<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 33-15807
Post-Effective Amendment No. 21
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-5240
Amendment No. 23
SELECTED CAPITAL PRESERVATION TRUST
124 East Marcy Street
Santa Fe, New Mexico 87501
Registrant's Telephone Number, Including Area Code
1-800-243-1575
Agent for Service:
Sheldon R. Stein
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(312) 580-2014
<PAGE>
It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b)
----
on May 1, 1998, pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)
----
on ________, pursuant to paragraph (a) of Rule 485
----
<TABLE>
<CAPTION>
<S> <C>
Title of securities being registered: Selected U.S. Government Income Fund,
shares of beneficial interest
Selected Daily Government Fund,
shares of beneficial interest
</TABLE>
FORM N-1A
SELECTED CAPITAL PRESERVATION TRUST
POST-EFFECTIVE AMENDMENT NO. 21 TO REGISTRATION STATEMENT NO. 33-15807 UNDER
THE SECURITIES ACT OF 1933 AND AMENDMENT NO. 23 UNDER THE INVESTMENT COMPANY
ACT OF 1940 TO REGISTRATION STATEMENT NO. 811-5240.
CROSS REFERENCE
<TABLE>
<CAPTION>
N-1A
Item No. Prospectus Caption or Placement
-------- -------------------------------
<S> <C>
1 Front Cover
2 Fund Expenses, Selected Fund - Summary
3 Financial Highlights; Fund Performance
4 Selected Funds - Summary; Investment
Objectives
5 Manager, Sub-Advisers and Distributor; Portfolio Managers
5a Management's Discussion of Fund Performance
(contained in 1997 Annual Report)
6 Organization of the Funds; Selected Funds -
Summary; Dividends; Taxes; How to Reach Us
7 Buying Shares; Determining the Price of
Shares - Net Asset Value; Exchanging Shares;
Manager, Sub-Advisers and Distributor
8 Selling Shares; Exchanging Shares
9 (Not Applicable)
Part B Caption or Placement
---------------------------
<PAGE>
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Investments; Investment Restrictions;
Portfolio Transactions
14 Trustees and Officers; Trustees' Compensation Table
15 (Not Applicable)
16 Manager and Sub-Adviser; Expense Limitation; Custodian and Transfer Agent;
Independent Auditors; Distribution Plans
17 Portfolio Transactions
18 *
19 Net Asset Value
20 Taxes
21 Distribution Plans
22 Performance Data
23 **
</TABLE>
- ------------------------
* Included in Prospectus
** Financial Statements appearing in the December 31, 1997 Annual Report
are incorporated by reference.
<PAGE>
PROSPECTUS MAY 1, 1998
THE SELECTED FUNDS
124 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
1-800-243-1575
Welcome to the Selected Funds, a family of diversified no-load mutual
funds offering a variety of investment opportunities. The Funds pay
distribution fees pursuant to distribution plans adopted in accordance with
Rule 12b-1.
STOCK-ORIENTED FUNDS
Selected American Shares, Inc. -- a Growth and Income Fund.
Selected Special Shares, Inc. -- a Growth Fund.
BOND-ORIENTED FUND
Selected U.S. Government Income Fund -- an Income Fund.
MONEY MARKET FUND
Selected Daily Government Fund -- a U.S. Government Money Market Fund.
Selected Daily Government Fund and Selected U.S. Government Income Fund
are part of Selected Capital Preservation Trust.
This Prospectus concisely sets forth information about the Selected
Funds that you should know before investing. Please keep it handy for future
reference. Additional information is included in the Statements of Additional
Information of the Selected Funds dated May 1, 1998, and filed with the
Securities and Exchange Commission. The Statements of Additional Information
are incorporated herein by reference. You may obtain copies of the Statements
of Additional Information without charge by writing or calling us at the above
address or phone number.
AN INVESTMENT IN THE SELECTED U.S. GOVERNMENT INCOME FUND OR SELECTED
DAILY GOVERNMENT FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT SELECTED DAILY GOVERNMENT FUND WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES IN THE
SELECTED 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
STOCK-ORIENTED FUNDS
Selected American Shares, Inc. ("Selected American") and Selected
Special Shares, Inc. ("Selected Special") are diversified, professionally
managed stock-oriented funds. Selected American seeks a combination of capital
growth and income and invests primarily in common stocks and other equity
securities. Selected Special seeks capital growth and invests primarily in
common stocks and securities convertible into common stocks. See "Investment
Objectives."
BOND-ORIENTED FUND
Selected U.S. Government Income Fund ("Selected Government Income")
seeks to obtain current income consistent with preservation of capital by
investing primarily in debt obligations of the U.S. Government, its agencies
or instrumentalities ("U.S. Government Securities").
MONEY MARKET FUND
Selected Daily Government Fund ("Selected Daily Government") seeks to
provide a high level of current income from short-term money market securities
consistent with prudent investment management, preservation of capital and
maintenance of liquidity. It invests in U.S. Government Securities and
repurchase agreements in respect thereto.
MANAGER, SUB-ADVISERS AND DISTRIBUTOR
Davis Selected Advisers, L.P. (the "Manager") serves as the
investment manager for Selected American, Selected Special, Selected
Government Income and Selected Daily Government (individually a "Fund" or
together the "Funds" or the "Selected Funds"). Davis Distributors, LLC (the
"Distributor") serves as the principal underwriter for the Funds. The Manager
has hired Bramwell Capital Management, Inc. (the "Sub-Advisor") to provide day
to day management of the portfolio of Selected Special. The Manager has
entered into a Sub-Advisory Agreement with its wholly-owned subsidiary, Davis
Selected Advisers-NY, Inc. ("DSA-NY"). DSA-NY performs research and other
services for the Funds on behalf of the Manager. There are management and Rule
12b-1 distribution fees payable by each Fund. For more information see "Fund
Expenses" and "Manager, Sub-Advisers and Distributor."
PURCHASES AND REDEMPTIONS
Shares of the Funds are sold and redeemed at net asset value without any
sales or redemption charge. The minimum initial investment in any of the
Selected Funds is $1,000 and subsequent investments are $25 or more. Please
see "Buying Shares" for more information on how easy it is to invest. Please
see "Selling Shares" for details on how to redeem shares.
FACTORS TO CONSIDER
An investment in any of our Funds, as with any mutual fund, includes
risks that vary depending upon the Fund's investment objectives and policies.
There is no assurance that the investment objective of any Fund will be
achieved. A Fund's return and net asset value will fluctuate, although
Selected Daily Government seeks to maintain a net asset value of $1.00 per
share.
2
<PAGE>
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases.............................................. None
Redemption Fee....................................................... None*
Sales Load on Reinvested Dividends................................... None
Exchange Fee......................................................... None
Deferred Sales Load.................................................. None
- ---------------------
* A service fee of $5 is charged for each wire redemption.
Annual fund operating expenses after any expense reimbursements, as a
percentage of average net assets:
<TABLE>
<CAPTION>
SELECTED SELECTED SELECTED GOV'T SELECTED DAILY
AMERICAN SPECIAL INCOME*** GOVERNMENT
-------- -------- -------------- --------------
<S> <C> <C> <C> <C>
Management fees.................... 0.59% 0.69% 0.50% 0.30%
12b-1 Fees**....................... 0.25% 0.25% 0.25% 0.25%
Other Expenses..................... 0.12% 0.34% 0.75% 0.15%
Total Operating Expenses........... 0.96% 1.28% 1.50% 0.70%
</TABLE>
- -------------
** The effect of a 12b-1 plan is that long-term shareholders may pay more
than the economic equivalent of the maximum front-end sales charge
permitted under applicable rules of the National Association of
Securities Dealers, Inc.
*** After contractual expense reimbursements.
The Manager agreed to absorb certain expenses for Selected Government
Income as reflected above. If the Manager had not done so, "Other Expenses"
for Selected Government Income in the table above would be 0.85%, and "Total
Operating Expenses" would be 1.60%. Please see "Manager, Sub-Advisers and
Distributor" and the Statements of Additional Information for more information
on fees.
We can illustrate these expenses with the examples below. You would pay
the following expenses on a $1,000 investment (assuming a 5% annual return and
redemption at the end of each period):
<TABLE>
<CAPTION>
SELECTED SELECTED SELECTED GOV'T SELECTED DAILY
AMERICAN SPECIAL INCOME*** GOVERNMENT
-------- -------- -------------- --------------
<S> <C> <C> <C> <C>
One Year..................... $10 $13 $15 $7
Three Years.................. $31 $41 $47 $22
Five Years................... $53 $70 $82 $39
Ten Years.................... $118 $155 $179 $87
</TABLE>
The tables are here to help you understand the various expenses that you
as an investor in a Fund will bear and are based on the Funds' expenses for
the year ended December 31, 1997, which reflect expense reimbursements in
respect to Selected Government Income as described above. 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 may be greater or lesser than those shown.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide you with information about the history of
the Funds' shares, including periods prior to May 1, 1993 when Davis Selected
Advisers, L.P. became the Funds' Manager. The tables present the financial
highlights for a share outstanding throughout each respective period. Such
tables are included as supplementary information to the Funds' financial
statements which are included in the December 31, 1997 Annual Report to
Shareholders which may be obtained by writing or calling the Fund. The Funds'
1997 financial statements including the financial highlights for each of the
five years in the period ended December 31, 1997, have been audited by Tait,
Weller & Baker serving as the Funds' independent certified public accountants,
whose unqualified opinion thereon is contained in the Annual Report.
SELECTED AMERICAN
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(2) 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ............. $ 21.53 $ 17.68 $ 13.09 $ 14.59 $ 17.13 $ 18.43 $ 12.79 $ 13.81 $ 13.67 $ 11.43
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income ........... 0.16 0.18 0.22 0.20 0.24 0.19 0.23 0.26 0.48 0.26
Net Gains or Losses on
Securities (both realized
and unrealized) .............. 7.72 5.15 4.74 (0.66) 0.70 0.89 5.65 (0.81) 2.21 2.24
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment
Operations ................... 7.88 5.33 4.96 (0.46) 0.94 1.08 5.88 (0.55) 2.69 2.50
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income ............ (0.17) (0.17) (0.22) (0.20) (0.24) (0.19) (0.23) (0.35) (0.45) (0.26)
Distributions (from
capital gains) ............... (2.05) (1.31) (0.15) (0.83) (3.24) (2.19) - (0.04) (2.10) -
Distributions in Excess
of Net Investment
Income........................ (0.01) - - (0.01) - - (0.01) (0.08) - -
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions .......... (2.23) (1.48) (0.37) (1.04) (3.48) (2.38) (0.24) (0.47) (2.55) (0.26)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End
of Period ....................... $ 27.18 $ 21.53 $ 17.68 $ 13.09 $ 14.59 $ 17.13 $ 18.43 $ 12.79 $ 13.81 $ 13.67
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN ....................... 37.25% 30.74% 38.09% (3.20)% 5.42% 5.78% 46.37% (3.90)% 20.08% 21.95%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000 omitted) .......... $2,221,655 $1,376,466 $925,512 $529,404 $451,392 $580,889 $711,905 $400,597 $360,366 $284,719
Ratio of Expenses to
Average Net Assets ............ .96% 1.03% 1.09% 1.26% 1.01%(1) 1.17% 1.19% 1.35% 1.08% 1.11%
Ratio of Net Income to
Average Net Assets ............ .62% .87% 1.42% 1.42% 1.37% .95% 1.41% 2.04% 3.06% 2.07%
Portfolio Turnover
Rate........................... 26% 29% 27% 23% 79% 50% 21% 48% 46% 35%
Average Commission
Rate Per Share ................ $.0600 $.0580 - - - - - - - -
</TABLE>
(1) Had the former manager not absorbed certain expenses, the ratio of
expenses for the year ended December 31, 1993 would have been 1.22%.
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services,
Inc. was the investment adviser.
4
<PAGE>
SELECTED SPECIAL
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1997 1996 1995 1994(2,3) 1993(3) 1992(3) 1991(3) 1990(3) 1989(3) 1988(3)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $10.89 $10.80 $ 9.02 $10.20 $10.40 $10.16 $ 9.04 $ 9.95 $ 8.52 $ 7.96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment
Income......................... (0.07) - - (0.03) - 0.07 0.12 0.17 0.21 0.10
Net Gains or Losses
on Securities (both realized
and unrealized)................ 2.83 1.27 3.04 (0.22) 1.10 0.78 2.11 (0.85) 2.23 1.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations................ 2.76 1.27 3.04 (0.25) 1.10 0.85 2.23 (0.68) 2.44 1.54
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net
investment income)............. - - - - - (0.07) (0.13) (0.20) (0.18) (0.10)
Distributions (from
capital gains)................. (0.62) (1.18) (1.26) (0.93) (1.30) (0.54) (0.98) (0.03) (0.83) (0.88)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions............ (0.62) (1.18) (1.26) (0.93) (1.30) (0.61) (1.11) (0.23) (1.01) (0.98)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Period........................ $13.03 $10.89 $10.80 $ 9.02 $10.20 $10.40 $10.16 $ 9.04 $ 9.95 $ 8.52
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN ....................... 26.91% 11.86% 34.24% (2.56)% 10.81% 8.43% 25.53% (6.87)% 28.91% 19.51%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000
omitted)....................... $74,930 $62,435 $58,975 $47,275 $53,257 $57,605 $60,216 $50,474 $49,887 $34,903
Ratio of Expenses to
Average Net Assets............. 1.28% 1.33% 1.48% 1.41% 1.24%(1) 1.41%(1) 1.39% 1.41% 1.22% 1.24%
Ratio of Net Income to
Average Net Assets........... (.60)% (.66)% (.58)% (.27)% (.07)% .56% 1.11% 1.81% 2.11% 1.09%
Portfolio Turnover
Rate........................... 51% 98% 127% 99% 100% 41% 74% 87% 45% 71%
Average Commission
Rate Per Share................. $.0600 $.0600 - - - - - - - -
</TABLE>
(1) Had the Manager not absorbed certain expenses, the ratio of expenses
for the years ended December 31, 1994 and 1993 would have been 1.62%
and 1.51%, respectively. Had the former manager not absorbed certain
expenses, the ratio of expenses for the year ended December 31, 1992
would have been 1.47%.
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services,
Inc. was the investment adviser.
(3) 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 4, 1994.
5
<PAGE>
SELECTED GOVERNMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993(2) 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period ....................... $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31 $ 9.70 $ 9.22 $ 9.20
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment
Income ..................... .51 .53 .54 .50 .56 .61 .60 .63
Net Gains or Losses
on Securities (both realized
and unrealized)............. .11 (.28) .78 (.75) .21 (.13) .58 .11
------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations............... .62 .25 1.32 (.25) .77 .48 1.18 .74
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net
investment
income)..................... (.51) (.53) (.54) (.50) (.56) (.61) (.60) (.63)
Distributions (from
capital gains).............. - (.02) (.03) - (.32) (.26) - -
Distributions in Excess of Net
Investment Income ........ - - - - - - (.10) (.09)
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions ..... (.51) (.55) (.57) (.50) (.88) (.87) (.70) (.72)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Period..................... $ 9.01 $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31 $ 9.70 $ 9.22
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN .................... 7.32% 2.85% 15.97% (2.71)% 7.99% 5.11% 13.46% 8.53%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000
omitted).................... $5,962 $6,934 $7,811 $10,263 $10,336 $13,945 $22,019 $21,153
Ratio of Expenses to
Average Net Assets.......... 1.50% 1.44%(1) 1.44%(1) 1.42%(1) 1.34%(1) 1.44%(1) 1.41% 1.44%
Ratio of Net Income to
Average Net Assets........ 5.79% 5.96% 6.09% 5.70% 5.85% 6.26% 6.51% 6.95%
Portfolio Turnover
Rate........................ 16% 26% 76% 65% 29% 53% 36% 29%
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
------------------
1989 1988
---- ----
<S> <C> <C>
Net Asset Value, Beginning of
Period ....................... $ 9.34 $10.01
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment
Income ..................... .64 .63
Net Gains or Losses
on Securities (both realized
and unrealized)............. .21 (.32)
------ ------
Total From Investment
Operations............... .85 .31
------ ------
LESS DISTRIBUTIONS
Dividends (from net
investment
income)..................... (.64) (.63)
Distributions (from
capital gains).............. - -
Distributions in Excess of Net
Investment Income ........ (.35) (.35)
------ ------
Total Distributions ..... (.99) (.98)
------ ------
Net Asset Value, End
of Period..................... $ 9.20 $ 9.34
====== ======
TOTAL RETURN .................... 8.47% 2.94%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000
omitted).................... $27,594 $14,611
Ratio of Expenses to
Average Net Assets.......... 1.50%(1) 1.50%(1)
Ratio of Net Income to
Average Net Assets........ 6.70% 6.30%
Portfolio Turnover
Rate........................ 75% 76%
</TABLE>
(1) Had the Manager not absorbed certain expenses, the ratio of expenses
for the years ended December 31, 1997, 1996, 1995, 1994 and 1993
would have been 1.60%, 1.67%, 1.58%, 1.69% and 1.88%, respectively.
