment thereto,
and the term "prospectus" shall include any prospectus and statement of
additional information filed as part of such registration statement.
(b) The Company represents that the registration statement
and prospectus will conform in all material respects to the Act and the
rules and regulations thereunder and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided that this representation will not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Distributor
expressly for use in the registration statement or prospectus.
(c) The Company agrees to advise the Distributor promptly:
(i) of any request of the Securities and Exchange
Commission for amendments to the registration statement or prospectus
or for additional information;
(ii) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness of
the registration statement or prospectus or the initiation of any
proceedings for that purpose;
(iii) of the happening of any event which makes untrue
any statement, or which requires the making of any change, in the
registration statement or prospectus in order to make the statements
therein not misleading; and
(iv) of all actions of the Securities and Exchange
Commission with respect to any amendments to the registration
statement or prospectus which may from time to time be filed with the
Securities and Exchange Commission under the Act.
10. Indemnification. The Company agrees to indemnify, defend and
hold the Distributor, its officers and directors and any person who
controls the Distributor within the meaning of Section 15 of the Act, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which the Distributor, its officers, directors or any such
controlling person may incur under the Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a material
fact contained in the registration statement or prospectus relating to the
Company or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary to make
the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any
such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information
furnished in writing by the Distributor to the Company for use in the
registration statement or prospectus relating to the Company; provided,
however, that this indemnity agreement, to the extent that it might
require indemnity for liability arising under the Act of any person who is
also an officer or director of the Company or who controls the Company
within the meaning of Section 15 of the Act, shall not inure to the benefit
of such officer, director or controlling person unless a court of competent
jurisdiction shall determine, or it shall have been determined by
controlling precedent, that such result would not be against public policy
as expressed in the Act; and further provided, that in no event shall
anything contained herein be so construed as to protect the Distributor
against any liability to the Company or to its security holders to which
the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of its
duties, or by reason of its reckless disregard of its obligations under this
Agreement. The Company's agreement to indemnify the Distributor, its
officers and directors and any such controlling person as aforesaid is
expressly conditioned upon the Company being promptly notified of any
action brought against the Distributor, its officers or directors, or any
such controlling person, such notification to be given by letter or
telegram addressed to the Company at its principal business office. The
Company agrees to promptly notify the Distributor of the commencement
of any litigation or proceedings against it or any of its officers or
directors in connection with the issue and sale of any Shares.
The Distributor agrees to indemnify, defend and hold the Company,
its officers and directors and any person who controls the Company, if
any, within the meaning of Section 15 of the Act free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
the Company, its directors or officers or any such controlling person may
incur under the Act or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Company, its
directors or officers or such controlling person resulting from such
claims or demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished in writing
by the Distributor to the Company for use in the Company's registration
statement or prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such information not
misleading or shall arise out of or be based on any false or misleading or
allegedly false or misleading sales literature relating to the Company and
prepared by the Distributor. The Distributor's agreement to indemnify the
Company, its directors and officers, and any such controlling person as
aforesaid is expressly conditioned upon the Distributor being promptly
notified of any action brought against the Company, its officers or
directors or any such controlling person, such notification being given to
the Distributor at its principal business office.
11. Compliance with Securities Laws. The Company represents that
it is registered as an open-end diversified management investment
company under the Investment Company Act of 1940, and agrees that it
will comply with all of the provisions of such Act and of the rules and
regulations thereunder. The Company and the Distributor each agree to
comply with all of the applicable terms and provisions of the Investment
Company Act of 1940, the Securities Act of 1933 and, subject to the
following provisions of this paragraph 11, all applicable state securities
("Blue Sky") laws. The Distributor agrees to comply with all of the
applicable terms and provisions of the Securities Exchange Act of 1934.
The Company will cooperate with the Distributor (to the extent of
supplying all necessary documents, exhibits and information), and will
execute and permit to be filed with the proper public bodies, such
applications (including amendments and renewals thereof), instruments,
papers and exhibits as may be appropriate to enable the Shares to be
offered for sale under the laws of such states as the Distributor shall
reasonably determine, and will cooperate with the Distributor in the
presentation of said applications (including amendments and renewals
thereof), to the end that Shares may be qualified in such states under the
respective Blue Sky laws thereof; provided that the Company shall not be
required to amend its Articles of Incorporation or By-Laws to comply with
the laws of any state, to maintain an office in any state, to change the
terms of the offering of Shares in any state from the terms set forth in
its registration statement and prospectus, to qualify as a foreign
corporation in any state or to consent to service of process in any state
other than with respect to claims arising out of Shares. The Distributor
will furnish to the Company any information known to the Distributor
which is necessary or desirable in the preparation of the Company's
registration statement and prospectus and any amendments or
supplements thereto.
12. Effect on Distribution Plan or Distribution Plan and Agreement.
Any Distribution Plan or Distribution Plan and Agreement in effect on the
effective date of this Agreement which has been adopted in accordance
with Rule 12b-1 under the 1940 Act shall remain in effect and any
reference therein to a Distributing Agreement or other underwriting
agreement between the parties as of any date prior thereto shall be
deemed to be a reference to this Agreement.
13. Effective Period; Termination. This Agreement shall become
effective for an initial period of not more than two years from the date of
its execution, and shall continue in full force and effect continuously
thereafter provided that such continuance is approved at least annually as
required by the 1940 Act. This Agreement shall automatically terminate
in the event of its assignment (as defined by the 1940 Act). In addition,
this Agreement may be terminated at any time, without penalty, by either
party on not more than sixty days' nor less than thirty days' written notice
delivered or mailed by registered mail, postage prepaid, to the other party.
IN WITNESS WHEREOF, Retirement Planning Funds of America, Inc.
and Venture Advisers, L.P. have caused this instrument to be signed in
several counterparts, each of which shall be an original and which
together shall constitute one and the same Agreement, by an officer or
officers thereunto duly authorized, as of the day and year first above
written.
RETIREMENT PLANNING FUNDS OF
AMERICA, INC.
By: ________________________________
Its: ___________Chairman___________
SELECTED/VENTURE ADVISERS, L.P.
By: _________________________________
Its:_______Senior Vice President____
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 1, 1996 accompanying the
financial statements of Davis Series, Inc. (comprising, respectively, Davis
Growth Opportunity Fund, Davis Government Bond Fund, Davis Government
Money Market Fund, Davis Financial Fund, Davis Convertible Securities
Fund and Davis Real Estate Fund) which are incorporated by reference in
Part B of the Post-Effective Amendment to this Registration Statement
and Prospectus. We consent to the use of the aforementioned report in
this registration Statement and Prospectus.
/s/ Tait, Weller & Baker
-----------------------------
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 9, 1996
