<PAGE>
PROSPECTUS May 1, 1995
As Revised October 1, 1995
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 sets forth concisely 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, 1995, as
revised October 1, 1995, 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 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-Adviser and Distributor
Davis Selected Advisers, L.P., (formerly, Selected/Venture Advisers
L.P.), (the "Manager") serves as the investment manager and distributor for
Selected American, Selected Special, Selected Government Income and
Selected Daily Government (individually a "Fund" or together the "Funds" or
the "Selected Funds"). The Manager has hired Bramwell Capital Management, Inc.
to act as the Sub-Adviser for Selected Special. There are management and
Rule 12b-1 distribution fees payable by each Fund. See "Fund Expenses" and
"Manager, Sub-Adviser 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
$100 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.
<PAGE>
<TABLE>
<CAPTION>
FUND EXPENSES
<S> <C>
Shareholder transaction expenses:
Sales Load on Purchases.......................................... None
Redemption Fee................................................... None<F1>
Sales Load on Reinvested Dividends............................... None
Exchange Fee..................................................... None
Deferred Sales Load.............................................. None
<FN>
<F1> A service fee of $5 is charged for each wire redemption.
</FN>
</TABLE>
Annual fund operating expenses after an expense reimbursements, as a percentage
of average net assets:
<TABLE>
<CAPTION>
Selected Selected Selected Gov't Selected Daily
American Special Income<F2> Gov't<F2>
________ ________ ______________ ______________
<S> <C> <C> <C> <C>
Management Fees........ 0.65% 0.70% 0.50% 0.30%
12b-1 Fees<F1>......... 0.25% 0.25% 0.25% 0.25%
Other Expenses......... 0.36% 0.67% 0.75% 0.20%
_____ _____ _____ _____
Total Operating Expenses 1.26% 1.62% 1.50% 0.75%
_____ _____ _____ _____
_____ _____ _____ _____
<FN>
<F1> 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.
<F2> After voluntary expense reimbursements which, will continue through
December 31, 1995.
</FN>
</TABLE>
The Manager agreed to absorb certain expenses during 1994 for Selected
Government Income and Selected Daily Government as is reflected above.
If the Manager had not done so, "Other Expenses" for Selected Government
Income and Selected Daily Government in the table above would be 0.94%
and 0.52%, respectively, and "Total Operating Expenses" for those Funds
would be 1.69% and 1.07%, respectively. Please see "Manager, Sub-Adviser
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 Gov't
________ ________ ______________ ______________
<S> <C> <C> <C> <C>
One Year........ $ 13 $ 16 $ 15 $ 8
Three Years..... $ 40 $ 51 $ 47 $ 24
Five Years...... $ 69 $ 88 $ 82 $ 42
Ten Years....... $ 152 $ 192 $ 179 $ 93
</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, 1994, which reflects expense
reimbursements in respect to Selected Government Income and Selected
Daily Government as described above. There can be no assurance that
reimbursements for Selected Government Income and Selected Daily
Government will continue beyond December 31, 1995. Expense information
for Selected Special and Selected Government Income has been restated
to reflect current fees. 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.
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
<PAGE>
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, 1994
Annual Report and June 30, 1995 Semi-Annual Report to Shareholders
which may be obtained by writing or calling the Fund. The Funds' 1994
financial statements including the financial highlights for each of the
five years in the period ended December 31, 1994, have been audited by the
Funds' independent certified public accountants, whose unqualified opinion
thereon is contained in the Annual Report.
<TABLE>
SELECTED AMERICAN
<CAPTION>
Six Months
ended
June 30, 1995 Year ended December 31,
________________________________________________________________________________________
(Unaudited) 1994 1993<F2> 1992 1991 1990 1989 1988 1987 1986 1985
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period...... $13.09 $14.59 $17.13 $18.43 $12.79 $13.81 $13.67 $11.43 $12.65 $13.35 $10.54
Income From Investment
_____________________
Operations
__________
Net Investment Income.. 0.11 0.20 0.24 0.19 0.23 0.26 0.48 0.26 0.34 0.42 0.48
Net Gains or Losses on
Securities (both
realized and
unrealized).......... 2.77 (0.66) .70 0.89 5.65 (0.81) 2.21 2.24 (0.22) 1.65 2.90
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total From
Investment
Operations......... 2.88 (0.46) .94 1.08 5.88 (0.55) 2.69 2.50 0.12 2.07 3.38
Less Distributions
__________________
Dividends (from net
investment income)... (0.12) (0.20) (.24) (0.19) (0.23) (0.35) (0.45) (0.26) (0.42) (0.48) (0.40)
Distributions (from
capital gains)....... - (0.83) (3.24) (2.19) - (0.04) (2.10) _ (0.92) (2.29) (0.17)
Distributions in
Excess of
Net Investment
Income............... - (0.01) - - (0.01) (0.08) - - - - -
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total Distributions.. (0.12) (1.04) (3.48) (2.38) (0.24) (0.47) (2.55) (0.26) (1.34) (2.77) (0.57)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net Asset Value, End of
Period................. $15.85 $13.09 $14.59 $17.13 $18.43 $12.79 $13.81 $13.67 $11.43 $12.65 $13.35
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total Return............. 22.05% (3.20)% 5.42% 5.78% 46.37% (3.90%) 20.08% 21.95% 0.23% 17.15% 33.34%
____________
Ratios/Supplemental Data
________________________
Net Assets, End of
Period (000 omitted).. 747,340 529,404 451,392 580,889 711,905 400,597 360,366 284,719 263,141 160,445 122,564
Ratio of Expenses to
Average Net Assets.... 1.16%<F3> 1.26% 1.01%<F1> 1.17% 1.19% 1.35% 1.08% 1.11% 1.11% 0.85% 0.87%
Ratio of Net Income to
Average Net Assets.... 1.59%<F3> 1.42% 1.37% 0.95% 1.41% 2.04% 3.06% 2.07% 2.38% 3.07% 4.42%
Portfolio Turnover
Rate.................. 14% 23% 79% 50% 21% 48% 46% 35% 45% 40% 33%
<FN>
<F1> Had the former manager not absorbed certain expenses, the ratio of
expenses for the year ended December 31, 1993 would have been 1.22%.
<F2> 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.