Had the former manager not absorbed certain expenses, the ratio of
expenses for the years ended December 31, 1992, 1989 and 1988 would
have been 1.72%, 1.59% and 1.63%, respectively.
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services,
Inc. was the investment adviser.
6
<PAGE>
SELECTED DAILY GOVERNMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1997 1996 1995 1994 1993(2) 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <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
-------- ------- ------- ------- ------- -------- -------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment
Income ............. .048 .046 .051 .034 .023 .030 .054
LESS DISTRIBUTIONS
Dividends (from net
investment
income)............. (.048) (.046) (.051) (.034) (.023) (.030) (.054)
-------- ------- ------- ------- ------- -------- -------
Net Asset Value, End
of Period............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN............. 4.91% 4.70% 5.23% 3.51% 2.34% 3.07% 5.51%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (000
omitted)............ $117,471 $112,674 $184,603 $121,886 $ 8,732 $ 6,626 $30,706
Ratio of Expenses to
Average Net
Assets.............. .70% .75% .75%(1) .75%(1) .75%(1) .75%(1) .68%
Ratio of Net Income
to Average
Net Assets........ 4.80% 4.62% 5.13% 3.44% 2.31% 3.02% 5.37%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
MAY 9, 1988
(COMMENCEMENT
OF OPERATIONS)
THROUGH
DECEMBER 31,
----------------------------------
1990 1989 1988
---- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.000 $ 1.000 $ 1.000
-------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment
Income ............. .074 .083 .051
LESS DISTRIBUTIONS
Dividends (from net
investment
income)............. (.074) (.083) (.051)
-------- ------- -------
Net Asset Value, End
of Period............. $ 1.000 $ 1.000 $ 1.000
======= ======= =======
TOTAL RETURN............. 7.66% 8.63% 8.17%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (000
omitted)............ $174,914 $100,517 $53,173
Ratio of Expenses to
Average Net
Assets.............. .63% .74% .70%(1)
Ratio of Net Income
to Average
Net Assets........ 7.39% 8.28% 7.86%
</TABLE>
(1) Had the Manager not absorbed certain expenses, the ratio of expenses
for the years ended December 31, 1995, 1994 and 1993 would have been
0.78%, 1.07% and 2.29%, respectively. Had the former manager not
absorbed certain expenses, the ratio of expenses for the year ended
December 31, 1992 would have been 1.23% and for the period May 9,
1988 through December 31, 1988 would have been 0.78% (annualized).
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services,
Inc. was the investment adviser.
7
<PAGE>
INVESTMENT OBJECTIVES
You probably have a variety of goals you want to reach, and these goals
will likely change over time. For that reason we offer a variety of Funds with
different objectives. In this way, you can balance your mix of investments
within one family of Funds. Of course, no mutual fund offered by us, or by
anyone else, can guarantee that its objective will be met or that you will
reach all of your goals.
STOCK-ORIENTED FUNDS
SELECTED AMERICAN -- A GROWTH AND INCOME FUND
Selected American seeks to provide its shareholders with both capital
growth and income. It invests primarily in common stocks and other equity
securities (including securities convertible into equity securities). The Fund
will normally invest at least 65% of its total assets in securities of U.S.
companies. The Fund diversifies its holdings among many companies and
industries, and although not required to do so, usually emphasizes "blue chip"
firms (companies that have market capitalizations of more than $1 billion and
long records of earnings growth and dividends). The Fund may also invest in
fixed-income securities for income or as a defensive strategy when the Manager
believes that existing economic or market conditions dictate such strategies.
Increases in interest rates tend to reduce the market value of fixed-income
securities and declines in interest rates tend to increase their value.
The Fund may invest in real estate investment trusts ("REITs"). Equity
REITs invest directly in real property while mortgage REITs invest in
mortgages on real property. REITs may be subject to certain risks associated
with the direct ownership of real estate including 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, and variations in rental income. REITs pay dividends to
their shareholders based upon available funds from operations. It is quite
common for these dividends to exceed the REIT's taxable earnings and profits
resulting in the excess portion of such dividends being designated as a return
of capital. The Fund intends to include the gross dividends from such REITs in
its distribution to its shareholders and, accordingly, a portion of the Fund's
distributions may also be designated as a return of capital.
The Fund may invest in high yield, high risk debt securities (including
convertible securities) rated BB or lower by Standard & Poor's Corporation
("S&P") or Ba or lower by Moody's Investor Services ("Moody's") or unrated
securities deemed by the Manager to be of an equivalent rating. 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 are considered speculative. The Fund
does not intend to purchase securities rated BB or Ba or lower if after such
purchase more than 30% of the Fund's net assets would be invested in such
securities (including downgraded securities). As of December 31, 1997, none of
the Fund's net assets were invested in high yield high risk securities. See
the Statement of Additional Information for more information regarding such
investments.
There is no other limitation on the percentage of assets that may be
invested in any particular type of security. Since Selected American invests
in common stocks and other securities that fluctuate in value, the price of
its shares will fluctuate.
SELECTED SPECIAL -- A GROWTH FUND
Selected Special seeks to provide capital growth. The Fund invests in
companies which the Sub-Adviser believes have capital growth potential because
of factors such as rapid growth of demand within their existing
8
<PAGE>
markets, expansion into new markets, new products and opportunities for
improving returns on sales and investments.
The Fund invests primarily in common stocks and other equity securities
(including convertible securities). Normally at least 65% of its total assets
are invested in equity securities. Investment income is only incidental. The
Fund invests primarily in securities of domestic companies. However, the Fund
may invest in the securities of foreign companies directly or through
registered closed-end investment companies that invest primarily in foreign
securities. An investment company invests primarily in foreign securities if
normally more than 50% of such company's assets are invested in foreign
securities. No such investment in other investment companies may be made if it
would cause more than 10% of Selected Special's total assets to be invested in
such companies. Such other investment companies usually have their own
expenses including management costs or fees and the Fund's Manager earns its
regular fee on such assets.
Generally, the Fund's holdings in equity securities are diversified in a
variety of industries and with companies of varying sizes, although the
investment emphasis is on companies with small and medium market
capitalizations (approximating $1 billion). The Fund may also invest in the
same types of high yield, high risk convertible securities as Selected
American; however, Selected Special will not invest in securities rated below
investment grade if such investment would cause more than 5% of net assets to
be so invested.
The price of the Fund's shares fluctuates because the value of the
securities in which the Fund invests also fluctuates. When the Sub-Adviser
believes that economic or investment conditions indicate the need for a
defensive strategy, the Fund may, to protect the interests of its
shareholders, temporarily and without limitation, hold assets other than
equity securities, including cash, U.S. Government Securities and other liquid
high-grade debt securities.
BOTH STOCK ORIENTED FUNDS
Both Selected American and Selected Special may invest in foreign
securities. Selected American will not make such an investment if it would
cause more than 35% of its total assets to be invested in foreign securities.
Selected Special does not currently have any investment restriction relative
to foreign securities. However, Selected Special's Sub-Adviser intends to
limit investments in foreign securities to 25% or less of the Fund's total
assets. As of December 31, 1997, Selected Special Shares did not have any
investments in foreign securities. Selected American Shares had 0.24% of net
assets invested in foreign securities.
The Funds will generally invest in securities of foreign companies
directly through trades of individual securities on recognized exchanges and
developed over-the-counter markets and through American Depository Receipts
("ADRs") covering such securities. In addition, Selected Special may invest in
foreign securities indirectly through registered closed-end investment
companies primarily investing in foreign securities.
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 generally is less publicly available information about foreign
securities and securities markets, and there may be less governmental
regulation and supervision of foreign issuers and securities markets. Foreign
securities and markets are also affected by political and economic
instabilities in such countries, and may be more volatile and less liquid than
domestic securities and markets. The risks of investment 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
9
<PAGE>
inflation rates, balance of payments, capital reinvestment, gross national
product expansion, and other relevant economic issues. When there are
significant foreign investments, the operating expense ratio of a Fund may be
higher than that of investment companies investing exclusively in U.S.
securities, since the management, custodial and certain other expenses are
expected to be higher.
The Funds may lend securities to broker/dealers or institutional
investors for their use in connection with short sales, arbitrages and other
securities transactions. The Funds may earn interest on cash collateral or
receive a fee from broker/dealers for lending its portfolio securities. The
Funds will not lend portfolio securities unless the loan is secured by
collateral (consisting of any combination of cash, United States Government
securities or irrevocable letters of credit) in an amount at least equal (on a
daily market-to market basis) to the current market value of the securities
loaned. In the event of a bankruptcy or breach of agreement by the borrower of
the securities, the Funds could experience delays and costs in recovering the
securities loaned. Neither Fund may lend securities with an aggregate market
value of more than 10% of each Fund's total assets.
For income purposes (which is only incidental with respect to
Selected Special) the Funds may write covered call options on portfolio
securities. Selected American may not write covered call options if more than
20% of its net assets would be subject to covered call options. Selected
Special may not write covered call options if more than 10% of its net assets
would be subject to covered call options.
The Funds may not invest in commodities or futures contracts. Until this
restriction is changed by shareholder vote, the Funds will not enter into
currency exchange contracts (agreements to buy or sell foreign currency
transactions at a future date) or other hedging transactions designed to
reduce overall investment risks, including the risks of currency fluctuation
with respect to foreign investments. Such techniques depend upon a portfolio
manager's ability to predict future foreign currency values, interest rates
and other relevant investment measures. The Manager and the Sub-Adviser
believe that the use of such techniques, which are not assured to work,
involves certain risks and costs. However, the failure to use such hedging
procedures may result in greater volatility, particularly with respect to
foreign currency fluctuations, than if such procedures were successfully
employed. Nevertheless, to the extent that the Funds' foreign investments are
globally diversified, fluctuations in one particular currency may be offset by
fluctuations in other currencies in which the Funds' investments are
denominated.
Selected American and Selected Special do not usually trade actively for
short-term profits. However, when the investment manager believes that it
would benefit the Funds, short-term profits may be taken.
SELECTED GOVERNMENT INCOME
The investment objective of Selected Government Income is to obtain
current income consistent with preservation of capital by investing primarily
in U.S. Government Securities. A shareholder's investment in the Fund is not
insured or guaranteed by the U.S. Government, its agencies or
instrumentalities. The net asset value of the Fund will fluctuate. A material
factor in such fluctuations is the fact that increases in interest rates tend
to reduce the market value of U.S. Government Securities owned by the Fund and
declines in interest rates tend to increase their value.
10
<PAGE>
INVESTMENTS
The Fund invests primarily in U.S. Government Securities, without
limitation on their maturities, and repurchase agreements secured by U.S.
Government Securities. Under normal market circumstances, at least 65% of the
Fund's total assets will be invested in U.S. Government Securities or
repurchase agreements related thereto.
Some U.S. Government Securities are supported by the full faith and
credit of the United States, such as Government National Mortgage Association
("GNMA") Certificates and obligations of the Farmers Home Administration and
the Export-Import Bank. Others are supported solely by the credit of the
issuing agency or instrumentality with limited rights to borrow from the U.S.
Treasury, such as obligations of the Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). With respect to
securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury,
there is no guarantee that the U.S. Government will provide financial support
to such agencies or instrumentalities. The government guarantee of the
securities owned by the Fund does not guarantee the yield to the Fund, the
market value of the securities owned by the Fund or the net asset value of the
Fund's shares.
The Fund may purchase collateralized mortgage obligations ("CMOs"),
including residual interests. A CMO is a debt security issued by a trust,
corporation or a U.S. Government instrumentality that is backed
("collateralized") by a portfolio of mortgages, mortgage-backed securities or
U.S. Government Securities. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of securities or
mortgages. The Fund may invest only in CMOs issued by FHLMC, FNMA, or GNMA and
privately-issued CMOs that are (i) fully collateralized by mortgage-backed
securities issued by GNMA, FNMA or FHLMC and (ii) rated AAA by S&P or Aaa by
Moody's or are unrated but in the opinion of the Manager, are of comparable
quality. "Fully collateralized" means that the collateral will generate cash
flows sufficient to meet obligations to holders of the collateralized
obligations under even the most conservative prepayment and interest rate
scenario. CMOs issued by FHLMC, FNMA and GNMA are considered U.S. Government
Securities for purposes of the above described 65% test; privately issued CMOs
are not.
In the case of CMOs, payments of principal and interest on the
underlying collateral securities are not passed through directly and equally
to all the holders of the collateralized obligations. Collateralized
obligations are often issued in two or more classes with varying maturities
and stated rates of interest. The payments are directed to different classes
of the CMO at unequal rates. This results in varying maturities among the
classes. This also may in effect "strip" the interest payments from principal
payments of the underlying securities and allow for the separate purchase of
either the interest or the principal payments (sometimes called "interest
only" and "principal only" securities). Such "stripped" CMOs are currently
considered by the staff of the Securities and Exchange Commission to
constitute illiquid securities and as such are to be included in the
calculation of the Fund's 10% limitation on illiquid securities. See "All
Funds -- Restricted or Illiquid Securities."
Mortgage prepayments at rates which are more rapid than those rates
projected at the time mortgage related U.S. Government Securities are
purchased at a premium can be expected to result in a decline in the value of
mortgage related securities because prepayments reduce the yield to maturity
on such securities. Conversely, the value of mortgage related securities
purchased at a discount can be expected to increase under the same
circumstances. Prepayments typically increase during periods of rapidly
declining interest rates.
Investment in such securities could also subject the Fund to "maturity
extension risk" which is the possibility that rising interest rates may cause
prepayments to occur at a slower than expected rate. This particular risk may
effectively change a security which was considered a short or
intermediate-term security at the time of purchase
11
<PAGE>
into a long term security. Long-term securities generally fluctuate more
widely in response to changes in interest rates than short or
intermediate-term.
Since the collateralized obligations may be issued in classes with
varying maturities and interest rates, the investor may obtain varying degrees
of predictability of maturity as opposed to direct investments in
mortgage-backed securities. With respect to the interest only securities and
the principal only securities, an investor has the option to select from the
pool of underlying collateral the portion of the cash flows that most closely
corresponds to the investor's forecast of interest rate movements. These
instruments tend to be highly sensitive to prepayment rates on the underlying
collateral and thus place a premium on accurate prepayment projections by the
investor.