<F3> Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
SELECTED SPECIAL
<CAPTION>
Six Months
ended
June 30, 1995 Year ended December 31,
______________________________________________________________________________________
(Unaudited) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<F2><F3> <F3> <F3> <F3> <F3> <F3> <F3> <F3> <F3>
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period...... $ 9.02 $10.20 $10.40 $10.16 $ 9.04 $ 9.95 $ 8.52 $ 7.96 $ 8.92 $10.28 $ 8.85
Income From Investment
______________________
Operations
__________
Net Investment Income.. (0.02) (0.03) - 0.07 0.12 0.17 0.21 0.10 0.09 O.25 0.34
Net Gains or Losses on
Securities (both
realized and
unrealized).......... 1.74 (0.22) 1.10 0.78 2.11 (0.85) 2.23 1.44 (0.03) 0.44 1.66
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total From
Investment
Operations......... 1.72 (0.25) 1.10 0.85 2.23 (0.68) 2.44 1.54 0.06 0.69 2.00
Less Distributions
_________________
Dividends (from net
investment income).... - - - (0.07) (0.13) (0.20) (0.18) (0.10) (0.32) (0.32) (0.25)
Distributions (from
capital gains)........ (0.14) (0.93) (1.30) (0.54) (0.98) (0.03) (0.83) (0.88) (0.70) (1.73) (0.32)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total Distributions... (0.14) (0.93) (1.30) (0.61) (1.11) (0.23) (1.01) (0.98) (1.02) (2.05) (0.57)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net Asset Value, End of
Period................. $10.60 $ 9.02 $10.20 $10.40 $10.16 $ 9.04 $ 9.95 $ 8.52 $ 7.96 $ 8.92 $10.28
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total Return............. 19.25% (2.56)% 10.81% 8.43% 25.53% (6.87%) 28.91% 19.51% 0.50% 7.34% 23.93%
____________
Ratios/Supplemental Data
________________________
Net Assets, End of
Period (000 omitted).. 54,204 47,275 53,257 57,605 60,216 50,474 49,887 34,903 36,073 32,818 35,867
Ratio of Expenses to
Average Net Assets.... 1.56%<F1><F4> 1.41%<F1> 1.24%<F1> 1.41%<F1> 1.39% 1.41% 1.22% 1.24% 1.10% 1.08% 1.23%
Ratio of Net Income to
Average Net Assets.... (0.45)%<F4> (0.27)% (0.07)% 0.56% 1.11% 1.81% 2.11% 1.09% 0.85% 2.47% 3.23%
Portfolio Turnover
Rate.................. 60% 99% 100% 41% 74% 87% 45% 71% 89% 133% 73%
<FN>
<F1> Had the Adviser 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%.
<F2> 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.
<F3> Per share data has been restated to give effect to a 2 for 1 stock
split to shareholders of record as of the close of January 4, 1994.
<F4> Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
SELECTED U.S. GOVERNMENT INCOME
<CAPTION>
November 24, 1987
(Commencement
Six Months of operations)
ended through
June 30, 1995 Year ended December 31, December 31,
______________________________________________________________________
(Unaudited) 1994 1993<F2> 1992 1991 1990 1989 1988 1987
____ ____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 8.45 $ 9.20 $ 9.31 $ 9.70 $ 9.22 $ 9.20 $ 9.34 $10.01 $10.00
Income From Investment
______________________
Operations
__________
Net Investment Income..... 0.27 0.50 0.56 0.61 0.60 0.63 0.64 0.63 0.06
Net Gains or Losses on
Securities (both realized
and unrealized)......... 0.58 (0.75) 0.21 (0.13) 0.58 0.11 0.21 (0.32) 0.02
______ ______ ______ ______ ______ ______ ______ ______ ______
Total From Investment
Operations............ 0.85 (0.25) 0.77 0.48 1.18 0.74 0.85 0.31 0.08
Less Distributions
__________________
Dividends (from net
investment income....... (0.27) (0.50) (0.56) (0.61) (0.60) (0.63) (0.64) (0.63) (0.06)
Distributions (from
capital gains).......... (0.03) - (0.32) (0.26) - - - - (0.01)
Distributions in Excess of
Net Investment Income... - - - - (0.10) (0.09) (0.35) (0.35) -
______ ______ ______ ______ ______ ______ ______ ______ ______
Total Distributions..... (0.30) (0.50) (0.88) (0.87) (0.70) (0.72) (0.99) (0.98) (0.07)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net Asset Value,
End of Period............... $ 9.00 $ 8.45 $ 9.20 $ 9.31 $ 9.70 $ 9.22 $ 9.20 $ 9.34 $10.01
______ ______ ______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______ ______ ______
Total Return.............. 10.12% (2.71)% 7.99% 5.11% 13.46% 8.53% 8.47% 2.94% 6.57%<F3>
____________
Ratios/Supplemental Data
________________________
Net Assets, End of Period
(000 omitted)......... 7,781 10,263 10,336 13,945 22,019 21,153 27,594 14,611 8,737
Ratio of Expenses to
Average Net Assets.... 1.44%<F1><F3> 1.42%<F1> 1.34%<F1> 1.44%<F1> 1.41% 1.44% 1.50%<F1> 1.50%<F1> 1.26%<F3>
Ratio of Net Income to
Average Net Assets.... 6.27%<F3> 5.70% 5.85% 6.26% 6.51% 6.95% 6.70% 6.30% 4.42%<F3>
Portfolio Turnover Rate... 60% 65% 29% 53% 36% 29% 75% 76% -
<FN>
<F1> Had the Adviser not absorbed certain expenses, the ratio of expenses
for the six months ended June 30, 1995 and the years ended December 31,
1994 and 1993 would have been 1.66%, 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.
<F2> 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.
<F3> Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
SELECTED DAILY GOVERNMENT
<CAPTION>
May 9, 1988
(Commencement
Six Months of operations)
ended through
June 30, 1995 Year ended December 31, December 31,
______________________________________________________________________
(Unaudited) 1994 1993<F2> 1992 1991 1990 1989 1988
____ ____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income From Investment
______________________
Operations
__________
Net Investment Income....... 0.026 0.034 0.023 0.030 0.054 0.074 0.083 0.051
______ ______ ______ ______ ______ ______ ______ ______
Total From Investment
Operations.............. 0.026 0.034 0.023 0.030 0.054 0.074 0.083 0.051
Less Distributions
Dividends (from net
investment income)........ (0.026) (0.034) (0.023) (0.030) (0.054) (0.074) (0.083) (0.051)
______ _______ ______ _______ ______ ______ ______ ______
Total Distributions........... (.026) (0.034) (0.023) (0.030) (0.054) (0.074) (0.083) (0.051)
______ _______ ______ ______ ______ ______ ______ ______
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
______ ______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______ ______
Total Return.................. 5.46% 3.51% 2.34% 3.07% 5.51% 7.66% 8.63% 8.17%<F3>
____________
Ratios/Supplemental Data
________________________
Net Assets, End of Period
(000 omitted)............. 132,339 121,886 8,732 6,626 30,706 174,914 100,517 53,173
Ratio of Expenses to
Average Net Assets........ 0.75%<F1><F3> 0.75%<F1> 0.75%<F1> 0.75%<F1> 0.68% 0.63% 0.74% 0.70%<F1><F3>
Ratio of Net Income to
Average Net Assets........ 5.32%<F3> 3.44% 2.31% 3.02% 5.37% 7.39% 8.28% 7.86%<F3>
<FN>
<F1> Had the Adviser not absorbed certain expenses, the ratio of expenses
for the six months ended June 30, 1995 and the years ended December
31, 1994 and 1993 would have been 0.85%, 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).
<F2> 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
<F3> Annualized.
</FN>
</TABLE>
<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 high yield, high risk debt securities
(including convertible securities) rated BBB or lower by Standard & Poor's
Corporation ("S&P") or Baa or lower by Moody's Investor Services
("Moody's") or unrated securities deemed by the Manager to be of an
equivalent rating. Securities rated BBB by S&P or Baa by Moody's have
speculative characteristics; changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest payments. Securities rated BB or lower by S&P and
Ba or lower by Moody's are referred to in the financial community as "junk
bonds" and are considered speculative. The Fund intends not 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). See "Quality Ratings of Bonds" and "High Yield,
High Risk Debt Securities." 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 markets, expansion into new markets, new products, reduced
competition and cost reduction.