The Fund may invest in FHLMC, FNMA and GNMA certificates, which are
mortgage-backed securities representing part ownership in a pool of mortgage
loans. These mortgages are assembled by financial institutions and, after
being approved by the government agency, are guaranteed by that agency and
some are backed by the full faith and credit of the U.S. Government. These
certificates are called "pass-through" securities, because both interest and
principal payments are passed through to the holder. As with CMOs, the Fund's
ability to maintain a portfolio of high-yielding securities will be adversely
affected to the extent that prepayments of mortgages must be reinvested in
securities which have lower yields than the mortgages. These securities may
also be subject to maturity extension risk, described above.
INVESTMENT POLICIES
Selected Government Income is managed with a view to obtaining current
income while seeking to preserve capital. Consistent with its investment
objective and policies, the Fund may invest in the full range of maturities of
U.S. Government Securities. The Manager may adjust the average maturity of the
Fund'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 the Fund's shares are more likely to be
greater when the portfolio average maturity is longer. At times, for defensive
purposes, the portfolio may be comprised substantially of securities maturing
in one year or less.
The Fund may sell portfolio securities without regard to the length of
time they have been held in order to take advantage of new investment
opportunities or yield differentials or to preserve gains or limit losses due
to changing economic conditions. This may cause the Fund to incur a relatively
high annual rate of portfolio turnover in some years. However, there are
usually no brokerage commissions paid in connection with transactions in U.S.
Government Securities.
The Fund may from time to time make commitments to purchase securities
on a "when-issued" or delayed delivery basis; that is, delivery and payment
for the securities normally takes place in the future. The Fund will not
invest in excess of 50% of its assets, determined at the time of investment,
in "when-issued" securities. Sometimes the purchase price of the securities is
not fixed until the date such securities are issued. The securities so
purchased are subject to market fluctuation and no interest accrues to the
Fund until delivery and payment take place. The Fund intends to make
commitments to purchase securities with the intention of actually acquiring
such securities, but it may sell the securities before the settlement date if
it is advisable or necessary as a matter of investment strategy. At the time
the Fund first makes a commitment to purchase a security, it will record the
transaction and reflect the value of the obligation in determining its net
asset value. The Custodian will maintain on a daily basis a separate Fund
account consisting of cash, U.S. Government Securities or other high grade
debt securities with a
12
<PAGE>
value at least equal to the amount of the commitments to purchase
"when-issued" securities. When payment is made for "when-issued" securities,
the Fund will meet its obligations from then available cash flow, sale of
securities held in the separate account, sale of other securities or, although
it would normally not expect to do so, sale of the "when-issued" securities
themselves (which may have a market value greater or lesser than the Fund's
obligation). If the Fund chooses to dispose of the right to acquire a
"when-issued" security prior to its acquisition, it could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation.
SELECTED DAILY GOVERNMENT -- A U.S. GOVERNMENT MONEY MARKET FUND
Selected Daily Government seeks to provide as high a level of current
income as possible from the type of short-term investments (i.e., with
maturities of one year or less) in which it invests, consistent with prudent
investment management, stability of principal and maintenance of liquidity.
Although there can be no guarantee, Selected Daily Government seeks to
maintain a share price of $1.00 per share and has done so since inception.
Selected Daily Government may invest in U.S. Government Securities
and repurchase agreements fully collateralized by such securities. See
"Selected Government Income-Investments" for a more detailed description of
U.S. Government Securities.
Selected Daily Government may invest in securities that have interest
rates that are adjusted periodically or that float continuously in relation to
an index such as the prime rate ("variable or floating rate securities"), and
in participation interests of such securities. The value of such securities
may change when interest rates change, although the variable or floating rate
nature of these securities should reduce the degree of fluctuation in the
value of portfolio investments.
Selected Daily Government limits its investments to securities that meet
the quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940. See "Determining the Price of Shares -- Net Asset Value"
for more information. For more information on Selected Daily Government's
investments, please see the Statement of Additional Information.
ALL FUNDS
BORROWING. The Funds may borrow money from banks for temporary or
emergency purposes in an amount not exceeding 10% of the value of a Fund's
total assets, and may pledge an amount not exceeding 15% of total assets to
secure such borrowing. No Fund will purchase portfolio securities while any
outstanding borrowing exceeds 5% of such Fund's total assets.
INDUSTRY CONCENTRATION. No Fund will make any investment (other than
U.S. Government Securities) which would cause 25% or more of its total assets
to be invested in any one industry.
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 managed by the Manager. A repurchase agreement
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 Manager or Sub-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
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
13
<PAGE>
underlying securities and losses, including possible decline in the value of
the collateral during the period while the Funds seek to enforce their rights,
possible loss of all or a part of the income during such period and expenses
of enforcing their rights.
RESTRICTED OR ILLIQUID SECURITIES. The Funds 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 (the "1933 Act") or which are
subject to contractual restrictions on resale. No investment will be made in
illiquid securities (which may include restricted securities that are
illiquid) if such investment would cause more than 15% of the net assets of
Selected American or Selected Special or more than 10% of the net assets of
Selected Government Income or Selected Daily Government, to be so invested. In
the event that market fluctuations cause a Fund to be invested in illiquid
securities exceeding 15% of net assets, steps will be taken as soon as
practicable to reduce the amount of illiquid securities held by such Fund.
The restricted securities which the Funds 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 Funds, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Manager or Sub-Adviser will consider
whether Rule 144A Securities being purchased or held by a Fund are illiquid
and thus subject to that Fund's policies limiting investments in illiquid
securities. In making this determination, the Manager or Sub-Adviser will
consider the frequency of trades and quotes, the number of dealers and
potential purchasers, dealer undertakings to make a market, and the nature of
the security and the market place trades (for example, the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A Securities will also be monitored by the
Manager or Sub-Adviser and, if as a result of changed conditions, it is
determined that a Rule 144A Security is no longer liquid, a 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 a 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.
PORTFOLIO TRANSACTIONS. Subject to an overall policy to place portfolio
transactions as efficiently as possible and at favorable prices, research
services and sales of Fund shares may be considered as factors in placing
portfolio transactions for a Fund. Usually the portfolio transactions of
Selected Government Income and Selected Daily Government are principal
transactions without brokerage commissions, although a profit or loss to a
dealer may be incurred. In principal transactions the sole consideration in
determining the amount paid is efficient execution at a favorable price. The
Adviser and Sub-Advisers are authorized to place portfolio transactions with
Shelby Cullom Davis & Co., a member of the New York Stock Exchange, which may
be deemed to be an affiliate of the Adviser, if the commissions are fair and
reasonable and comparable to commissions charged by non-affiliated qualified
brokerage firms for similar services. Due to differences in the investment
objectives of the Funds, portfolio turnover rates may vary. At times it could
be high, which, for Selected Special and Selected American, would require the
payment of larger amounts in brokerage commissions. Each Fund's portfolio
turnover rates are set forth in "Financial Highlights."
FUNDAMENTAL POLICIES. The investment objectives of the Funds and the
restrictions set forth in the Statements of Additional Information, including
those set forth in respect to borrowing and diversification as discussed
above, are fundamental policies. The policies with respect to permissible
investments are fundamental policies of Selected Government Income and
Selected Daily Government. All other investment objectives and policies of the
Selected Funds are not fundamental and may be changed without shareholder
approval.
14
<PAGE>
Any percentage restrictions set forth in this Prospectus or in the
Statements of Additional Information, other than the restriction with respect
to illiquid securities, apply as of the time of investment without regard to
later increases or decreases in the values of securities or total net assets.
MANAGER, SUB-ADVISERS AND DISTRIBUTOR
Davis Selected Advisers, L.P., whose principal office is at 124 E. Marcy
Street, Santa Fe, New Mexico 87501, (the "Manager") serves as the manager for
the Selected Funds. The sole general partner of the Manager is Venture
Advisers, Inc. (the "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/Trustees, the Manager is responsible for investment
management and administration activities for the Selected Funds. Davis
Distributors, LLC (the "Distributor") a subsidiary of the Manager, serves as
the distributor or principal underwriter of the Funds' shares. As discussed
below, the Manager has hired Bramwell Capital Management, Inc. as the
Sub-Adviser for Selected Special. Davis Selected Advisers-NY, Inc. ("DSA-NY"),
a wholly-owned subsidiary of the Manager, performs research and other services
for the Funds on behalf of the Manager under a sub-Advisory Agreement with the
Manager. This Agreement does not affect the services provided by Bramwell
Capital Management. The Manager also acts as investment adviser of Davis New
York Venture Fund, Inc., Davis High Income Fund, Inc., Davis Tax Free High
Income Fund, Inc., Davis Series, Inc. and Davis International Series, Inc.
(collectively the "Davis Funds"). The Distributor also serves as the principal
underwriter for the Davis and Selected Funds.
The Manager receives advisory fees monthly based upon each Fund's
average daily net assets at the following annual rates: Selected American --
0.65% on the first $500 million, 0.60% on the next $500 million, and 0.5% on
amounts over $1 billion; Selected Special -- 0.70% on the first $50 million,
0.675% on the next $100 million, 0.65% on the next $100 million and 0.60% on
amounts over $250 million; Selected Government Income -- 0.50% on all amounts;
Selected Daily Government -- 0.30% on all amounts. Under the Sub-Advisory
Agreement with DSA-NY, the Manager pays all of DSA-NY's direct and indirect
costs of operations. All the fees paid to DSA-NY are paid by the Manager and
not the Funds.
The Manager has agreed to absorb Fund operating expenses during 1998 to
the extent that the ratio of expenses to average net assets exceeds 1.50% for
Selected Government Income.
Bramwell Capital Management, Inc. (the "Sub-Adviser"), is the
Sub-Adviser for Selected Special. The Sub-Adviser is employed by the Manager
to manage the day to day investment operations for Selected Special subject to
the Manager's responsibility to monitor the performance and effectiveness of
the Sub-Adviser. Selected Special pays no fees directly to the Sub-Adviser.
The Sub-Adviser receives from the Manager a fee in an amount equal to 50% of
the advisory fees received by the Manager from Selected Special less 50% of
any trail commissions paid to dealers by the Manager in excess of 0.25% of the
Fund's net assets per annum, with a minimum annual fee of $150,000. The
Sub-Adviser also provides investment advisory services to individuals and
institutional investors as well as the Bramwell Funds, Inc. The Sub-Adviser's
offices are located at 745 Fifth Avenue, New York, New York 10151. Elizabeth
R. Bramwell is the controlling shareholder of the Sub-Adviser.
The shares of the Selected Funds are distributed by the Distributor. The
Distributor is paid a fee provided by Distribution Plans adopted and approved
by the Funds' Boards and shareholders in accordance with Rule 12b-1 under the
Investment Company Act of 1940. This Rule regulates the manner in which a
mutual fund may assume the costs of distributing and promoting the sale of its
shares. The Distributor provides office space and equipment, personnel,
literature distribution and advertising to promote the sale of the Funds'
shares. Each Fund pays a monthly distribution fee at the annual rate of 0.25%
of average daily net assets. In addition, the Plans provide
15
<PAGE>
that the Manager, in its sole discretion, may utilize its own resources for
distributing and promoting sales of Fund shares, including any profits from
its management fees.
The Distributor has agreements with securities dealers for distributing
shares of the Funds and providing services to shareholders. The Manager may
pay such firms service fees of up to 0.55% of the average net asset value of
the shares of Selected American and Selected Special and up to 0.25% of the
average net asset value of the shares of Selected Government Income and
Selected Daily Government in accounts for which representatives of the dealers
are responsible and provide services.
Shares of the Selected Funds may be sold through banks or
bank-affiliated dealers. If it is determined that the Glass-Steagall Act
(which limits the ability of a bank to be an underwriter of securities)
prohibits banks or bank affiliates from selling shares of the Funds, there
would be no material adverse effects on the Funds. State securities laws may
require such firms to be licensed as securities dealers in order to sell
shares of the Selected Funds.
PORTFOLIO MANAGERS
Effective May 1, 1998, Christopher C. Davis is a co-portfolio manager
for Selected American. He was portfolio manager of Selected American from
February 19, 1997 through April 30, 1998. He was co-portfolio manager of
Selected American, with Shelby M.C. Davis, from December, 1994 until February
19, 1997. Prior thereto, Christopher C. Davis worked closely with Shelby M.C.
Davis as an assistant portfolio manager and research analyst beginning in
September, 1989. Christopher C. Davis also co-manages other equity funds
managed by the Adviser.
Effective May 1, 1998, Kenneth Charles Feinberg is a co-portfolio
manager for Selected American. He also co-manages other equity funds managed
by the Adviser. He has been associated with the Adviser since December, 1994
as a research analyst. He previously served as Assistant Vice President of
Investor Relations for the Continental Corporation from 1988 to 1994.
Shelby M.C. Davis is Chief Investment Officer of the Manager. As Chief
Investment Officer, he is active in providing investment themes, strategies
and individual stock selection to Selected American. He was the primary
portfolio manager for Selected American from May 1, 1993 until February 19,
1997. He is an officer of all investment companies managed by the Manager and
was the portfolio manager of a growth fund from its inception in 1969 until
February 19, 1997. He has been a director of the Manager's general partner
since 1969.
Elizabeth R. Bramwell is the primary portfolio manager of Selected
Special. Since February, 1994, Ms. Bramwell has been the Chief Executive
Officer and sole director of the Sub-Adviser. Prior to February, 1994, Ms.
Bramwell was President, Chief Investment Officer, Portfolio Manager and a
Trustee of The Gabelli Growth Fund from its inception, April 10, 1987.
Carolyn H. Spolidoro is the primary portfolio manager of Selected
Government Income and Selected Daily Government. She has been employed by the
Adviser since August, 1985. She is a Vice President of the Manager's General
Partner and Vice President of all of the investment companies managed by the
Manager, except the Selected Funds. She is also portfolio manager of the Davis
Series, Inc., Davis Government Bond Fund and Davis Government Money Market
Fund.
16
<PAGE>
BUYING SHARES
Shares of the Funds may be purchased through a securities dealer having
a sales agreement with the Manager (a "Qualified Dealer") or directly from the
Funds. No matter how you purchase your shares, you pay no sales load. You buy
shares at the net asset value computed after receipt of your investment in
proper form. This procedure is described below. Shares purchased through a
Qualified Dealer may be subject to administrative charges or transaction fees
imposed by the Dealer.
INITIAL INVESTMENT ($1,000 MINIMUM)
You may make an initial investment in any of the Selected Funds for
$1,000 or more.
DIRECTLY BY WIRE. Opening an account directly by wire means that your
money is invested earlier than if you mail a check and will go to work for you
sooner.
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 Distributors, LLC at 1-800-243-1575 to advise them of the
investment and class of shares and to obtain an account number and
instructions. A completed 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 & Trust Co.
Boston, MA 02210
Attn: Mutual Fund Services
Fund Name
Shareholder Name
Shareholder Selected Account Number
Federal Routing Number 011000028
DDA 9905-325-8
We accept wires at no charge. However, your bank may charge you for this
service.
DIRECTLY BY MAIL. All it takes to open an account is a check and the
enclosed application. Once you've completed the application, mail it along
with your check to:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
17
<PAGE>
Please make your check payable to the Selected Funds, and do not forget
to indicate on the application the Fund(s) and amount(s) you are investing. An
investment in Selected American, Selected Special or Selected Government
Income will be effected at the next net asset value computed after your order
is received in good form. Your investment in Selected Daily Government will be
effected when your check is converted to federal funds (money credited to a
financial institution's account at a Federal Reserve Bank), which usually
takes at least two business days.
SUBSEQUENT INVESTMENTS ($25 MINIMUM)
DIRECTLY BY WIRE. Follow the instructions above for initial investments
directly by wire. There is no need to call us first. Just contact your
financial institution.
DIRECTLY BY MAIL. To add to your account by mail, please send your check
or money order with the detachable stub which you'll find at the bottom of
your most recent account statement, or you may drop us a note that includes
the registered account name, name of the Fund, account number, and amount you
wish to invest. Please remember that purchases should be sent to:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
AUTOMATIC INVESTING THROUGH YOUR BANK
Whether you purchase through a Qualified Dealer or directly, you may
arrange for automatic monthly investing by authorizing State Street Bank &
Trust Co. to initiate a debit to your bank account of a specific amount
(minimum $25) each month to be used to purchase Fund shares. The account
minimums of $1,000 for non-retirement accounts and $250 for retirement
accounts will be waived if, pursuant to the automatic investment plan, the
account balance will meet the minimum investment requirements within twelve
months of the initial investment. After each automatic investment, you will
receive a transaction confirmation and the debit should be reflected on your
next bank statement. You may terminate the plan at any time, and we may modify
or terminate the plan at any time. If you desire to utilize this investment
option, complete the Automatic Investment Plan portion of the Application form
enclosed with this Prospectus.
PROTOTYPE RETIREMENT PLANS
The Manager has available various types of prototype Individual
Retirement Account ("IRA") plans (deductible IRAs, non-deductible IRAs,
including "Roth IRAs", and educational IRAs) and SIMPLE IRA plans for both
individuals and employers. These plans utilize the shares of the Selected
Funds as their investment vehicle. State Street acts as custodian or trustee
for the plans and charges the participant $10 to establish each
18
<PAGE>
account and an annual maintenance fee of $10 per social security number. Such
fees will be redeemed automatically at year end from your account, unless you
elect to pay the fee directly.
GENERAL
Selected American, Selected Special and Selected Government Income do
not issue share certificates unless you specifically request one each time you
make a purchase. We do not issue certificates for Selected Daily Government
shares, for fractional shares, or to shareholders who have elected the
Automatic Withdrawals plan. Also, shares represented by certificates may not
be redeemed by wire or by telephone. See "Selling Shares" for information on
how to sell shares.
Because clearance of foreign checks generally takes longer than checks
drawn on domestic banks, shares will not be purchased until the Funds have
collected funds from checks drawn on foreign banks. Therefore, all purchases
made by check should preferably be in U.S. dollars and made payable to the
Selected Funds. Any fees involved in collecting on foreign checks will be
charged to the shareholder. THIRD PARTY CHECKS WILL NOT BE ACCEPTED. When
purchases are made by check or periodic automatic investment, redemption will
not be allowed until the investment being redeemed has been in the account for
15 business days.
SELLING SHARES
With any of our Funds, you can access all or part of your account by
selling (redeeming) your shares through your securities dealer (who may charge
you a fee for this service) or directly by using one of the methods described
below. You can sell shares at the net asset value computed after receipt of
your redemption request in proper form. Please refer to "Dividends" and
"Determining the Price of Shares -- Net Asset Value" for information on
dividends and redemptions and the price you will receive for your shares upon
redemption.
Redemptions are ordinarily paid to you in cash. However, the Funds'
Boards of Directors are authorized to decide that conditions exist making cash
payments undesirable, although the Boards have never reached such a decision.
If the Boards should decide to make payment in other than cash, redemptions
could be paid in securities, valued at the value used in computing a Fund's
net asset value. There would be brokerage costs incurred by the shareholder in
selling such redemption proceeds. The Funds must, however, redeem shares
solely in cash up to the lesser of $250,000 or 1% of a Fund's net asset value,
whichever is smaller, during any 90-day period for any one shareholder.
To keep expenses low, we reserve the right to redeem any single Fund
account that falls below $750. Because we value you as a shareholder, before
your account is redeemed, you will be notified in writing and we will allow
you 30 days to make additional share purchases to bring your account value up
to the minimum level.
You may not sell shares by wire or through the Automatic Withdrawals
plan or write checks against a Selected Daily Government account until the
shares have been on the Fund's books for at least 15 days, although there is
no delay for selling shares which have been purchased by wire.
BY WIRE OR ELECTRONIC FUNDS TRANSFER
You can sell shares by wire or electronically through the Automated
Clearing House system (ACH), if you have selected this option in your
application, have named a commercial bank or savings institution and have
attached a voided check or encoded deposit slip to which we can send your
money. You will be charged a service fee of $5 for each wire redemption. There
is a $25,000 maximum for all the Funds if you utilize ACH.
19
<PAGE>
Once you elect this redemption privilege, you or any other person can
make a request to use this privilege by calling 1-800-243-1575. You may also
use your privilege by mailing to the Funds a signed request that includes the
Fund name, account number and amount you wish to have wired. The proceeds will
be sent only to the financial institution you have designated on your
application. You may terminate this redemption privilege by notifying us in
writing. See "Please Note" following "By Telephone," as the conditions set
forth in the note also apply to wire and ACH redemptions.
Changes in your bank account ownership or bank account number (including
the name of the financial institution) may be made by written notice to us
with your signature and those of the new owner(s) signature guaranteed. See
"By Mail" for signature guarantee instructions. Additional documents may be
required when shares are held by a corporation, partnership, executor,
administrator, trustee or guardian.
Requests for wire redemptions are normally paid by the next business
day. However, in the event that the Manager determines that such redemptions
would adversely affect the Funds by requiring untimely disposition of
portfolio securities, such payment may be delayed for up to seven calendar
days.
AUTOMATIC WITHDRAWALS PLAN
This Plan may be appropriate if you have special income needs or
recurring major expenses and your account balance is $10,000 or more. Under
the Automatic Withdrawals Plan, you may choose to have your shares redeemed
from your account monthly, quarterly or semi-annually and a check will be sent
to you or to anyone you choose. Just let us know what the amount of the check
should be, although there is a $25 minimum for the Plan. Withdrawals can also
be processed electronically as described in the preceding section. Any income
and capital gains dividends will be automatically reinvested in your account
on the dividend reinvestment date. Shares are redeemed and checks are issued
at the end of the month of the time period selected. Therefore, you should
receive your check during the first week of the next month.
As these withdrawals involve redemption of shares, they may result in a
gain or loss for income tax purposes (although generally no gain or loss
results from redemption of shares of Selected Daily Government). Purchases of
Selected American, Selected Special or Selected Government Income shares at
the same time you are selling shares may not be advantageous because of tax
consequences. In addition, depending upon the size of the requested payment
and fluctuations in the share price, you may exhaust your account.
BY TELEPHONE
You can sell shares by calling 1-800-243-1575 (see "How to Reach Us")
and receive a check by mail, but please keep in mind:
The check can be issued only in amounts up to a maximum $25,000; The
check can be issued only to the registered owner (who must be an
individual); The check can be sent only to the address of record; and
Your current address of record must have been on file for 30 days.
PLEASE NOTE:
UNLESS YOU HAVE PROVIDED IN YOUR APPLICATION THAT THE TELEPHONE
PRIVILEGE IS NOT TO BE AVAILABLE, THE TELEPHONE PRIVILEGE IS AUTOMATICALLY
AVAILABLE FOR SELLING OR EXCHANGING SHARES. By exercising the telephone
privilege to sell or exchange shares, you agree that the Fund will not be
liable for following telephone instructions
20
<PAGE>
reasonably believed to be genuine. Reasonable procedures will be employed to
confirm that such instructions are genuine and if not employed, the Fund 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 experience difficulty accepting telephone requests,
in which case you should mail your redemption request. See "By Mail" below.
BY MAIL
Simply send your written request to redeem your shares as follows:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
This written request must: (1) be signed by all account owners exactly
as the account is registered (both parties must sign in the case of joint
accounts); (2) state the dollar amount or number of shares to be redeemed; and
(3) specify the Fund and account number from which shares are to be redeemed.
Please remember that you cannot place any conditions on your request. If any
share certificates were issued, they must also be returned duly endorsed or
accompanied by a separate stock assignment. For your protection, you should
send your share certificates by registered mail.
If the redemption proceeds are $50,000 or less and are to be paid to an
individual shareholder of record at the address of record, a signature
guarantee is not required (unless there has been an address change within 30
days). All other redemption requests must have signatures guaranteed.
Signatures may be guaranteed by a commercial bank, trust company, savings and
loan association, federal savings bank, a member firm of a national stock
exchange, credit union or other eligible financial institution. An
acknowledgment by a notary public is not acceptable. Certain shareholders,
such as corporations, trusts and estates, may be required to submit additional
documents.
Normally, payment by check is made within seven days after the
redemption request is received with all required documents in proper form.
However, if you bought your shares by check, a Fund will delay sending
redemption proceeds until it has determined that your check has cleared, which
is generally within 15 days.
BY CHECK -- SELECTED DAILY GOVERNMENT ONLY
If you are a shareholder in Selected Daily Government, you can also
redeem shares by check. If you choose this free check writing privilege in
your account application (or request it later), you will be provided with a
supply of checks. These checks will be imprinted with your name, the Fund name
and your account number, and can be made payable to any person with a $100
minimum. You may not sell shares by writing checks against your Selected Daily
Government account until the shares have been on the Fund's books for at least
15 days.
21
<PAGE>
When a check is presented for payment, a sufficient number of shares in
your account will be redeemed to cover the amount of the redemption check. You
will continue to earn dividends on these shares until the check clears. All
checks must be signed exactly as the account is registered so that, unless
only one signer is authorized on the account application, these redemption
checks must be signed by all account owners. You should not write a check to
close your account because the amount in your account varies daily (due to the
daily declaration of dividends). If you wish to close your account, you should
do so by the other redemption procedures described above.
IRA or other retirement plan accounts and certain accounts established
through brokers may not use the check redemption feature.
The Fund will not honor checks when the right to redeem shares has been
suspended or postponed, or whenever the account has been otherwise restricted.
PLEASE NOTE:
The Funds reserve the right to terminate, suspend or modify the
Automatic Withdrawals plan, check-writing privilege or telephone redemption
privilege. A Fund may suspend the right of redemption or delay payment (1)
during any period when the New York Stock Exchange is closed (other than
customary weekend and holiday closings), (2) when trading in the markets that
a Fund normally utilizes is restricted, or an emergency exists, as determined
by the Securities and Exchange Commission, so that the disposal of any of a
Fund's investments or the determination of its net asset value is not
reasonably practicable, or (3) for such other periods as the Securities and
Exchange Commission by order may permit for protection of a Fund's
shareholders. In case of suspension of the right of redemption, you may either
withdraw your request for redemption or, if your request is not withdrawn,
receive payment based on the next net asset value computed after termination
of the suspension.
EXCHANGING SHARES
You may exchange your shares in one Selected Fund for shares of another
Selected Fund. Please remember that you cannot place any conditions on your
request. Simply send us a written request that includes:
Your name;
Your account number;
The name of the Fund you currently own; The name of the Fund you
wish to exchange into; and The dollar amount or number of shares
you wish to exchange.
If you have any share certificates, you must include them with your
request. A signature guarantee is not required except in cases where shares
are also redeemed for cash at the same time. For certificate delivery and
signature guarantee instructions, please see "Selling Shares -- By Mail."
You may also make exchanges by calling 1-800-243-1575 (see "How to Reach
Us"). Please remember that during unusual market conditions, we may experience
difficulty accepting telephone requests, in which case you should mail your
request. In addition, exchanges may also be made through securities dealers
who may charge you a fee for effecting an exchange. See "Please Note"
following "Selling Shares-By Telephone," as the conditions set forth in the
note also apply to exchanges.
22
<PAGE>
An exchange of shares is considered a sale for federal income tax
purposes. A shareholder may realize a gain or loss depending upon whether the
value of the shares being exchanged is more or less than the adjusted cost
basis. This is usually the case except when exchanging shares of Selected
Daily Government for shares of another Selected Fund.
Since excessive trading may hurt Fund performance, disrupt portfolio
management and increase transaction costs, the Funds have decided to limit
excessive exchange activity. EXCHANGES OUT OF A FUND ARE LIMITED TO FOUR PER
CALENDAR YEAR. This exchange limitation may be terminated or amended at any
time upon such notice as is required by applicable regulatory authorities.
Exchanges are available only in states where shares of a particular Fund
being acquired may legally be sold. The Funds reserve the right to suspend,
terminate or modify the exchange privilege at any time, but will normally give
you advance notice.
FUND PERFORMANCE
The Funds may quote information from publications including, but not
limited to, The Wall Street Journal, Money Magazine, Forbes, Barron's,
Newsweek, Chicago Tribune, The New York Times, U.S. News and World Report, USA
Today, Fortune, Investors Business Daily, Financial World, Smart Money,
No-Load Fund Investor and Kiplinger's and may cite information from
Morningstar, Value Line or the Investment Company Institute. Selected
American, Selected Special and Selected Government Income may compare their
performance to the Consumer Price Index, Dow Jones Industrial Average,
Standard & Poor's 500 Stock Index, the Russell 2,000 Index or Wilshire 5,000
and to the performance of mutual fund indexes as reported by Lipper Analytical
Services, Inc. or CDA Investment Technologies, Inc., two widely recognized
independent mutual fund reporting services. We invite you to compare the
performance of the Selected Funds to the historical returns of various
investments, performance indexes or economic indicators such as stocks, bonds,
certificates of deposit, money market funds and U.S. Treasury Bills. Some of
these investments may offer fixed rates of return and guaranteed principal and
may be insured. For more information on the Funds' performance, and
performance advertising see "Performance Data" in the Statements of Additional
Information. Please remember that performance information is based upon
historical results and is not necessarily indicative of future performance.
The Funds' Annual Report contains additional performance information.
Such Annual Report will be made available upon request and without charge.
STOCK-ORIENTED FUNDS
We may advertise the performance of Selected American or Selected
Special expressed in terms of "total return" or "average annual total return."
Average annual total return (which is standardized in accordance with
Securities and Exchange Commission regulations) and total return reflect the
change in the value of an investment in a Fund over a stated period. Total
return and average annual total return measure both the net investment income
from, and any realized or unrealized appreciation of, a Fund's holdings for a
stated time period and assume that all dividends were reinvested. The average
annual total return calculation is annualized and is shown as a percentage
change over the time period. Total return represents the aggregate percentage
or dollar value change over the stated period. Performance data will generally
be stated for one, five and ten year periods, but may also be quoted for other
longer or shorter periods.
23
<PAGE>
SELECTED GOVERNMENT INCOME
In addition to advertising "total return" or "average annual total
return" (see discussion under "Fund Performance--Stock-Oriented Funds"), we
may also advertise Selected Government Income's "yield." "Yield" with respect
to Selected Government Income refers to the net investment income generated by
a hypothetical investment in the Fund during a thirty day or one month period.
The income is then annualized by assuming the same income was generated each
month for a twelve month period, and is shown as a percentage of the
investment.
SELECTED DAILY GOVERNMENT
We may, from time to time, advertise Selected Daily Government's
"yield," and "compounded yield."
"Yield" with respect to Selected Daily Government refers to the net
investment income generated by a hypothetical investment in the Fund during a
seven-day period. The income is then annualized by assuming the same income
was generated each week during a 52-week period, and is shown as a percentage
of the investment. "Compounded yield" is determined similarly but, when
annualized, the income earned by an investment is assumed to be compounded
weekly. Compounded yield will be slightly higher than the yield because of the
effects of compounding.
The performance of Selected Daily Government may be compared to that of
other money market mutual funds tracked by Lipper or rated by Donaghue's Money
Fund Report, a money market fund reporting service. Investors may want to
compare the Fund's performance to that of various bank products as reported by
BANK RATE MONITOR --, A FINANCIAL REPORTING SERVICE THAT PUBLISHES EACH WEEK
AVERAGE RATES OF BANK AND THRIFT INSTITUTION MONEY MARKET DEPOSIT ACCOUNTS,
SUPER N.O.W. ACCOUNTS AND CERTIFICATES OF DEPOSIT
DETERMINING THE PRICE OF SHARES -- NET ASSET VALUE .
The price you pay when you buy shares in a Fund and the price you
receive if you redeem is the next net asset value computed after we receive
your order to buy or redeem in proper form.