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
<PAGE>
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 (less than $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. See "High Yield, High Risk Debt Securities."
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 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, 1994, neither Fund had
investments 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
<PAGE>
States favorably or unfavorably with respect to 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.
For income purposes (which is only incidental with respect to
Selected Special) the Funds may lend portfolio securities and may write
covered call options on portfolio securities. A Fund will not engage in
such a transaction if more than 5% of its net assets would be subject to
loans or if more than 5% 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.
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
<PAGE>
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 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
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.
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 than with 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
<PAGE>
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.
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 on 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 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
<PAGE>
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 is obtainable 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 the
Selected Daily Government's investments, please see "Investments" and
"Investment Restrictions" in 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 underlying securities and losses, including
<PAGE>
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 Funds' 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 the 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. 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.
The Funds' 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.
Any percentage restrictions set forth in this Prospectus or in the
Statements of Additional Information, other than the 15% 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
or net assets.
<PAGE>
MANAGER, SUB-ADVISER 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 and distributor 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 supervison of the Board of Directors/Trustees, the Manager
is responsible for investment management, administration and distribution
activities for the Selected Funds. As discussed below, the Manager has
hired Bramwell Capital Management, Inc. as the Sub-Adviser for Selected
Special. The Manager also acts as investment advisers and distributor 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.
(formerly, New York Venture Fund, Inc., Venture Income (+) Plus, Inc.,
Venture Muni(+) Plus, Inc., Retirement Planning Funds of America, Inc. and
Venture Series, Inc., respectively), (collectively the Davis 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
0.55% 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.
The Manager has agreed to absorb Fund operating expenses during
1995 to the extent that the ratio of expenses to average net assets
exceeds 0.75% for Selected Daily Government and 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 Manager. The
Manager 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 Manager 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
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 Manager 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 in accounts for which representatives of the dealers are
responsible and provide services.
<PAGE>
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
Shelby M.C. Davis is the principal portfolio manager for Selected
American. Mr. Davis has been the portfolio manager since May 1, 1993.
Since 1968, he has been a director of the General Partner. He is also a
director and officer of all of the investment companies managed by the Manager.
Mr. Davis has been the primary portfolio manager for Davis New York Venture
Fund, Inc. (formerly, New York Venture Fund, Inc.), a mutual fund seeking to
achieve growth of capital by investing primarily in common stocks and
securities convertible into common stocks, since it began operations in 1969.
Christopher C. Davis is the co-portfolio manager of Selected American
and the portfolio manager of the Davis Series, Inc., Davis
Financial Fund, (formerly, Retirement Planning Funds of America, Inc.,
Financial Value Fund). He was co-portfolio manager of the Davis Financial
Fund, with Shelby M.C. Davis, from its inception on May 1, 1991 until
December 1, 1994. He has been employed by the Adviser since September,
1989 as an assistant portfolio manager and research analyst.
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 (formerly, Retirement Planning
Funds of America, Inc., Bond Fund and Government Money Market Fund).
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.
To open an account, just call us at 1-800-243-1575 and we will ask
you your name, address, social security or tax I.D. number, the name of the
Fund in which you want to invest, the amount of your
<PAGE>
investment and the name and address of the financial institution that will be
wiring your investment to the Selected Funds and we will immediately give you
an account number. (We will then mail you an application form, which you will
need to complete, sign and return to us immediately.) Then have your
financial institution wire federal funds to the Selected Funds' Custodian
with the following instructions:
Selected Funds
c/o Investors Fiduciary Trust Company
127 W. 10th Street
Kansas City, MO 64105
ABA #101003621
Selected Funds Group Account No. 7523734
The name of the Selected Fund(s) in which you wish to invest
Your shareholder account number
The name in which your account is registered
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:
Selected Funds
P.O. Box 419782
Kansas City, MO 64141-6782
Please make your check payable to the Selected Funds, and don't
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 ($100 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:
Selected Funds
P.O. Box 419798
Kansas City, MO 64141-6798
AUTOMATIC INVESTING THROUGH YOUR BANK
Whether you purchase through a Qualified Dealer or directly, you may
arrange for automatic monthly investing by authorizing Investors Fiduciary
Trust Company to initiate a debit to
<PAGE>
your bank account of a specific amount (minimum $100) each month to be used
to purchase Fund shares. 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 located at the back of this Prospectus.
PROTOTYPE RETIREMENT PLANS
The Manager has available various types of prototype retirement
plans, including Individual Retirement Accounts ("IRAs"). See "Retirement
Plans" for more information.
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 don't 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. Any fees
involved in collecting on foreign checks will be charged to the
shareholder.
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 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.
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 60 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 Funds' books for at least 15
days, although there is no delay for selling shares which have been
purchased by wire.
By Wire or Electronic Fund 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. There is a $1,000 redemption minimum for Selected Daily Government
and a $10,000 redemption minimum for the other Funds if you wire the Funds.
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 the ACH deposit slip procedure.
<PAGE>
Once you have applied for 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) 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 $5,000 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 is sent to you or anyone you choose. Just let us know what the
amount of the check should be, although there is a $100 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 60 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
<PAGE>
telephone instructions 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 in 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:
Selected Funds
P.O. Box 419782
Kansas City, MO 64141-6782
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 $25,000 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
60 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 $250 minimum and $5 million maximum amount. 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.
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
<PAGE>
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.
Your account will be charged a $10 service fee if you:
Write a check for less than the $250 minimum;
Overdraw your available account balance;
Draw against shares owned for less than 15 days (does not apply
to shares purchased by wire); or
Order a "stop payment."
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."
<PAGE>
You may also make exchanges by calling 1-800-243-1575 (see "How
to Reach Us"). Exchanges made over the phone may be made by any person,
not just the shareholder of record. Please remember that during unusual
market conditions, we may experience difficulty in 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.
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
determined 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 such as 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. ("Lipper") 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
<PAGE>
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.
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 "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 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. The net asset value per
share of a Fund is computed by dividing the total value of the assets of a
Fund, minus its liabilities, by the total number of its shares outstanding.
The net asset value per share is determined on each day the New
York Stock Exchange is open, at the earlier of the close of the Exchange or
4:00 p.m. New York time. The price per share for purchases or redemptions
made directly through Investors Fiduciary Trust Company is value
next computed after
<PAGE>
Investors Fiduciary Trust Company receives the purchase order or redemption
request. If the purchase order or redemption request is placed with a
Qualified Dealer, then the applicable price is computed as of 4:00 p.m.
New York time, provided that the Qualified Dealer receives the order before
4:00 p.m. New York time and the Distributor receives the order before
5:30 p.m. New York time. Otherwise the applicable price is the next determined
net asset value. It is the responsibility of Qualified Dealers to promptly
forward purchase and redemption orders to the Distributor. Note that in the
case of redemptions and repurchases of shares owned by corporations, trusts
or estates, the Transfer Agent may require additional documents to effect the
redemption and the applicable price will be that next determined following the
receipt of the required documentation.
Method of Valuation
Selected American, Selected Special and Selected Government
Income each value their security holdings on the basis of market value
which, with respect to fixed-income securities, may be based on prices
provided by a pricing service. If no market value is readily available, such
securities will be valued at a fair value determined by the Boards.