NET ASSET VALUE. The net asset value per share of each Fund is
determined daily by dividing the total value of investments and other assets,
less any liabilities by the total outstanding shares. The net asset value of
the Fund is determined daily as of the earlier of the close of the New York
Stock Exchange (the "Exchange") or 4:00 p.m., Eastern Time, on each day that
the Exchange is open for trading.
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. In order for your purchase order or
redemption request to be effective on the day you place your order with a
Qualified Dealer (your broker-dealer or other financial institution), such
Qualified Dealer must (i) receive your order before 4:00 p.m. Eastern time and
(ii) promptly transmit the order to State Street. The Qualified Dealer is
responsible for promptly transmitting purchase orders or redemption requests
to State Street so that you may receive the same day's net asset value. Note
that in the case of redemptions and repurchases of shares owned by
corporations, trusts or estates, or shares represented by outstanding
certificates, State Street may require additional documents to effect the
redemption and the applicable price will be that next determined following the
receipt of the required documentation or outstanding certificates. See
"Redemption of Shares."
24
<PAGE>
VALUATION OF PORTFOLIO SECURITIES
Selected American, Selected Special and Selected Government Income each
value their security holdings on the basis of market value. Securities traded
on a national securities exchange are valued at the last published sales price
on the exchange, or, in the absence of recorded sales, at the closing bid
price on such exchange. Over-the-counter securities are valued at the closing
bid price. Fixed-income securities may be based on prices provided by a
pricing service. Debt securities maturing in 60 days or less are usually
valued at amortized cost and longer term debt securities may be valued by an
independent pricing service. Securities for which market quotations are not
readily available and other assets will be valued at fair value as determined
by or at the direction of the Board of Directors.
Selected Daily Government investments are normally valued at amortized
cost, which means that they are valued at acquisition cost (and adjusted for
amortization of premium or discount) rather than current market value. This
enables Selected Daily Government to maintain a stable net asset value or
share price of $1.00, although there can be no assurance that a stable price
of $1.00 will always be maintained.
If a deviation of 1/2 of 1% or more were to occur between Selected Daily
Government's net asset value per share calculated at current market values and
amortized cost, or if there were any other deviations that the Board of
Trustees believed would result in a material dilution to shareholders, the
Board of Trustees would promptly consider what action, if any, should be
taken. Please see "Net Asset Value" in the Statement of Additional Information
for further discussion.
DIVIDENDS
To help keep your account growing, income and capital gains dividends
from any Fund are automatically reinvested on the payment date for you as
additional shares of that Fund, unless you request that dividends be paid by
check. You may make such an election on your account application or make such
a request later by writing to the Funds. Your request will be effective for
the current dividend or distribution if it is received before the record date.
Requests received after that time will be effective beginning with the next
dividend or distribution.
If you elect to have dividends and/or distributions paid in cash, and
the U.S. Postal Service cannot deliver the check, or if it remains uncashed
for six months, it, as well as future dividends and distributions, will be
reinvested in additional shares.
STOCK-ORIENTED FUNDS
Selected American pays any income dividends quarterly and any capital
gains dividends at least annually. Selected Special pays any income and
capital gains dividends at least annually.
SELECTED GOVERNMENT INCOME
Net income dividends are accrued daily and paid monthly. Shares earn
dividends as of the day after the effective purchase date up to, but not
including, the date of redemption. Capital gains dividends, if any, are paid
at least annually.
25
<PAGE>
SELECTED DAILY GOVERNMENT
Dividends from the net income of Selected Daily Government are accrued
daily and paid monthly. Shares earn dividends as of the first business day
after the effective purchase date up through the date of redemption.
ALL FUNDS
As a protection, if two of your dividend checks are returned as
undeliverable, those undelivered dividends will be invested in additional
shares at the then current net asset value, and the account will be
redesignated as a dividend reinvestment account.
TAXES
The Funds intend to continue qualifying as "regulated investment
companies" under the Internal Revenue Code (the "Code"). The Funds distribute
all of their taxable net income and net realized capital gains to shareholders
so that the Funds themselves do not pay any income taxes. You should consult
your tax adviser about the effects of federal, state and local tax laws on
investments in the Funds.
Distributions of net investment income from a Fund are taxable to
shareholders as ordinary income. A portion of the income dividends received by
the Funds from U.S. corporations may qualify for the "dividends received"
deduction available to corporate shareholders. Distributions from net
long-term capital gains are taxable as long-term capital gains regardless of
how long Fund shares are owned. Distributions from net short-term capital
gains are taxable as ordinary income. Shareholders are informed annually of
the amount and nature of any income or gain. Distributions are taxable whether
received in cash or reinvested in additional shares.
If for any reason you do not provide us with your correct Social
Security or Tax I.D. number (or certify that you are not subject to backup
withholding), we are required by the Code to withhold a portion of taxable
dividends and proceeds of certain exchanges and redemptions.
If a Fund distributes less than the amount it is required to distribute
during any year, a 4% excise tax will be imposed on the undistributed amount.
The Funds intend to declare and distribute dividends during each year
sufficient to prevent imposition of the excise tax.
RETIREMENT PLANS
The Selected Funds offer prototype retirement plans (e.g. 401(k), profit
sharing, money purchase, Simplified Employee Pension ("SEP") plans, model
"SEP" plans, model 403(b) and 457 plans for charitable, educational and
governmental entities) for corporations and self-employed individuals and
prototype Individual Retirement Account ("IRA") plans and SIMPLE IRA plans for
both individuals and employers. These plans utilize the shares of the Selected
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 Social Security number. Such fees will be
redeemed automatically at year end from your account, unless you elect to pay
the fee directly.
The Funds' custodian, State Street Bank and Trust Co., acts as the
trustee or custodian under the IRA, SEP and 403(b) plans and may act as
trustee or custodian under the other plans. For information, please call
1-800-243-1575, or write us at Selected Funds, P.O. Box 8243, Boston, MA
02266-8243.
26
<PAGE>
Please do not use the application included with this prospectus to open
your retirement plan account. Instead, call 1-800-243-1575 for a retirement
plan account application. Please consult your tax adviser to determine the
effect of any of the plans on your financial picture.
ORGANIZATION OF THE FUNDS
STOCK-ORIENTED FUNDS
Selected American, organized in 1933, and Selected Special, organized in
1939, are Maryland corporations and are both diversified, open-end management
investment companies. Selected American and Selected Special each issue one
series of common stock. Shares when issued are fully paid, non-assessable, and
freely transferable. Shares of each Fund have equal non-cumulative voting
rights and equal rights with respect to dividends, assets and liquidation.
SELECTED GOVERNMENT INCOME AND SELECTED DAILY GOVERNMENT
Selected Government Income and Selected Daily Government are each
separate series of Selected Capital Preservation Trust. The Trust is a
diversified open-end management investment company organized as a business
trust under the laws of Ohio in 1987. Shares of the Trust when issued are
fully paid, non-assessable and freely transferable.
Shares of each series have equal voting rights with other shares of that
series and each share is entitled to one vote at a shareholder meeting. On
certain matters, such as election of the Board of Trustees and ratification of
the selection of independent auditors, all series vote together. However, on
certain matters affecting a particular series, such as changes in investment
restrictions, the shares of that series vote separately.
ALL FUNDS
The Funds do not have annual shareholder meetings but do have special
shareholder meetings when the Boards believe it is necessary or when required
by law. A Fund will have a special meeting when requested in writing by the
holders of at least 10% of the shares entitled to vote at a meeting.
In the opinion of the staff of the Securities and Exchange Commission,
the use of this combined Prospectus may make each Fund liable for any
misstatement or omission in this Prospectus regardless of the particular Fund
to which it pertains.
DIRECTORS AND TRUSTEES
The management and affairs of the Funds are under the direction and
supervision of the Boards of Directors and Trustees.
The following persons serve as Directors and Trustees of the Selected
Funds:
William P. Barr Katherine L. MacWilliams
Floyd A. Brown James J. McMonagle
Andrew A. Davis Richard C. O'Brien
Christopher C. Davis Larry Robinson
Jerome E. Hass Marsha Williams
27
<PAGE>
More information concerning the Directors and Trustees is contained in
the Statements of Additional Information.
HOW TO REACH US
You can have your questions answered about any of the Selected Funds or
the status of your account simply by calling 1-800-243-1575 Monday through
Friday from 7:00 a.m. to 4:00 p.m. Mountain time. The Funds are closed on days
on which the New York Stock Exchange is closed. Whenever you want to contact
us by mail, please write to us at:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Selected Daily INFORMATION CONCERNING THE DRAFTS USED FOR CHECK WRITING PRIVILEGE:
Government Check
Writing Privilege:
</TABLE>
[ ] If you wish to use
this privilege please
check the box to the
left and complete the
signature card below.
1. Your Selected Daily Government Fund drafts are
paid from an account at State Street Bank & 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 their service telephone
number for the Selected Funds, (800) 243-1575.
State Street Bank & Trust Company, c/o The
Selected Funds.
4. These rules may be amended from time to time.
THE SELECTED DAILY GOVERNMENT FUND SIGNATURE CARD
(TYPE OR PRINT)
Account
number_____________________________________________
Shareholder
Name_______________________________________________
Co-Shareholder
Name_______________________________________________
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 THE SELECTED DAILY GOVERNMENT FUND,
THAT PERTAIN TO THE USE OF REDEMPTION CHECKS.
(SOME OF THE CURRENT RULES APPEAR ABOVE.) EACH
SIGNATORY GUARANTEES THE OTHER'S SIGNATURE.
(Signature) _______________________________________
(Signature of Co-Shareholder)______________________
[ ] Check here if both signatures are required on
checks.
[ ] Check here if only one signature is required
on checks.
If neither box is checked, all checks will require
both signatures.
29
<PAGE>
DAVIS SELECTED ADVISERS, L.P.
GROUP OF FUNDS
Selected American Shares
Selected Special Shares
Selected U.S. Government Income Fund
Selected Daily Government Fund
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
124 E Marcy Street
Santa Fe, NM 87501
DISTRIBUTOR
Davis Distributors LLC
124 East Marcy Street
Santa Fe, NM 87501
LEGAL COUNSEL
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, IL 60202-2502
AUDITORS
KPMG Peat Marwick
1707 17th St., Suite 2300
Denver, Colorado 80202
30
<PAGE>
TABLE OF CONTENTS
PAGE
Summary .................................................................. 2
Fund Expenses ............................................................ 3
Financial Highlights ..................................................... 4
Investment Objectives .................................................... 8
Manager, Sub-Advisers and Distributor .................................... 15
Portfolio Managers ....................................................... 16
Buying Shares ............................................................ 17
Selling Shares ........................................................... 19
Exchanging Shares ........................................................ 22
Fund Performance ......................................................... 23
Determining the Price of Shares-Net Asset Value .......................... 24
Dividends ................................................................ 25
Taxes .................................................................... 26
Retirement Plans ......................................................... 26
Organization of the Funds ................................................ 27
Directors and Trustees ................................................... 27
How to Reach Us .......................................................... 28
31
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MAY 1, 1998
SELECTED CAPITAL PRESERVATION TRUST
124 East Marcy Street
Santa Fe, New Mexico 87501
Call Toll-Free l-800-243-1575
Selected Capital Preservation Trust (the "Trust") is a diversified, open-end,
management investment company currently offering two separate funds (the
"Funds"):
Selected U.S. Government Income Fund ("Selected Government Income"), and
Selected Daily Government Fund ("Selected Daily Government")
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1998. THE PROSPECTUS MAY
BE OBTAINED FROM THE TRUST.
THE FUND'S DECEMBER 31, 1997 ANNUAL REPORT ACCOMPANIES THIS STATEMENT OF
ADDITIONAL INFORMATION. THE FINANCIAL STATEMENTS APPEARING IN THIS REPORT ARE
INCORPORATED HEREIN BY REFERENCE.
<PAGE>
TABLE OF CONTENTS
TOPIC PAGE
Investments........................................................... 3
Investment Restrictions............................................... 4
Net Asset Value....................................................... 6
Trustees and Officers................................................. 7
Trustees' Compensation Schedule....................................... 8
Manager............................................................... 9
Expense Limitations................................................... 10
Custodian ............................................................ 10
Independent Auditors.................................................. 10
Distribution Plans.................................................... 10
Portfolio Transactions................................................ 11
Taxes................................................................. 11
Trust Shares.......................................................... 12
Major Shareholders.................................................... 12
Shareholder Meetings.................................................. 12
Ratings of Permissible Investments.................................... 13
Performance Data...................................................... 14
2
<PAGE>
INVESTMENTS
The following information supplements the discussion of investment
objectives contained in the Prospectus.
SELECTED GOVERNMENT INCOME
Selected Government Income seeks to achieve its investment objective
by investing primarily in U.S. Treasury bills, notes, bonds and other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities") and repurchase agreements
secured by such obligations. Direct obligations issued by the U.S. Treasury
include bills, notes and bonds which differ from each other only in interest
rates, maturities and times of issuance: Treasury bills have maturities of one
year or less, Treasury notes have initial maturities of one to ten years and
Treasury bonds have initial maturities of greater than ten years.
Examples of obligations issued by agencies or instrumentalities
established or sponsored by the U.S. Government include, among others,
securities issued by the Central Bank for Cooperatives, Export-Import Bank of
the United States, Farmers Home Administration, Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal Housing Administration, Federal Intermediate
Credit Banks, Federal National Mortgage Association ("FNMA"), General Services
Administration, Government National Mortgage Association ("GNMA"), the
International Bank for Reconstruction and Development, Maritime
Administration, Small Business Administration, and The Tennessee Valley
Authority. Selected Government Income may also invest in securities issued by
agencies or instrumentalities which may be established or sponsored by the
U.S. Government in the future.
GNMA Certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans. A "pool" or group of such mortgages is
assembled and, after being approved by GNMA, typically 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. FNMA and FHLMC Certificates are similar to GNMA Certificates
except that timely payment of interest and principal on each mortgage may not
be guaranteed by the full faith and credit of the U.S. Government.
General Factors. The value of fixed-rate debt securities generally is
affected by three factors: (1) quality (the credit risk); (2) yield (the
interest rate); and (3) maturity (the length of time remaining until principal
is due). Because of the high quality of the permissible investments in
Selected Government Income, the credit risk is minimal and should not
significantly impact the value of portfolio securities. However, changes in
prevailing interest rates can be expected to cause changes in the value of
portfolio securities and therefore the net asset value per share; the degree
of such changes will depend on the yield and maturity of such securities.
Generally speaking, the longer the average maturity of the portfolio, the more
susceptible the portfolio will be to changes in value as the result of
fluctuations in interest rates. Investors purchasing shares of Selected
Government Income should understand that it is not a money market fund and
should expect the net asset value of the shares to fluctuate as interest rates
change and as dividends are declared and paid. Accordingly, investors seeking
a constant net asset value should consider investing in Selected Daily
Government.
Futures and Options Transactions. Selected Government Income is not
prohibited from engaging in transactions in futures and options. However the
Fund has not done so for several years and does not intend to do so in the
near future. In the event that the Manager determines that such investments
would be in the best interest of the Fund, shareholders will be given advance
notice and the proper disclosure will be provided in the Fund's registration
statement, including the Prospectus.
SELECTED DAILY GOVERNMENT
Selected Daily Government may invest in U.S. Treasury bills, notes,
bonds and other U.S. Government Securities and repurchase agreements secured
by such obligations. The Fund limits its investments to securities and
repurchase agreements which will mature in 397 days or less from the date of
purchase. This period is calculated
3
<PAGE>
pursuant to the provision of Rule 2a-7 under the Investment Act of 1940 which
governs the use of amortized cost valuation. Maturities of securities
collateralizing repurchase agreements are not so limited.
BOTH FUNDS
Additional Information Regarding Repurchase Agreements. The Manager,
under guidelines and standards of review established by the Trust's Board of
Trustees, evaluates the creditworthiness of sellers and enters into repurchase
agreements only with those institutions that it believes present minimal
credit risks. The Manager has been directed to obtain from the seller full
collateral for the amount of any repurchase agreement and to require the
seller to maintain collateral, on a daily basis, at least equal to the
repurchase price.
INVESTMENT RESTRICTIONS
The Funds have adopted as fundamental policies their investment
objectives as described in the Prospectus and the investment restrictions
enumerated below. These cannot be changed unless authorized by the holders of
a majority of the outstanding shares of the Funds, as defined in the
Investment Company Act of 1940 (the "1940 Act").
SELECTED GOVERNMENT INCOME MAY NOT:
(1) Buy the securities of any company if more than 5% of the value of the
Fund's total assets would be invested in that company. Securities
issued by the U.S. Government, or its agencies or instrumentalities and
repurchase agreements involving such securities (U.S. Government
Securities") are excluded from this restriction;
(2) invest 25% or more of its total assets in any one industry, except that
this restriction shall not apply to U.S. Government Securities.
(3) borrow money except for temporary or emergency non-investment purposes,
such as to accommodate abnormally heavy redemption requests, and then
only in an amount not exceeding 10% of the value of Selected Government
Income's total assets at the time of borrowing;
(4) pledge, mortgage or hypothecate its assets, except that to secure
borrowings permitted by (3) above, it may pledge securities having a
market value at the time of pledge not exceeding 15% of Selected
Government Income's total assets; provided, however, that the deposit
of underlying securities and other assets in escrow in connection with
the writing of put or call options and collateral arrangements with
respect to margin for futures contracts and options thereon are not to
be considered pledges or other encumbrances;
(5) purchase securities on margin except that Selected Government Income
may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities and further excepting
that the deposit or payment by Selected Government Income of initial or
variation margin in connection with futures contracts or related
options transactions is not to be considered the purchase of a security
on margin;
(6) make short sales of securities;
(7) underwrite any securities issued by others except to the extent that,
in connection with the disposition of its portfolio investments, it may
be deemed to be an underwriter under certain Federal securities laws;
(8) purchase or sell real estate, real estate mortgage loans, commodities
or commodity futures contracts, or oil, gas, or mineral exploration or
development interests except that Selected Government Income may invest
in futures contracts and related options as described in the Prospectus
and Statement of Additional Information;
(9) make loans, other than (a) by entering into repurchase agreements, (b)
through the purchase of other permitted investments in accordance with
its investment objective and policies, and (c) through the lending of
portfolio securities with respect to not more than 30% of its assets;
4
<PAGE>
(10) enter into a repurchase agreement maturing in more than seven days, or
knowingly purchase securities that are subject to restrictions on
resale or for which there are no readily available market quotations
if, as a result, more than 10% of the value of Selected Government
Income's total assets (taken at current value) at the time would be
invested in such securities;
(11) invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of
assets;
(12) issue senior securities as defined in the 1940 Act, except insofar as
Selected Government Income may be deemed to have issued a senior
security by reason of (a) entering into any repurchase agreements; (b)
permitted borrowings of money; (c) purchasing securities on a
"when-issued" or delayed delivery basis; or (d) purchasing options,
futures contracts and related options;
(13) purchase or sell futures contracts or options on futures contracts if,
as a result, the sum of the initial margin deposits on Selected
Government Income's existing futures contracts and related options
positions and the premiums paid for options on futures contracts would
exceed 5% of the fair market value of Selected Government Income's
assets after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into; provided, however,
that in the case of an option that is "in-the-money" at the time of the
purchase, the "in-the-money" amount may be excluded in computing such
5%; or
(14) invest more than 10% of its total assets (determined at the time of
investment) in illiquid securities, securities which are not readily
marketable and repurchase agreements which have a maturity of longer
than seven days. In addition, Selected Government Income will not
invest more than 5% of its total assets in securities the disposition
of which is restricted under federal securities laws. The staff of the
SEC has taken the position that OTC Options and the assets used as
"cover" for written OTC Options should generally be treated as illiquid
securities. However, if a dealer recognized by the Federal Reserve Bank
as a "primary dealer" in U.S. Government Securities is the other party
to an option contract written by a fund, and that fund has the absolute
right to repurchase the option from the dealer at a formula price
established in a contract with the dealer, the SEC staff has agreed
that fund only needs to treat as illiquid that amount of the "cover"
amount equal to the amount by which (a) the formula price exceeds (b)
any amount by which the market value of the security subject to the
option exceeds the exercise price of the option (the amount by which
the option is "in-the-money"). Although the Manager does not believe
that OTC Options are generally illiquid, it has agreed that pending
resolution of this issue, Selected Government Income will conduct its
operations in conformity with the views of the staff.
All percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total or
net assets.
SELECTED DAILY GOVERNMENT MAY NOT:
(1) purchase securities, if immediately after such purchase more than 5% of
its total assets would be invested in the securities of any one issuer
excluding U.S. Government Securities, and repurchase agreements with
respect to such securities;
(2) invest 25% or more of its total assets in any one industry, except that
this restriction shall not apply to U.S. Government Securities;
(3) borrow money, except for temporary or emergency non-investment purposes
such as to accommodate abnormally heavy redemption requests, and then
only in an amount not exceeding 10% of the value of its total assets at
the time of borrowing;
(4) pledge, mortgage or hypothecate its assets, except that to secure
borrowings permitted by (3) above, it may pledge securities having a
market value at the time of pledge not exceeding 15% of its total
assets;
(5) sell securities short or purchase any securities on margin, except for
such short-term credits as are necessary for clearance or portfolio
transactions;
5
<PAGE>
(6) write, purchase or sell put or call options;
(7) underwrite any securities issued by others (except that it may
technically be considered an underwriter if it sells restricted
securities);
(8) purchase or sell real estate, real estate mortgage loans, commodities,
commodity contracts (including futures contracts) or oil and gas
interests;
(9) make loans, other than by entering into repurchase agreements and
through the purchase of other permitted investments in accordance with
its investment objective and policies;
(10) invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of
assets;
(11) enter into a repurchase agreement maturing in more than seven days or
knowingly purchase securities that are subject to restrictions on
resale or for which there are no readily available market quotations
if, as a result of such purchase more than 10% of a Fund's assets would
be invested in such securities;
(12) issue any class of securities senior to any other class of securities.
All percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total or
net assets.
NET ASSET VALUE
The net asset value per share of each Fund is calculated on each day
that the New York Stock Exchange (the "Exchange") is open for business. The
Exchange is currently closed on weekends and on New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
The method of valuing portfolio securities is as set forth below.
Net asset value per share is determined by calculating the total value
of a Fund's assets, deducting total liabilities and dividing the result by the
number of shares outstanding.
SELECTED GOVERNMENT INCOME
Fixed income securities are valued by using market quotations or
independent pricing services that use prices provided by market makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics. Portfolio securities that are
primarily traded on a securities exchange or securities listed on the NASDAQ
National Market are valued at the last sale price on the exchange or market
where primarily traded or listed or, if there is no recent sale price
available, at the last current bid quotation. Securities not so traded or
listed are valued at the last current bid quotation if market quotations are
available. Other securities, including restricted securities, and other assets
are valued at fair value as determined in good faith by the Board of Trustees.
On each day the Exchange is open for trading, the net asset value is
determined as of the earlier of 4:00 p.m. New York time or the close of the
Exchange.
SELECTED DAILY GOVERNMENT
Investment securities are valued using the amortized cost method
whereby a security is valued at cost adjusted for the amortization of any
premiums or discounts over the period until maturity. With respect to
repurchase agreements, which are collateralized by U.S. Government Securities,
the market value of the collateral is evaluated daily.
As discussed in the Prospectus, if a deviation of 1/2 of 1% or more
were to occur between Selected Daily Government's net asset value per share
calculated at current market values and amortized cost, or if there were any
other deviation the Board of Trustees believed would result in a material
dilution to shareholders, the Board of
6
<PAGE>
Trustees would consider certain temporary actions to protect the interests of
the shareholders. Such action could include withholding dividends, paying
dividends out of surplus, realizing gains or losses, or using market asset
valuation.
TRUSTEES AND OFFICERS
Information about the trustees and officers, including principal
occupations during the past 5 years, is shown below. Each of the Fund's
directors is also a director of Selected American Shares, Inc. and Selected
Special Shares (collectively with the Fund, the "Selected Funds"). As
indicated below, certain directors and officers of the Fund hold similar
positions with the following funds that are also managed by the Manager: Davis
New York Venture Fund, Inc., Davis High Income Fund, Inc., Davis Tax-Free High
Income Fund, Inc., Davis Series, Inc. and Davis International Series, Inc.
(collectively the "Davis Funds").
William P. Barr (5/23/50) - Trustee. Senior Vice President and
General Counsel, GTE Corporation since July 1994. Attorney General of the
United States from August 1991 to January 1993. Deputy Attorney General from
May 1990 to August 1991. Assistant Attorney General from April 1989 to May
1990. Partner with the law firm of Shaw, Pittman, Potts & Trowbridge from 1984
to April 1989 and January 1993 to August 1994. His address is One Stamford
Forum, Stamford, CT 06904.
Floyd A. Brown (11/5/30) - Trustee. Staff announcer and program host
for WGN Radio and Television, Chicago, Illinois. Sole proprietor of The Floyd
Brown Co., Elgin, Illinois (advertising, media production and mass media
marketing). His address is 51 Douglas Avenue, Elgin, Illinois 60120.
Andrew A. Davis (6/25/63),* 124 East Marcy Street, Santa Fe, NM
87501. Trustee. Director and Vice President of each of the Davis Funds (except
Davis International Series, Inc.), Director and President, Venture Advisers,
Inc.; Director and Vice President Davis Selected Advisers-NY, Inc.; Consultant
to Shelby Cullom Davis & Co.; Consultant to Capital Ideas, a private financial
consultant. Former Vice President and head of convertible security research,
PaineWebber, Incorporated.
Christopher C. Davis (7/13/65),* 609 Fifth Ave, New York, NY 10017.
Trustee.. Director and Vice President of each of the Davis Funds; Director,
Vice Chairman, Venture Advisers, Inc.; Director, Chairman, Chief Executive
Officer, Davis Selected Advisers-NY, Inc.; Chairman and Director, Shelby
Cullom Davis Financial Consultants, Inc.; employee of Shelby Cullom Davis &
Co., a registered broker/dealer; Director, Rosenwald, Roditi and Company,
Ltd., an offshore investment management company.
Jerome E. Hass (6/1/40) - Trustee. Professor of Finance and Business
Strategy Johnson Graduate School of Management, Cornell University. Consultant
National Economic Research Associates. Formerly Chief of Research of the
Federal Power Commission and Special Assistant to James R. Schlesinger at the
Executive Office of the President of the United States.
Katherine L. MacWilliams (1/19/56) - Trustee. Vice President,
Treasurer Coors Brewing Company and Adolph Coors Company. Formerly Vice
President of Capital Markets for UBS Securities in New York. Former member of
the Board of International Swaps and Derivatives Association, Inc.
James J. McMonagle (10/1/44) - Chairman and Trustee. Senior Vice
President and General Counsel of University Health System, Inc. and University
Hospitals of Cleveland. From 1976 to 1990, Judge of the Court of Common Pleas,
Cuyahoga County, Ohio. His address is 11100 Euclid Avenue, Cleveland, Ohio
44106.
Richard O'Brien (9/12/45) - Trustee. Corporate Economist for
Hewlett-Packard Company. Director, National Association of Business
Economists, former President of the Northern California High Technology
Council and former Chairman of the Economic Advisory Council of the California
Chamber of Commerce.
Larry Robinson (10/28/28) - Trustee. General Partner, Robinson Investment
Company. Management Consultant. Corporate Liaison for Mayor Michael R. White
of Cleveland, Ohio. Adjunct Professor at Weatherhead School of Management,
Case Western Reserve University. His address is 950 Terminal Tower, 50 Public
Square, Cleveland, Ohio 44113.
7
<PAGE>
Marsha Williams (3/28/51) - Trustee. Treasurer, Amoco Corporation. Director,
Illinois Benedictine College, The Conference Board Council of Corporate
Treasurers, Illinois Council on Economic Education, Chicagoland Chamber of
Commerce; Formerly, Director, Fertilizers of Trinidad and Tobago from
1989-1993, Ok Tedi Mining Limited from 1992-1993, Just Jobs from 1988-1992.
Her address is 200 E. Randolph Dr., Chicago, IL 60601.
**Kenneth C. Eich (8/14/53), 124 East Marcy Street, Santa Fe, NM 87501. Vice
President. Vice President of each of the Davis Funds, Chief Operating Officer,
Venture Advisers, Inc.; Vice President, Davis Selected Advisers-NY, Inc.;
President, Davis Distributors, L.L.C. Former President and Chief Executive
Officer of First of Michigan Corporation. Former Executive Vice President and
Chief Financial Officer of Oppenheimer Management Corporation.
**Eileen R. Street (3/11/62), 124 East Marcy Street, Santa Fe, NM 87501. Vice
President, Treasurer and Assistant Secretary. Vice President, Treasurer and
Assistant Secretary of each of the Davis Funds, Senior Vice President and
Chief Financial Officer, Venture Advisers, Inc.; Vice President and Treasurer,
Davis Selected Advisers-NY, Inc.; Senior Vice President and Treasurer, Davis
Distributors, L.L.C.
**Sharra L. Reed (9/25/66), 124 East Marcy Street, Santa Fe NM 87501.
Assistant Treasurer and Assistant Secretary. Assistant Treasurer and assistant
Secretary of each of the Davis Funds, Vice President of Venture Advisers, Inc.
Former Unit Manager with Investors Fiduciary Trust Company.
**Thomas D. Tays (3/7/57), 124 East Marcy Street, Santa Fe NM 87501. Vice
President and Secretary. Vice President and Secretary of the Company and each
of the Davis Funds, Vice President and Secretary, Venture Advisers, Inc.,
Davis Selected Advisers-NY, Inc., and Davis Distributors, L.L.C. Former Vice
President and Special Counsel of U.S. Global Investors, Inc.
**Arthur Don (9/24/53) - Assistant Secretary of each of the Selected Funds.
Assistant Secretary of each of the Davis Funds. Partner, D'Ancona & Pflaum,
Fund Legal Counsel. His address is 30 North LaSalle Street, Suite 2900,
Chicago, Illinois 60602.
**Sheldon R. Stein (11/29/28) - Assistant Secretary of each of the Selected
Funds. Assistant Secretary of each of the Davis Funds. Partner, D'Ancona &
Pflaum, Fund Legal Counsel. His address is 30 North LaSalle Street, Suite
2900, Chicago, Illinois 60602.
As of March 31, 1998, the trustees and officers of the Fund as a
group owned 3.389% of the Fund's outstanding shares.
* A Trustee who is an "interested person" of the Fund (as defined in
the 1940 Act).
**Holds same office(s) with Selected Special Shares, Inc. and
Selected Capital Preservation Trust.
TRUSTEES' COMPENSATION SCHEDULE
During the fiscal year ended December 31, 1997 the compensation paid
to trustees who are not considered to be interested persons of the Fund was as
follows:
Aggregate Fund Total Complex
Name Compensation Compensation*
---- -------------- -------------
William P. Barr 1,173 23,000
Floyd A Brown 1,632 32,000
William G. Cole 1,632 32,000
Robert J. Greenebaum 2,397 47,000
Jerome E. Hass*** 1,301 25,500
Katerine L. MacWilliams*** 1,428 28,000
James J. McMonagle 1,811 35,500
Richard C. O'Brien*** 1,428 28,000
8
<PAGE>
Larry Robinson 1,173 23,000
Marsha Williams 1,301 25,500
* Complex compensation is the aggregate compensation paid, for services
as a Trustee, by all mutual funds with the same investment adviser.