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 payment by
check on your account application or make such a request later. You can
make such a request 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.
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.
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 to qualify 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 don't 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 31% of taxable
dividends and proceeds of certain exchanges and redemptions.
<PAGE>
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 including
401(k), profit sharing, money purchase, IRAs, Simplified Employee Pension
("SEP") plans and model 403(b) and 457 plans for charitable, educational
and governmental entities. These plans utilize the shares of the Funds as
their investment vehicle. Investors Fiduciary Trust Company ("IFTC") acts
as custodian or trustee for the plans and charges the participant an annual
maintenance fee of $12 per account (which will be redeemed automatically at
year end from your account, unless you elect to pay the fee directly to
IFTC each year).
The Funds' custodian, IFTC 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 419782, Kansas City, MO 64141-6782.
<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 following persons serve as Directors and Trustees of the
Selected Funds:
William P. Barr Walter E. Hoadley
Floyd A. Brown James J. McMonagle
William G. Cole Martin H. Proyect
Shelby M.C. Davis Larry Robinson
Robert J. Greenebaum
More information concerning the Directors and Trustees is contained
in the Statements of Additional Information.
<PAGE>
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 8:00 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:
Selected Funds
P.O. Box 419782
Kansas City, MO 64141-6782
QUALITY RATINGS OF BONDS
Portfolio Quality Ratings
The table on the following page reflects Selected American's
portfolio quality ratings for the year ended December 31, 1994 calculated
on the basis of the average weighted ratings of all bonds held during the
year. The table reflects the percentage of total assets represented by
fixed income securities rated by Moody's or S&P, by unrated fixed-income
securities and by other assets. The percentages shown reflect the higher
of the Moody's or S&P rating. U.S. Government Securities, whether or not
rated, are reflected as Aaa and AAA (highest quality). Other assets may
include money market instruments, repurchase agreements, equity
securities, net payables and receivables and cash. The allocations in the
table are not necessarily representative of portfolio composition at other
times. Portfolio quality ratings will change over time.
The description of each bond quality category set forth below is
intended to be a general guide and not a definitive statement as to how
Moody's and S&P define such rating category. A more complete description
of the rating categories is set forth following the table. The ratings of
Moody's and S&P represent their opinions as to the quality of the
securities that they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and are not absolute standards of
quality. There is no assurance that a rating assigned initially will not
change. Selected American may retain a security whose rating has
changed or has become unrated.
<TABLE>
Portfolio Composition of Selected American by
Quality Rating as a
Percentage of Total Assets at
December 31, 1994
<CAPTION>
Fund's Assessment of General Definition
Moody's/S&P Rating Category Percentage Unrated Securities of Bond Quality
___________________________ __________ ____________________ __________________
<S> <C> <C> <C>
Aaa/AAA.................... - - Highest quality
Aa/AA...................... - - High quality
A/A........................ - - Upper medium grade
Baa/BBB.................... 4.45% - Medium grade
Ba/BB...................... - - Some speculative elements
B/B........................ - - Speculative
Caa/CCC.................... - - More speculative
Ca,C/CC,C,D................ - - Very speculative, may be in default
Not Rated.................. - - Not rated by Moody's or S&P
Common and Preferred Stock. 95.55% -
Short-term Investments..... - -
_______ ______
100.00% -
</TABLE>
<PAGE>
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat greater than Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e. they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics,
as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any longer period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative to a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Standard & Poor's Corporation Corporate Bond Ratings
AAA - Debt rated AAA has the highest rating assigned by Standard
and Poor's. Capacity to pay interest and repay principal is extremely
strong.
<PAGE>
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied BB or BB- rating.
CCC - CC - C- is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay
principal. C indicates the highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these are
out-weighed by large uncertainties or major exposures to adverse
conditions.
D - This rating indicates that the issue is either in default as to
payment of interest and/or repayment of principal or is expected to be in
default upon maturity.
HIGH YIELD, HIGH RISK DEBT SECURITIES
Selected American and Selected Special may invest in debt
securities, including securities convertible into common stocks.
Investments may be made in convertible securities to provide an
opportunity for appreciation as the value of the common stock
appreciates. However, convertible securities are often viewed by the
issuer as future common stock subordinated to other debt and carry a
lower rating than the issuer's non-convertible debt obligations.
The debt securities (including convertible securities) in which the
Funds may invest include securities rated BB or lower by S&P or Ba or
lower by Moody's or, if unrated, deemed by management to be comparable
to such ratings. Securities rated BB or Ba or lower are referred to in the
financial community as "junk bonds." While likely to have some quality
and protective characteristics, such securities, whether or not
convertible into common stock, usually involve increased risk as to
payment of principal and interest. Such securities are subject to greater
price volatility than higher rated securities, tend to decline in price
<PAGE>
more steeply than higher rated securities in periods of economic difficulty or
accelerating interest rates and are subject to greater risk of non-payment
in adverse economic times. There may be a thin trading market for such
securities. This may have an adverse impact on market price and the
ability of the Funds to dispose of particular issues and may cause the
Funds to incur special securities registration responsibilities, liabilities
and costs and liquidity and valuation difficulties. Unexpected net
redemptions may force the Funds to sell high yield, high risk debt
securities without regard to investment merit, thereby possibly reducing
return rates. Such securities may be subject to redemptions or call
provisions which, if exercised when investment rates are declining, could
result in the replacement of such securities with lower yielding
securities, resulting in a decreased return. To the extent that the Funds
invest in bonds that are original issue discount, zero coupon, pay-in-kind
or deferred interest bonds, the Funds may have taxable interest income in
excess of the cash actually received on these issues. In order to avoid
taxation to the Funds, the Funds may have to sell portfolio securities to
meet taxable distribution requirements.
See the Statements of Additional Information for more detailed information on
high yield, high risk debt securities.
<PAGE>
Selected Daily INFORMATION CONCERNING THE DRAFTS USED FOR CHECK
Government Check WRITING PRIVILEGE:
Writing Privilege:
/_/If you wish to 1. Your Selected Daily Government Fund drafts are
use this privilege paid from an account at Investors Fiduciary
please check the Trust Company ("IFTC").
box to the left
and complete the 2. In connection with this account, you will have
signature card below. 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 Kansas Uniform
Commercial Code. All notices with regard to
those rights and duties must be given to IFTC.
3. Stop payment instructions must be given to
Davis Selected Advisers, L.P. by calling
their service telephone number for the
Selected Funds: (800) 243-1575 or by writing
to IFTC. IFTC's address is Investors
Fiduciary Trust Company, c/o The Selected
Funds, P.O. Box 419782, Kansas City,
MO 64141-6782.
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.
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
Summary............................................................... 2
Fund Expenses......................................................... 3
Financial Highlights.................................................. 3
Investment Objectives................................................. 8
Manager, Sub-Adviser and Distributor.................................. 15
Portfolio Managers.................................................... 16
Buying Shares......................................................... 16
Selling Shares........................................................ 18
Exchanging Shares..................................................... 21
Fund Performance...................................................... 22
Determining the Price of Shares -
Net Asset Value..................................................... 23
Taxes................................................................. 24
Dividends............................................................. 25
Retirement Plans...................................................... 25
Organization of the Funds............................................. 26
Directors and Trustees................................................ 26
How to Reach Us....................................................... 27
Quality Ratings of Bonds.............................................. 27
High Yield, High Risk Debt Securities................................. 29
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION May 1, 1995
As Revised October 1, 1995
Selected Special Shares, Inc.
124 East Marcy Street
Santa Fe, New Mexico 87501
Call Toll-Free 1-800-243-1575
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1995, AS REVISED OCTOBER 1,
1995. THE PROSPECTUS MAY BE OBTAINED FOR THE FUND.
THE FUND'S DECEMBER 31, 1994 ANNUAL REPORT AND JUNE 30, 1995 SEMI-ANNUAL REPORT
ACCOMPANY THIS STATEMENT OF ADDITIONAL INFORMATION. THE FINANCIAL STATEMENTS
APPEARING IN THESE REPORTS ARE INCORPORATED HEREIN BY REFERENCE. ALL INTERIM
FINANCIAL INFORMATION REFLECTS ALL ADJUSTMENTS WHICH ARE, IN THE OPINION OF
MANAGEMENT, NECESSARY TO A FAIR STATEMENT OF THE RESULTS FOR SUCH INTERIM
PERIOD.
<PAGE>
TABLE OF CONTENTS
TOPIC PAGE
Investment Restrictions.............................................. 3
Lending Portfolio Securities and Writing Covered Call Options........ 4
High Yield, High Risk Debt Securities................................ 5
Net Asset Value...................................................... 6
Directors and Officers............................................... 7
Manager and Sub-Adviser.............................................. 9
Custodian and Transfer Agent......................................... 10
Independent Auditors................................................. 10
Distribution Plan.................................................... 10
Portfolio Transactions............................................... 11
Taxes................................................................ 11
Major Shareholders................................................... 12
Shareholder Meetings................................................. 12
Performance Data..................................................... 12
<PAGE>
INVESTMENT RESTRICTIONS
Selected Special Shares, Inc. (the "Fund") has adopted as fundamental
policies its investment objective as described in the Prospectus under
"Investment Objectives" and the investment restrictions enumerated
below. These cannot be changed unless authorized by vote of the holders of
a majority of the Fund's outstanding shares, as defined in the Investment
Company Act of 1940 (the "1940 Act"). The Fund will not:
1. Purchase securities of any one issuer (excluding U.S. Government
Securities) if, as a result of such purchase, the Fund would own more
than 10% of the total outstanding securities or voting stock of the
issuer or more than 5% of the value of the Fund's total assets would be
invested in the securities of the issuer.
2. Invest for the purpose of exercising management or control.
3. Purchase or sell real estate, commodities or commodity
contracts, or oil, gas or other mineral exploration or development
programs, or any direct interests therein. It may, however, purchase
marketable securities of companies which may make such investments.
4. Sell short, buy on margin, or deal in options, except that the Fund
may write call options against its portfolio securities which are traded
on a national securities exchange and purchase call options in closing
transactions. (When permitted by applicable federal and state
authorities and when there exists an established market for call options
written on securities traded otherwise than on a national securities
exchange, the Fund may also issue call options on such portfolio
securities and purchase such call options on such securities in closing
transactions). The Fund will not write a covered option if following
issuance of the option the market value of the Fund's portfolio securities
underlying such options would be in excess of 10% of the value of the
Fund's net assets.
5. Borrow money, except for temporary or emergency purposes, and
then only from banks, in an amount not exceeding 10% of the value of the
Fund's total assets. The Fund will not borrow money for the purpose of
investing in securities, and the Fund will not purchase any portfolio
securities for so long as any borrowed amounts remain outstanding.
6. Pledge or hypothecate its assets, except in an amount not exceeding
15% of its total assets, and then only to secure borrowings for
temporary or emergency purposes.
7. Underwrite securities of other issuers (although the Fund may
technically be considered an underwriter if it sells restricted
securities).
8. Purchase securities of any other investment company (as defined in
the Investment Company Act of 1940) except: (i) shares of investment
companies investing primarily in foreign securities provided that such
purchase does not cause the Fund to (a) have more than 5% of its total
assets invested in any one such company, (b) have more than 10% of its
total assets invested in the aggregate of all such companies, or (c) own
more than 3% of the total outstanding voting stock of any such company;
and (ii) as a part of a merger, consolidation, reorganization or
acquisition of assets.
9. Purchase illiquid securities (including restricted securities that are
illiquid) if such purchase would cause more than 15% of the value of the
Fund's net assets to be invested in such securities.
10. Purchase securities of any company which (with its predecessors) has a
record of less than 3 years' continuous operation if, as a result
of such purchase, more than 5% of the value of the Fund's total assets
would be invested in such companies.
11. Make loans, except it may acquire debt securities from the issuer or
others which are publicly distributed or are of a type normally acquired by
institutional investors and except that it may make loans of portfolio
securities if any such loans are secured continuously by collateral at
least equal to the market value of the securities loaned in the form of
cash and/or securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and provided that no such loan will be made
if upon the making of that loan more than 10% of the value of the Fund's
total assets would be the subject of such loans.
<PAGE>
12. Purchase for or retain in the Fund's portfolio the securities of an
issuer if, to the Fund's knowledge, any officer, director or security owner
of such issuer is an officer or director of the Fund or of the Fund's
Manager and one or more of such persons owns beneficially more than 0.5%
of such securities and those persons owning more than 0.5% of such
securities together own more than 5% of such securities.
13. Allow any person associated with the Fund or its investment
manager who is an officer or director of another issuer to participate in
any decision to purchase or sell any securities of such other issuer.
14. Concentrate more than 25% of its assets in securities of any one
industry.
As a matter of non-fundamental policy, the Fund has voluntarily
undertaken with various states to limit its investments in restricted
securities to 10% of its total assets, excluding restricted securities
eligible for resale pursuant to Rule 144A of the Securities Act of 1933.
All percentage restrictions, except those 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 or net assets.
LENDING PORTFOLIO SECURITIES AND WRITING COVERED CALL OPTIONS
Lending Portfolio Securities
The Fund's investment restrictions provide that the Fund may loan
portfolio securities so long as no more than 10% of the value of the Fund's
total assets would be subject to such loans. However, the Fund does not
intend to engage in any such transaction if it would cause more than 5% of
its net assets to be subject to such loans. Income may be earned on
collateral received to secure the loans. Cash collateral would be invested
in money market instruments. U.S. Government Securities collateral
would yield interest or earn discount. Part of this income might be shared
with the borrower. Alternatively, the Fund could allow the borrower to
receive the income from the collateral and charge the borrower a fee. In
either event, the Fund would receive the amount of dividends or interest
paid on the loaned securities.
Usually these loans would be made to brokers, dealers or financial
institutions. Loans would be fully secured by collateral deposited with
the Fund's custodian in the form of cash and/or U.S. Government
Securities. This collateral must be increased within one business day in
the event that its value shall become less than the market value of the
loaned securities.
The borrower, upon notice, must redeliver the loaned securities
within 5 business days. In the event that voting rights with respect to the
loaned securities pass to the borrower and a material proposal affecting
the securities arises, the loan may be called or the Fund will otherwise
secure or be granted a valid proxy in time for it to vote on the proposal.