Mr. Christopher C. Davis and Mr. Andrew A. Davis were elected to the
Board of Trustees on January 30, 1998.
** Mr. Shelby M.C. Davis retired from the Board of Trustees effective
January 30, 1998. Mr. Willian G. Cole and Mr. Robert J. Greenebaum
retired from the Board of Trustees effective December 31, 1997.
MANAGER AND SUB-ADVISER
Davis Selected Advisers, L.P., 124 East Marcy Street, Santa Fe, New
Mexico 87501, a Colorado limited partnership, has served as the Manager since
May 1, 1993. The Manager's general partner is Venture Advisers, Inc. (the
"General Partner"), 124 East Marcy Street, Santa Fe, New Mexico 87501, a New
York corporation. Shelby M.C. Davis is the controlling shareholder of the
General Partner.
The Manager, subject to the general supervision of the Funds' Board of
Trustees, provides the Funds with investment advice and management. It
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 Trustees
of the Funds. The Manager pays all salaries of officers and fees and expenses
of trustees who are directors, officers or employees of the Manager or any of
its affiliates. The Funds pays all other Fund expenses. Under the Investment
Management Agreement between the Fund and the Manager, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties, the Manager will not be liable for any act or omission in the cause
of, or connected with, rendering service under the Agreement or for any losses
that may be sustained in the purchase, holding or sale of any security.
Davis Selected Advisers-NY, Inc. ("DSA-NY"), a wholly-owned
subsidiary of the Manager, performs research and other services for the Funds
on behalf of the Manager under a sub-Advisory Agreement with the Manager.
The Manager is paid a fee for its services at the annual rates of .50
of 1% of average daily net assets for Selected Government Income and .30 of 1%
of average daily net assets for Selected Daily Government. All the fees paid
to DSA-NY are paid by the Manager and not the Fund.
During the years ended December 31, 1997, 1996, and 1995, Selected
Government Income paid advisory fees of $29,928, $36,483, and $39,847,
respectively. During such periods Selected Daily Government paid advisory fees
of $345,976, $438,932, and $396,025, respectively.
The Manager has adopted a Code of Ethics which regulates the personal
securities transactions of the Manager's investment personnel and other
employees and affiliates with access to information regarding securities
transactions of the Fund. The Code of Ethics requires investment personnel to
disclose personal securities holdings upon commencement of employment and all
subsequent trading activity to the Manager'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 the Fund has a pending buy or
sell order, (ii) which the Fund is considering buying or selling, or (iii)
which the Fund purchased or sold within seven calendar days.
9
<PAGE>
EXPENSE LIMITATIONS
SELECTED GOVERNMENT INCOME
Pursuant to the Investment Management Agreement, if the aggregate
expenses (including the management fee and any fee paid pursuant to a
distribution expense plan, but excluding taxes, interest, brokerage fees,
commissions and extraordinary expenses) for any fiscal year exceed 1.50% of
the average daily net assets of Selected Government Income (or any lesser
limitation imposed by a state regulatory authority), the Manager will refund,
or otherwise bear, the excess over the specified percentage.
During the years ended December 31, 1997, 1996 and 1995, the Manager
limited the Fund's ratio of expenses to average annual net assets of Selected
Government Income to 1.50%, 1.44%, and 1.44% respectively. The Manager
reimbursed or absorbed expenses in excess of that amount. During the years
ended December 31, 1997, 1996 and 1995 , Selected Government Income was
reimbursed $5,654, $16,402 and $10,709, respectively by the Manager.
CUSTODIAN
The Custodian of the Fund's assets is State Street Bank and Trust
Company ("State Street"), One Heritage Drive, North Quincy, Massachusetts
02171. The Custodian maintains all of the instruments representing the
investments of the Fund and all cash. The Custodian delivers securities
against payment upon sale and pays for securities against delivery upon
purchase. The Custodian also remits Fund assets in payment of Fund expenses,
pursuant to instructions of officers or resolutions of the Board of Directors.
INDEPENDENT AUDITORS
The Fund's auditors are KPMG Peat Marwick, 707 17th St. Suite 2300,
Denver, Colorado 80202. The services of KPMG Peat Marwick include an audit of
annual financial statements included in the annual reports to shareholders,
amendments to the registration statement filed with the Securities and
Exchange Commission, consultation on financial accounting and reporting
matters, and meeting with the Audit Committee of the Board of Trustees. In
addition, the auditors normally provide assistance in preparation of federal
and state income tax returns and related forms.
DISTRIBUTION PLANS
Davis Distributors, LlC (the "Distributor") is te principal
underwriter of the shares of the Funds. The Trust has adopted Distribution
Plans (the "Plans") under Rule l2b-l of the 1940 Act with respect to each
Fund. Rule l2b-l permits an investment company to finance, directly or
indirectly, any activity which is primarily intended to result in the sale of
its shares only if it does so in accordance with the provisions of the Rule.
Under the Plans, each Fund pays the Distributor an annual compensatory fee of
0.25% of average daily net assets for distributing the Fund's shares. The
Distributor pays all the costs of distribution except for the cost of
prospectuses and reports sent to current shareholders. The Board of Trustees
has determined that there is a reasonable likelihood that the Plans will
benefit the Funds and their shareholders.
The Board of Trustees has been informed by the Distributor that the
expenses of distribution currently exceed, and for the foreseeable future are
expected to exceed, the amounts paid by the Funds under the Plans. Such excess
is and will be paid out of the Distributor's own resources and not by the
Funds.
During the year ended December 31, 1997 Selected Government Income
paid distribution fees of $14,964. The Distributor reported that it spent the
following amounts on the indicated items: $15,868 was spent on advertising,
$3,797 on printing and mailing prospectuses and sales literature to other than
current shareholders, $14,904 on fees to brokers.
During the year ended December 31, 1997 Selected Daily Government
paid distribution fees of $288,313. The Distributor reported that it spent the
following amounts on the indicated items: $87,302 on advertising for
10
<PAGE>
Selected Daily Government; and $20,894 on printing and mailing prospectuses
and sales literature to other than current shareholders of Selected Daily
Government.
PORTFOLIO TRANSACTIONS
The Manager makes investment decisions and decisions as to the
execution of portfolio transactions for the Funds, subject to the general
supervision of the Board of Trustees.
Selected Daily Government expects that most of its purchase and sale
transactions will be with the issuer or an underwriter or with major dealers
in money market instruments acting as principals or as agents. Such
transactions are normally on a net basis and generally do not involve payment
of brokerage commissions. However, the cost of securities purchased from an
underwriter normally includes a commission paid by the issuer to the
underwriter. Purchases and sales from dealers will normally reflect the spread
between bid and ask prices. In placing portfolio transactions with brokers or
dealers for Selected Daily Government, the Manager's sole consideration is the
ability to promptly execute and clear orders in an efficient manner at
favorable prices. Selected Daily Government did not pay any brokerage
commissions during the last three fiscal years.
It is the policy of Selected Government Income to seek to place
portfolio transactions with brokers or dealers who will execute transactions
as efficiently as possible, and at a favorable price. Selected Government
Income does not usually pay brokerage commissions in connection with the
purchase of U.S. Government Securities, although purchases from or sales to
dealers will normally reflect the spread between bid and asked prices. During
the years ended December 31, 1997, 1996, and 1995 Selected Government Income
did not pay brokerage commissions.
The Manager, in effecting purchases and sales of portfolio securities
for Selected Government Income, will place orders in such manner as in the
opinion of the Manager will offer a favorable price and market for the
execution of each transaction. In seeking a favorable price and market for
securities traded only in the over-the-counter market, Selected Government
Income will generally deal directly with the issuer or with major dealers
acting as principals or as agents. Subject to the foregoing policy, it will be
the practice of Selected Government Income, when purchasing through dealers,
to select them primarily on the basis of research information and statistical
and other services furnished to the Manager as well as satisfactory execution.
It is not always possible to place a dollar value on information and services
received from dealers. Since it is only supplementary to the Manager's own
research efforts, the receipt of research information is not expected to
significantly reduce the Manager's expenses. Selected Government Income may
also consider, subject to the requirement of favorable execution and price,
dealers' sales of the Funds' shares when selecting dealers to execute
portfolio transactions.
Research services furnished by brokers and used by Selected Government
Income for portfolio transactions may be utilized by the Manager in connection
with its investment services for other accounts and, conversely, research
services provided by brokers used for transactions in other accounts may be
utilized by the Manager in performing its services for Selected Government
Income.
On occasions, the Manager may deem the purchase or sale of a security
to be in the best interests of one or more of the Funds as well as other
fiduciary accounts. In such event, the Manager may aggregate such purchase or
sale in order to obtain the best net price and most favorable execution.
Allocation will be made by the Manager in the manner considered to be most
equitable and consistent with its fiduciary obligations to all such fiduciary
accounts, including the Funds. In some instances, this procedure could
adversely effect a Fund but the Funds deem that any disadvantage in the
procedure would be outweighed by the increased selection available and the
increased opportunity to engage in volume transactions.
TAXES
A Fund may be subject to an excise tax of 4% to the extent that its
distributions do not meet the "required distribution" pursuant to the Code.
The required distribution for any calendar year is the sum of 98% of a Fund's
ordinary income for that year plus 98% of the Fund's capital gain net income
for the one-year period ending on October 31 of that year. The Funds do not
intend to incur any excise tax and, if necessary, will make special
distributions to shareholders in order to avoid such tax.
11
<PAGE>
Fund dividends that are derived from interest on direct (but not
guaranteed) obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states.
In other states, arguments can be made that such distributions should be
exempt from state and local taxes based on federal law, 31 U.S. C. Section
3124, and the U.S. Supreme Court's interpretation of that provision in
American Bank and Trust Co. v. Dallas County, 463 U.S. 855 (1983). The Funds
currently intend to advise shareholders of the proportion of dividends that
consists of such interest. Shareholders should consult their tax advisers
regarding the possible exclusion of such portion of their dividends for state
and local income tax purposes.
SELECTED GOVERNMENT INCOME
Dividends derived from interest or dividends in respect of portfolio
securities held by Selected Government Income or from short-term capital gains
are taxable to you as ordinary income even if such dividends are reinvested in
additional shares of Selected Government Income. Distributions of the excess,
if any, of net capital gain (i.e., the excess of any realized net long-term
capital gain over any net realized short-term capital loss), to the extent so
designated by Selected Government Income, will be taxable to you as long-term
capital gain irrespective of the length of time you have held the Fund's
shares. Dividend distributions will not qualify for the dividends received
deduction for corporations. You will realize a taxable gain or loss on your
shares when they are sold or redeemed for an amount different from your
original cost. Such a gain or loss will generally constitute a long-term
capital gain or loss if the shares were held for more than one year and a
short-term capital gain or loss if the shares were held for one year or less.
However, if you recognize a loss on the sale of shares that you had held for
six months or less, your loss will be a long-term capital loss to the extent
of any net capital gain distributions that you received with respect to those
shares. Information as to capital gains distributions, if any, and the tax
status of your dividends and distributions will be mailed annually shortly
after the end of the calendar year.
You should be aware of the tax implication of purchasing shares of
Selected Government Income just prior to a distribution on such shares. When
distributions are paid shortly after a purchase, you will suffer a reduction
in the per share net asset value of your shares by the amount of the
distribution. Although, in effect, this is a return of your capital, such
distributions are subject to Federal income tax.
TRUST SHARES
Upon issuance and sale in accordance with the terms of the Prospectus
and this Statement of Additional Information, each share of the Trust will be
fully paid and non-assessable. Shares of the Trust have no preemptive,
subscription or conversion rights and are redeemable as set forth in the
Prospectus. Assets received for the issue or sale of the shares of each Fund
and all income, earnings, profits and proceeds thereof are exclusively
allocated to each such Fund and constitute the underlying assets of each such
Fund. The underlying assets of each Fund are segregated on the books of
account and are to be charged with the liabilities of each such Fund and with
a share of the general liabilities of the Trust. All creditors, persons
contracting with the Trust or persons having any claim against the Trust may
look solely to the assets of the Fund with which such person dealt for
payments of such credit, contract or claim.
MAJOR SHAREHOLDERS
As of March 31, 1998, Shelby Cullom Davis & Co., 609 5th Avenue, 11th
Floor, New York, NY , 10017-1021, owned of record 100,879,323.440 shares of
Selected Daily Government, constituting 83.92% of the outstanding shares of
such stock. Everen Clearing Corp. Custodian FBO Louis W. Grossman JR IRA, 209
East Winter Avenue, New Castle, PA 16101-2347, owned of record 34,486.647
shares of Selected Government Income, constituting 5.21% of the outstanding
shares of such stock.
SHAREHOLDER MEETINGS
The Trust does not hold annual meetings, but will hold special
meetings of shareholders as required by the 1940 Act such as to elect trustees
or when called by Trustees for any other purpose they deem appropriate. The
Secretary is required to call a special meeting of shareholders upon written
request of at least 10% of the shares entitled to be cast as votes at the
meeting.
12
<PAGE>
Trustees may be removed from office by a vote of the holders of a
majority of the outstanding shares at a meeting called for that purpose, which
meeting shall be held upon the written request of the holders of not less than
10% of the outstanding shares. Upon the written request of ten or more
shareholders who have been such for at least six months and who hold shares
constituting at least 1% of the outstanding shares of the Trust stating that
such shareholders wish to communicate with the other shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a Trustee, the Trust has undertaken to disseminate appropriate
materials at the expense of the requesting shareholders.
RATINGS OF PERMISSIBLE INVESTMENTS
The following is a description of the highest commercial paper and bond
ratings issued by Standard & Poor's Corporation ("S&P") and Moody's Investors
Services, Inc. ("Moody's"). To the extent that ratings accorded by S&P or
Moody's may change as a result of changes in such organizations, the Funds
will attempt to use comparable rating standards for their permissible
investments.
Commercial Paper, Loans and Notes. Commercial paper rated A-1 by S&P
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign designation.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance
on debt and ample asset production.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Description of S&P's Two Highest Bond Ratings. AAA - Bonds rated AAA
have the highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and usually differ from the higher rated issues only in small
degree.
Plus (+) or Minus (-): The rating AA may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
Description of Moody's Two Highest Bond Ratings. Aaa - Bonds which
are Aaa are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as "gilt-edge." 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 most 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 greater than in Aaa
securities.
Moody's also applies the numerical modifiers 1, 2 and 3 in the
generic rating classification of Aa. 1 indicates that a security ranks in the
higher end of a rating category, 2 in the mid-range of a category and 3 in the
lower end of a category.
13
<PAGE>
PERFORMANCE DATA
The current yield quotations for Selected Daily Government as they
appear in advertising and sales materials are computed by determining the net
change, exclusive of capital changes, over a seven-day base period in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period. The net change in account value is divided by the
value of the account at the beginning of the base period to obtain the base
period return. The base period return is then multiplied by (365/7), with the
resulting annualized yield figure carried to the nearest 1/100 of 1%. For
purposes of calculating current yield, net change in account value reflects:
(1) the value of additional shares purchased with dividends from the original
shares and dividends declared on both the original shares and any such
additional shares, and (2) all fees (other than non-recurring account charges)
that are charged to all shareholder accounts in proportion to the length of
the base period and the average account size of Selected Daily Government. The
capital changes excluded from the calculation of current yield are realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation.
The effective yield quotations for Selected Daily Government are
computed by compounding the unannualized seven-day base period return as
follows: 1 is added to the base period return and this sum is then raised to a
power equal to (365/7), and 1 is then subtracted from the result.
Based upon the seven days ended December 31, 1997, Selected Daily
Government's current and effective yields were 4.95% and 5.07%, respectively.