In making such loans, the Fund may utilize the services of a loan
broker and pay a fee therefor. The Fund may incur additional custodian
fees for services in connection with lending of securities.
Writing Covered Call Options
The Fund may write covered call options on a portion of its portfolio
securities and purchase call options in closing transactions. The Fund's
investment restrictions provide that such an option may not be written if
<PAGE>
thereafter the market value of all securities subject to options would
exceed 10% of the value of the Fund's net assets. However, the Fund does
not intend to write an option if it would cause more than 5% of its net
assets to be subject to options. The Fund would only write options on
securities in its portfolio and would not write options on loaned
securities. The Fund will limit its income derived from the writing of
options that expire in less than 3 months so as to meet the requirements
for qualification as a regulated investment company under the Internal
Revenue Code.
A covered call option gives the purchaser of the option the right to
buy the underlying security at the price specified in the option (the
"exercise price") at any time until the option expires, generally within 3
to 9 months, in return for the payment to the writer upon the issuance of
the option of an amount called the "premium." A commission may be
charged in connection with the writing of the option. The premium
received for writing a call option is determined by the option markets.
The premium paid plus the exercise price will always be greater than the
market price of the underlying securities at the time the option is
written. By writing a covered call option, the Fund forgoes, in exchange
for the premium, the opportunity to profit from any increase in the market
value of the underlying security above the exercise price.
The obligation of the Fund is terminated upon exercise of the call
option, its expiration or when the Fund effects a closing purchase
transaction. A closing purchase transaction is one in which the writer
purchases another call option in the same underlying security (identical as
to exercise price, expiration date and number of shares). The writer
thereby terminates its obligation and substitutes the second writer as the
obligor to the original option purchaser. A closing purchase transaction
would normally involve the payment of a brokerage commission by the
Fund. During the remaining term of the option, if the Fund cannot enter
into a closing purchase transaction, it would lose the opportunity for
realizing any gain over and above the premium through sale of the
underlying security and if the security is declining in price, the Fund
would continue to experience such decline.
HIGH YIELD, HIGH RISK DEBT SECURITIES
As stated in the Prospectus, the Fund may invest up to 5% of its net
assets in high yield, high risk debt securities rated BBB or lower by
Standard & Poor's Corporation ("S & P") or Baa or lower by Moody's
Investor Services ("Moody's"). Securities rated BBB by S&P or Baa by
Moody's have speculative characteristics; changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to
make principal and interest payments than is the case for higher grade
bonds. Securities rated BB or lower by S&P and Ba or lower by Moody's are
referred to in the financial community as "junk bonds" and may include
securities of issuers in default. Such securities are considered
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation and generally will involve
more credit risk than securities in the higher rating categories. The
Sub-Adviser considers the ratings assigned by S&P and Moody's as one of
several factors in its independent credit analysis of issuers. Ratings
assigned by credit agencies do not evaluate market risks.
The market values of such securities tend to reflect individual
corporate developments to a greater extent than do higher rated
securities, which react partly to fluctuations in the general level of
interest rates. Such lower rated securities also tend to be more sensitive
to economic and industry conditions than higher rated securities. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis regarding individual lower rated bonds and the high yield, high
risk market, may depress the prices for such securities. If the negative
factors such as the aforementioned adversely impact the market value of
high yield, high risk securities, the portfolio's net asset value will be
adversely affected.
The high yield, high risk bond market comprised a small piece of the
general bond market until the middle 1980's when issuance increased
dramatically. Since that time the high yield, high risk bond market has
experienced only one recessionary environment but never has been exposed
to a significant increase in interest rates. During the economic downturn
that was experienced, prices of high yield, high risk bonds declined and
defaults rose. Future economic downturns and/or significant increases in
interest rates are likely to
<PAGE>
have a negative effect on the high yield, high risk bond market and
consequently on the value of these bonds, as well as increase the incidence
of defaults on such bonds.
High yield, high risk bonds may be issued in a variety of
circumstances. Some of the more common circumstances are issuance by
corporations in the growth stage of their development, in connection with
a corporate reorganization or as part of a corporate takeover. Companies
that issue such high yielding, high risk bonds often are highly leveraged
and may not have more traditional methods of financing available to them.
Therefore, the risk associated with acquiring the bonds of such issuers
generally is greater than is the case with higher rated bonds. For
example, during an economic downturn or recession, highly leveraged
issuers of high yield, high risk bonds may experience financial stress.
During such periods, such issuers may not have sufficient revenues to
meet their principal and interest payment obligations. The issuer's ability
to service its debt obligations may also be adversely affected by specific
corporate developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing.
The risk of loss due to default by the issuer is significantly greater for
the holders of high yielding bonds because such bonds are generally
unsecured and are often subordinated to other creditors of the issuer. The
costs associated with recovering principal and interest once a security
has defaulted may impact the return to holders of the security.
The Fund may have difficulty disposing of certain high yield, high
risk bonds because there may be a thin trading market for such bonds.
Because not all dealers maintain markets in all high yield, high risk bonds,
the Fund anticipates that such bonds could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid
secondary market may have an adverse impact on market price and the
ability to dispose of particular issues and may also make it more difficult
for the Fund to obtain accurate market quotations or valuations for
purposes of valuing the Fund's assets. Market quotations generally are
available on many high yield issues only from a limited number of dealers
and may not necessarily represent firm bid prices of such dealers or
prices for actual sales. In addition, adverse publicity and investor
perceptions may decrease the values and liquidity of high yield, high risk
bonds regardless of a fundamental analysis of the investment merits of
such bonds. To the extent that the Fund purchases illiquid or restricted
bonds, it may incur special securities registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties relating to
such bonds.
Bonds may be subject to redemptions or call provisions. If an issuer
exercises these provisions when investment rates are declining, the Fund
may replace such bonds with lower yielding bonds resulting in a decreased
return. Zero coupon, pay-in-kind and deferred interest bonds involve
additional special considerations. Zero coupon bonds are debt obligations
that do not entitle the holder to any periodic payments of interest prior to
maturity or a specified cash payment date when the securities begin
paying current interest (the "cash payment date") and therefore are issued and
traded at a discount from their face amount or par value. The market prices
of zero coupon securities are generally more volatile than the market prices
of securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do securities paying
interest currently having similar maturities and credit quality.
Pay-in-kind bonds pay interest in the form of other securities rather than
cash. Deferred interest bonds defer the payment of interest to a later
date. Zero coupon, pay-in-kind or deferred interest bonds carry additional
risk in that, unlike bonds which pay interest in cash throughout the period
to maturity, the Fund will realize no cash until the cash payment date
unless a portion of such securities are sold. The Fund has no assurance of
the value or the liquidity of securities received from pay-in-kind bonds.
If the issuer defaults, the Fund may obtain no return at all on its
investment. To the extent that the Fund invests in bonds that are original
issue discount, zero coupon, pay-in-kind or deferred interest bonds, the
Fund may have taxable interest income in excess of the cash actually
received on these issues. In order to avoid taxation to the Fund, the Fund
may have to sell portfolio securities to meet its taxable distribution
requirements under potentially adverse circumstances.
NET ASSET VALUE
The Fund does not price its shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange (the "Exchange") is
closed. Such days include the following holidays: New Year's Day,
<PAGE>
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Net asset value per share is determined by calculating the total
value of the Fund's assets, deducting total liabilities, and dividing the
result by the number of shares outstanding. Portfolio securities 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.
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. Equity options
are valued at the last sale price unless the bid price is higher or the asked
price is lower, in which event such higher bid or lower asked price is used.
Exchange-traded fixed income options are valued at the last sale price
unless there is no sale price, in which event current prices provided by
market makers are used. Fixed income options traded over-the-counter
are valued based upon current prices provided by market makers. Other
securities, including restricted securities, and other assets are valued at
fair value as determined in good faith by the Board of Directors. 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.
DIRECTORS AND OFFICERS
Information about the directors 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 a
trustee of Selected Capital Preservation Trust (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.
(formerly, New York Venture Fund, Inc.), Davis High Income Fund, Inc.
(formerly, Venture Income (+) Plus, Inc.), Davis Tax-Free High Income
Fund, Inc. (formerly, Venture Muni (+) Plus, Inc.), Davis Series, Inc.
(formerly, Retirement Planning Funds of America, Inc.) and Davis
International Series, Inc. (formerly, Venture Series, Inc.) (collectively the
"Davis Funds").
William P. Barr (5/23/50) - Director. 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) - Director. 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.
William G. Cole (3/7/17) - Director. Retired educator; writer. His
address is 544 W. Brompton, Chicago, Illinois 60657.
***Shelby M.C. Davis (3/20/37) - Director and Executive Vice President.
Director, Chairman and Chief Executive Officer of Venture Advisers, Inc.;
President of each of the Davis Funds; Employee of Capital Ideas, Inc.
(financial consulting firm); Consultant to Fiduciary Trust Company
International. Director of Shelby Cullom Davis Financial Consultants,
Inc. Chairman of Venture Pension Advisers, Inc. until December 31, 1992.
His address is P.O. Box 205, Hobe Sound, Florida 33455.
**Robert J. Greenebaum (7/30/17) - Director and Chairman of the Board.
Retired. Engaged in investment consulting and private investment
activities. Director, Blue Chip Value Fund, Inc. and United Asset
<PAGE>
Management Corporation (a holding company in the investment
management field). His address is 111 West Washington Street, Chicago,
Illinois 60602.
Walter E. Hoadley (8/16/16) - Director. Economic and financial
specialist and lecturer. Senior Research Fellow, Hoover Institution,
Stanford University. Director, PLM International, Inc. and Transcisco
Industries, Inc. From 1989 to 1991, Regent, University of California.
His address is c/o Bank of America Center, Dept. 3001-B, P.O. Box 37000,
San Francisco, California 94137.
James J. McMonagle (10/1/44) - Director. 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.
***Martin H. Proyect (10/24/32) - Director and President. Chairman,
President and Treasurer of Venture Advisers, Inc. until August 15,
1995. Director of each of the Davis Funds; Secretary and Treasurer of
Venture Pension Advisers, Inc. until December 31, 1992. His address is
P.O. Box 80176, Las Vegas, Nevada 89180-0176.
Larry Robinson (10/28/28) - Director. 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.
**Carl R. Luff (4/30/54) - Vice President, Treasurer and Assistant
Secretary. Director, Co-President and Treasurer of Venture Advisers, Inc.
effective August 15, 1995. Vice President, Treasurer and Assistant
Secretary of each of the Davis Funds. His address is 124 East Marcy
Street, Santa Fe, New Mexico 87501.
**Louis R. Proyect (3/7/45) - Vice President and Secretary of the
Selected Funds. Director, Executive Vice President and Secretary of
Venture Advisers, Inc. effective August 15, 1995. Vice President of
each of the Davis Funds; Secretary of Shelby Cullom Davis Financial
Consultants, Inc. Counsel, Shelby Cullom Davis & Co. His address is 124
East Marcy Street, Santa Fe, New Mexico 87501.
**Raymond O. Padilla (2/22/51) - Vice President and Assistant Secretary.
Senior Vice President, Venture Advisers, Inc. Vice President, Secretary
and Assistant Treasurer of each of the Davis Funds. His address is 124
East Marcy Street, Santa Fe, New Mexico 87501.
**Eileen R. Street (3/11/62) - Assistant Treasurer and Assistant
Secretary. Senior Vice President, Venture Advisers, Inc. Assistant
Treasurer and Assistant Secretary of each of the Davis Funds. Her address
is 124 East Marcy Street, Santa Fe, New Mexico 87501.
**Arthur Don (9/24/53) - Assistant Secretary. 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. 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 July 14, 1995, the directors and officers of the Fund as a
group owned 1.10% of the Fund's outstanding shares.
- -----------------------
* A Director who is an "interested person of the Fund (as defined in the
1940 Act).
** Holds same office(s) with Selected American Shares, Inc. and Selected
Capital Preservation Trust.
<PAGE>
DIRECTORS' COMPENSATION SCHEDULE
During the fiscal year ended December 31, 1994 the compensation
paid to directors who are not considered to be interested persons of the
Fund was as follows:
<TABLE>
<CAPTION>
Aggregate Fund Total Complex
Name Compensation Compensation<F1>
- ---- ------------ ------------
<S> <C> <C>
William P. Barr 2,845 22,667
Floyd A Brown 2,762 22,000
William G. Cole 3,515 28,000
Robert J. Greenebaum 6,026 48,000
Walter E. Hoadley 3,515 28,000
James J. McMonagle 3,013 24,000
Larry Robinson 2,762 22,000
<FN>
<F1> Complex compensation is the aggregate compensation paid, for
services as a Director, by all mutual funds with the same investment
adviser.
</FN>
</TABLE>
MANAGER AND SUB-ADVISER
Davis Selected Advisers, L.P. (formerly, Selected/Venture 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 sole 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 Fund's Board
of Directors, provides the Fund with administrative services and monitors
the performance of the portfolio management performed by the
Sub-Adviser. It furnishes statistical, executive and clerical personnel,
bookkeeping, office space, and equipment necessary to carry out its
administrative functions and such corporate managerial duties as are
requested by the Board of Directors of the Fund. The Manager pays all
salaries of officers and fees and expenses of directors who are directors,
officers or employees of the Manager or any of its affiliates. The Fund
pays all other Fund expenses. If the total expenses of the Fund (as
determined under applicable statutes or regulations) exceed any
applicable expense limitation prescribed by any statute or regulatory
authority of a jurisdiction in which the Fund's shares are qualified for
offer and sale, the Manager will reimburse the Fund in the amount of such
excess to the extent required by such securities law or regulation.
California and South Dakota are currently the only states which have
such limitations. California's limitation is 2.5% of the first $30 million
of average net assets, 2.0% of the next $70 million of average net assets
and 1.5% of the remaining average net assets. South Dakota's limitation
is 2.5% of average net assets.
Under the Investment Management Agreement between the Fund and
the Manager, and under the Sub-Advisory Agreement between the Manager
and the Sub-Adviser, in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of their respective duties, neither
the Manager nor the Sub-Adviser will be liable for any act or omission in
the cause of, or connected with, rendering service under either Agreement
or for any losses that may be sustained in the purchase, holding or sale of
any security.
The Fund pays the Manager monthly an investment advisory fee
computed at the following annual rates: 0.70% of the first $50 million of
average daily net assets, 0.675% of the next $100 million of average daily
net assets, 0.65% of the next $100 million of average daily net assets and
0.60% of average daily net assets in excess of $250 million.