Selected Government Income's average annual total return for the one,
five, and ten year periods ended December 31, 1997 was, 7.32%, 6.09% and
6.88%, respectively. 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 Selected
Government Income's portfolio. Selected Government Income's average annual
total return figures are computed by determining the average annual compounded
rates of return over the periods indicated in the advertisement, sales
literature or shareholders' report, that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(l + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such period
This calculation (1) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectus and (2) deducts all recurring fees, such as advisory fees, charged
as expenses to all shareholder accounts.
Selected Government Income's total return for the one, five, and ten
year periods ended December 31, 1997 was 7.32%, 34.84% and 96.34%,
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, subtracting the amount
of the original investment, and dividing this amount by the amount of the
original investment. This calculated amount is then expressed as a percentage
by multiplying by 100.
Selected Government Income's yield for the thirty day period ended
December 31, 1997 was 4.92%. Yield refers to the net investment income
generated by a hypothetical investment in the Fund during a thirty-day or one
month period. The income is then annualized by assuming the same income was
generated each month for a twelve month period, and is shown as a percentage
of the investment.
14
<PAGE>
The value of the portfolio securities of Selected Government Income
fluctuates with market and economic conditions, causing the value of its
shares to fluctuate. Depending upon when shares are redeemed, their value may
be higher or lower than their value on the date of purchase. The performance
figures of Selected Government Income as described above will vary from time
to time depending upon market and economic conditions, the composition of its
portfolio and operating expenses. These factors should be considered when
comparing the performance figures of Selected Government Income with those of
other investment companies and investment vehicles.
Unlike bank deposits and other investments that pay a fixed rate of
interest, the average annual total return rates on Selected Government
Income's shares fluctuate. Accordingly, you should not consider such rates as
representative of what your investment may earn in any future period. At any
time in the future, such rates may be higher or lower than past rates, and
there is no assurance that any historical rate will continue.
The performance of Selected Daily Government may be compared to that of
other money market mutual funds tracked by Lipper Analytical Services, Inc.
("Lipper"), a widely used independent research firm that ranks mutual funds by
overall performance, investment objective and assets. Lipper performance
calculations include the reinvestment of all capital gain and income dividends
for the periods covered by the calculation.
The performance and relative size of Selected Daily Government may be
compared to other money market mutual funds rated by Donaghue's Money Fund
Report ("Donaghue"), a reporting service on money market funds. As reported by
Donaghue's, all investment results represent total return (annualized results
for the period net of management fees and expenses) and one year investment
results are effective annual yields assuming reinvestment of dividends.
Investors may want to compare the performance of Selected Daily
Government to that of various bank products as reported by BANK RATE
MONITOR(R), a financial reporting service that publishes each week average
rates of bank and thrift institution money market deposit accounts, Super
N.O.W. accounts and certificate of deposit. The rates published by the Bank
Rate Monitor National Index(R) are averages of the personal account rates
offered on the Wednesday prior to the date of publication by 100 large banks
and thrifts in the top ten Consolidated Standard Metropolitan Statistical
Areas.
With respect to money market deposit accounts and Super N.O.W.
accounts, account minimums range upward from $2,000 in each institution and
compounding methods vary. Super N.O.W. accounts generally offer unlimited
check writing while money market deposit accounts generally restrict the
number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Generally, the
rates offered for these products take market conditions and competitive
product yields into consideration when set. Bank products represent a taxable
alternative income producing product. Bank and thrift institution deposit
accounts may be insured, while shareholder accounts in Selected Daily
Government are not so insured. Bank passbook savings accounts compete with
money market mutual fund products with respect to certain liquidity features
but may not offer all of the features availabl from a money market mutual
fund, such as check writing. Bank passbook savings accounts normally offer a
fixed rate of interest while the yield of Selected Daily Government
fluctuates. Bank checking accounts normally do not pay interest but compete
with money market mutual fund products with respect to certain liquidity
features (e.g., the ability to write checks against the account). Bank
certificates of deposit may offer fixed or variable rates for a set term.
(Normally, a variety of terms are available.) Withdrawal of these deposits
prior to maturity will normally be subject to a penalty. In contrast, shares
of Selected Daily Government are redeemable at the net asset value (normally,
$1.00 per share) next determined after a request is received, without charge.
15
<PAGE>
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 from the
December 31, 1997 Annual Report:
(i) Schedule of Investments.
(ii) Statement of Assets and Liabilities.
(iii) Statement of Operations.
(iv) Statement of Changes in Net Assets
(v) Notes to Financial Statements.
(vi) Report of Tait, Weller & Baker.
(b) Exhibits:
(1) Amended Declaration of Trust, incorporated
by reference to Exhibit (1) to
Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(2) Amended and Restated By-Laws as of January
22, 1992, incorporated by reference to
Exhibit (2) to Post-Effective Amendment
No. 11 to Registrant's Registration
Statement on Form N-1A, File No. 33-15807.
(3) Not applicable.
(4) Not applicable.
(5)(a) Management Agreement dated May 1, 1993,
incorporated by reference to Exhibit (5)
to Post-Effective Amendment No. 13 to
<PAGE>
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(5)(b) Sub-Advisory Agreement Dated December 1,
1996, incorporated by reference to Exhibit
(5)(b) to Post-Effective Amendment No. 20
to Registrant's Registration Statement on
Form N-1A, File No. 33-15807..
(6) Distribution Services Agreement and Plan
of Distribution dated May 1, 1993,
incorporated by reference to Exhibit
(6)/(15) to Post-Effective Amendment No.
13 to Registrant's Registration Statement
on Form N-1A, File No. 33-15807.
(7) Not applicable.
(8)(a) Custody Agreement dated November 25, 1991,
incorporated by reference to Exhibit (8)
(a) to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(8)(b) Agency Agreement dated November 25, 1991,
incorporated by reference to Exhibit (8)
(b) to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(9) Not Applicable
(10)* Opinion and Consent of Counsel (D'Ancona &
Pflaum).
(11)* Consent of Tait, Weller & Baker.
(12) Financial Statements, included in
Statement of Additional Information.
(13) Not applicable.
(14)(a) Individual Retirement Account Plan
Documents, incorporated by reference to
Exhibit (14) (a) to Post-Effective
Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, File
No. 33-15807.
(14)(b) Money Purchase Pension and Profit Sharing
Plan Basic Document, incorporated by
reference to Exhibit (14) (b) to
Post-Effective Amendment No. 13 to
Registrant's Registration Statement on
form N-1A, File No. 33-15807.
<PAGE>
(14)(c) Money Purchase Pension Adoption Agreement,
incorporated by reference to Exhibit (14)
(c) to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(14)(d) Profit-Sharing Adoption Agreement,
incorporated by reference to Exhibit (14)
(d) to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(14)(e) Profit-Sharing 401(k) Plan, incorporated
by reference to Exhibit (14) (e) to
Post-Effective Amendment No. 13 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(14)(f) 403 (b) Plan Documents, incorporated by
reference to Exhibit (14) (f) to
Post-Effective Amendment No. 10 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(14)(g) Prototype Simplified Employee Pension Plan
Documents, incorporated by reference to
Exhibit (14) (g) to Post-Effective
Amendment No. 10 to Registrant's
Registration Statement on Form N-1A, File
No. 33-15807.
(14)(h) Deferred Compensation Section 457 Savings
Plan, incorporated by reference to Exhibit
(14) (h) to Post-Effective Amendment No.
10 to Registrant's Registration Statement
on Form N-1A, File No. 33-15807.
(14)(i) Defined Contribution Trust, incorporated
by reference to Exhibit (14) (i) to
Post-Effective Amendment No. 13 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
(15) Distribution Services Agreement and Plan
of Distribution dated May 1, 1993,
incorporated by reference to Exhibit
(6)/(15) to Post-Effective Amendment No.
13 to Registrant's Registration Statement
on Form N-1A, File No. 33-15807.
(16)(a) Sample Computations of Performance
Quotations, incorporated by reference to
Exhibit (16) (a) to Post-Effective
Amendment Nos. 2 and 11 to Registrant's
Registration Statement on Form N-1A, File
No. 33-15807.
(16)(b) Sample Computations of Total Return,
incorporated by reference to Exhibit (16)
(b) to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on
Form N-1A, File No. 33-15807.
<PAGE>
(17)(a) Powers of Attorney, incorporated by
reference to Exhibit (17) to
Post-Effective Amendment No. 18 and
Exhibit 17(b) to Post-Effective Amendment
No. 20 to Registrant's Registration
Statement on Form N-1A, File No. 33-15807.
(17)(b) Power of attorney for Andrew A. Davis and
Christopher C. Davis.
(17)(c) Power of attorney for Shelby M.C. Davis
and Eileen R. Street.
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of March 31, 1998
-------------- ------------------------
<S> <C>
Shares of Beneficial
Interest, par value
$.10 per share:
Selected U.S. Government Income Fund 273
Selected Daily Government Fund 1,539
</TABLE>
Item 27. Indemnification
Reference is made to Article V of the Amended Declaration of
Trust of the Registrant, previously filed as Exhibit (1) to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on Form N-1A, File No.
33-15807. Officers and Trustees of Registrant are insured against liability by
reason of acts, errors, or omissions in such capacities.
Item 28. Business and Other Connections of Investment Adviser
Information pertaining to business and other connections of
Registrant's investment adviser is incorporated by reference to the Prospectus
and Statement of Additional Information contained in Parts A and B of this
Registration Statement at the sections entitled "Adviser, Su-Advisers, and
Distributor" in the Prospectus and "Investment Advisory Services" in the
Statement of Additional Information.
Item 29. Principal Underwriters
Davis Distributors, L.L.C., a wholly owned subsidiary of the
Adviser, located at 124 East Marcy Street, Santa Fe, NM 87501, is the
principal underwriter for the Registrant and also acts as principal
underwriter for Davis New York Venture Fund, Inc., Davis Tax-Free High Income
Fund, Inc., Davis Series, Inc., Davis High Income Fund, Inc., Davis
International Series, Inc., Selected American Shares, Inc., and Selected
Special Shares, Inc.
<PAGE>
(b) Management of the Principal Underwriter:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
- ------------------ -------------------------- ---------------------
<S> <C> <C>
Kenneth C. Eich President Vice President
124 East Marcy Street
Santa Fe, NM 87501
Eileen R. Street Senior Vice President, Treasurer Vice President, Treasurer
124 East Marcy Street and Assistant Secretary and Assistant Secretary
Santa Fe, NM 87501
Thomas D. Tays Vice President and Secretary Vice President and Secretary
124 East Marcy Street
Santa Fe, NM 87501
Russell O. Wiese Senior Vice President None
124 East Marcy Street
Santa Fe, NM 87501
Sharra Reed Assistant Treasurer Assistant Treasurer and
124 East Marcy Street Assistant Secretary
Santa Fe, NM 87501
</TABLE>
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, and at the
officers of 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 to each person to whom a prospectus
is delivered a copy of Registrant's latest annual report to shareholders upon
request and without charge.
<PAGE>
SELECTED CAPITAL PRESERVATION TRUST
SIGNATURES
Registrant certifies that this Amendment meets all of the
requirements for effectiveness pursuant to Rule 485(b).
Pursuant to the requirements of the Securities Act of 1933 and 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 State of Illinois on the 27th day of April,
1998
SELECTED CAPITAL PRESERVATION TRUST
*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 27, 1998
------------------ Chief Executive
Shelby M.C. Davis Officer and Director
Eileen R. Street* Vice President, April 27, 1998
------------------ principal accounting
Eileen R. Street officer
*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
(17) to Post-Effective Amendment No. 18 to Registrant's Registration Statement
on Form N-1A and Exhibit 17(c) to this Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed on
April 27, 1998 by the following persons in the capacities indicated.
Signature Title
--------- -----
William P. Barr* Trustee
----------------------
William P. Barr
Floyd A. Brown* Trustee
----------------------
Floyd A. Brown
Andrew A. Davis* Trustee
----------------------
Andrew A. Davis
Christopher C. Davis* Trustee
----------------------
Christopher C. Davis
Jerome E. Hass* Trustee
----------------------
Jerome E. Hass
Katherine L. MacWilliams* Trustee
----------------------
Katherine L. MacWilliams
James J. McMonagle* Trustee
----------------------
James J. McMonagle
Richard C. O'Brien* Trustee
----------------------
Richard C. O'Brien
Larry J.B. Robinson* Trustee
----------------------
Larry J.B. Robinson
Marsha Williams* Trustee
----------------------
Marsha Williams
*By: /s/ Sheldon R. Stein
-----------------------
Sheldon R. Stein,
Attorney-in-Fact
*Sheldon R. Stein signs this document on behalf of the foregoing
persons pursuant to the powers of attorney filed as Exhibit 17 to
Post-Effective Amendment No. 18; Exhibit 17 (b) to Post Effective Amendment
No. 19; Exhibit 17 (b) to Post Effective Amendment No. 20; and Exhibit 17(b)
to this Registration Statement on Form N-1A.
<PAGE>
EXHIBIT 10
[LETTERHEAD OF D'ANCONA & PFLAUM]
April 22, 1998
Selected Capital Preservation Trust
124 East Marcy Street
Santa Fe, New Mexico 87501
Ladies and Gentlemen:
We have acted as counsel for Selected Capital Preservation Trust (the
"Trust") in connection with the registration under the Securities Act of 1933
(the "Act") of an indefinite number of shares of beneficial interest of the
series of the Trust designated as Selected Government Income Fund and Selected
Daily Government Fund (collectively, the "Shares") in registration statement
No. 2-27514 on Form N-1A (the "Registration Statement").
In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and
other records, certificates and other papers as we deemed it necessary to
examine for the purpose of this opinion, including the Declaration of Trust
and bylaws of the Trust, actions of the Board of Trustees authorizing the
issuance of hares of the Trust and the Registration Statement.
Based on the foregoing examination, we are of the opinion that upon
the issuance and delivery of the Shares of the Fund in accordance with the
Articles of Incorporation and the actions of the Board of Directors
authorizing the issuance of the Shares, and the receipt by the Fund of the
authorized consideration therefor, the Shares so issued will be validly
issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under section 7 of the Act.
Very truly yours,
/s/ D'ANCONA & PFLAUM
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration
Statement, (Form N-1A), and related Statement of Additional Information of
Selected Capital Preservation Trust and to the inclusion of our report dated
February 13 , 1998 to the Shareholders and Board of Directors/Trustees of
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
APRIL 27, 1998
<PAGE>
SELECTED CAPITAL PRESERVATION TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
constitutes and appoints James J. McMonagle, Sheldon R. Stein and Arthur Don,
and each of them, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any
post-effective amendments to the registration statement under the Securities
Act of 1933 (Registration No. 2-27514) and/or the Investment Company Act of
1940 (Registration No. 811-1550), whether on Form N-1A or any successor forms
thereof, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and all
appropriate state or federal regulatory authorities. Each of the undersigned
hereby ratifies and confirms all that each of the aforenamed
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney as of the ___th day of April, 1998.
- -----------------------------
Andrew A. Davis, Trustee
- -----------------------------
Christopher C. Davis, Trustee
<PAGE>
SELECTED CAPITAL PRESERVATION TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
constitutes and appoints James J. McMonagle, Sheldon R. Stein and Arthur Don,
and each of them, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any
post-effective amendments to the registration statement under the Securities
Act of 1933 (Registration No. 2-27514) and/or the Investment Company Act of
1940 (Registration No. 811-1550), whether on Form N-1A or any successor forms
thereof, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and all
appropriate state or federal regulatory authorities. Each of the undersigned
hereby ratifies and confirms all that each of the aforenamed
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney as of the 27th day of April, 1998.
- -----------------------------
Shelby M.C. Davis, President
- -----------------------------
Eileen R. Street, Chief Accounting Officer