During the six month ended June 30, 1995 and the years ended
December 31, 1994, 1993 and 1992 the Fund paid management fees of
$173,909, $343,348, $395,642 and $387,000, respectively. During the
years ended
<PAGE>
December 31, 1994 and 1993, the Fund was reimbursed
$104,324 and $150,755, respectively of expenses by the Manager.
Bramwell Capital Management, Inc., 745 Fifth Avenue, New York, New
York 10151, has served as the Sub-Adviser since November 1, 1994. The
Sub-Adviser manages the day to day investment operations of the Fund,
subject to the Manager's responsibility to monitor the performance and
effectiveness of the Sub-Adviser. The Sub-Adviser's fee is paid by the
Manager.
The Manager and the Sub-Adviser have both adopted Codes of Ethics
which regulate the personal securities transactions of the Manager's and
the Sub-Adviser's investment personnel and other employees and
affiliates with access to information regarding securities transactions of
the Fund. Both Codes of Ethics require investment personnel to disclose
personal securities holdings upon commencement of employment and all
subsequent trading activity to the firm's Compliance Officer. Investment
personnel are prohibited from engaging in any securities transactions,
including the purchase of securities in a private offering, without the
prior consent of the Compliance Officer. Additionally, such personnel are
prohibited from purchasing securities in an initial public offering and are
prohibited from trading in any securities (i) for which 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.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street,
Kansas City, Missouri 64105, serves as the Fund's custodian and the
United Missouri Bank of Kansas City, N.A., Tenth and Grand Streets, Kansas
City, Missouri 64106, serves as the Fund's sub-custodian. The custodian
and sub-custodian have custody of all securities and cash of the Fund. The
custodian and sub-custodian attend to the collection of principal and
income and the payment for, and the collection of proceeds of, securities
bought and sold by the Fund. IFTC is also the Fund's transfer agent and
dividend-paying agent.
INDEPENDENT AUDITORS
The Fund's auditors are Tait, Weller & Baker, Two Penn Center, Suite
700, Philadelphia, Pennsylvania 19102-1707. The services of Tait, Weller
& Baker include an audit of the Fund's annual financial statements
included in the annual reports to shareholders, a review of the
semi-annual reports to shareholders and 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 Directors. In addition, the
auditors normally provide assistance in preparation of federal and state
income tax returns and related forms.
DISTRIBUTION PLAN
The Manager has served as the Distributor of the Fund's shares
since May 1, 1993. The Fund has adopted a Distribution Plan (the "Plan")
under Rule l2b-l of the 1940 Act. Rule 12b-1 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 Plan, the 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 Directors has determined that there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
The Board of Directors has been informed by the Manager that the
expenses of distribution currently exceed, and for the foreseeable future
are expected to exceed, the amounts paid by the Fund under the Plan. Such
excess is and will be paid out of the Manager's own resources and not by
the Fund.
<PAGE>
During the six months ended June 30, 1995 and the year ended
December 31, 1994, the Fund's distribution fees were $62,148 and
$122,624, respectively. The Distributor reported that the following
amounts were spent on the indicated items: $89,573 and $81,522,
respectively, on advertising; $17,872 and $55,112, respectively, on
printing and mailing prospectuses and sales literature to other than
current shareholders; $13,546 and $22,671, respectively, on fees to
brokers; and $2,116 and $4,232, respectively, on registration and filing
fees.
PORTFOLIO TRANSACTIONS
The Sub-Adviser makes investment decisions and decisions as to the
execution of portfolio transactions for the Fund, subject to the general
supervision of the Board of Directors. The Fund's policy is to seek to
place portfolio transactions with those brokers or dealers who will
execute transactions as efficiently as possible and at favorable prices.
Many of these transactions involve the payment of brokerage commissions
by the Fund. In some cases, transactions are with firms that act as
principal for their own account. In effecting transactions in
over-the-counter securities, the Fund deals with market makers unless
it appears that better prices and execution are available elsewhere.
Subject to the policy of seeking favorable price and execution for
the transaction size and risk involved, in selecting brokers or dealers or
negotiating the commissions to be paid, the Sub-Adviser considers the
firm's financial responsibility and reputation, range and quality of
services made available to the Fund, and the professional services
provided, including execution, clearance procedures, wire service
quotations, and ability to provide supplemental performance,
statistical and other research information for consideration, analysis
and evaluation by the Sub-Adviser's staff. In accordance with this policy,
the Fund does not execute brokerage transactions solely on the basis of
the lowest commission rate available for a particular transaction.
Subject to the requirements of favorable price and efficient execution,
placement of orders by securities firms for the purchase of shares of the
Fund may be taken into account as a factor in the allocation of portfolio
transactions.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interests of the Fund as well as other fiduciary
accounts, the Sub-Adviser may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other
accounts in order to obtain the best net price and most favorable
execution. In such event, the allocation will be made by the Sub-Adviser
in the manner considered to be most equitable and consistent with its
fiduciary obligations to all such fiduciary accounts, including the Fund.
In some instances, this procedure could adversely effect the Fund but the
Fund deems that any disadvantage in the procedure would be outweighed by
the increased selection available and the increased opportunity to engage
in volume transactions.
Research services furnished by brokers used by the Fund for
portfolio transactions may be utilized by the Sub-Adviser in connection
with its investment services for other accounts and, likewise, research
services provided by brokers used for transactions in other accounts may
be utilized by the Sub-Adviser in performing its services for the Fund.
The Sub-Adviser determines the reasonableness of the commissions paid
in relation to its view of the value of the brokerage and research services
provided, considered in terms of the particular transaction and its overall
responsibilities with respect to all accounts as to which it exercises
investment discretion.
During the six months ended June 30, 1995 and the years ended
December 31, 1994 and 1993, the Fund paid brokerage commissions of
$71,796, $189,005 and $150,186, respectively. Of this amount, 97%, 98%
and 95%, respectively, was paid to brokers providing research services to
the Fund. During 1992, the Fund paid brokerage commissions of
$115,000, 72% of which was paid to brokers providing research
services to the Fund. No commissions were paid to the Distributor or its
affiliates during such periods. The increase in brokerage commissions
during 1993 and 1994 can be attributed to an increase in portfolio
turnover due to the change in portfolio management.
TAXES
A dividend received shortly after the purchase of shares reduces the
net asset value of the shares by the amount of the dividend, and although
it is, in effect, a return of capital, such dividend will be taxable to the
<PAGE>
shareholder. If a shareholder realizes a loss on the sale or exchange of
any shares held for six months or less and if the shareholder received a
capital gain distribution during such six-month period, then the loss is
treated as a long-term capital loss to the extent of the capital gain
distribution.
MAJOR SHAREHOLDERS
As of July 14, 1995, Shelby Cullom Davis & Co., 609 5th Avenue,
Floor 11, New York, NY 10017-1021, owned of record 337,072.534 shares
of the Fund's common stock, constituting 6.57% of the outstanding shares
of such stock.
SHAREHOLDER MEETINGS
The Fund does not hold annual meetings of shareholders, but will
hold special meetings of shareholders as required by the 1940 Act such as
to elect directors or when called by the directors for any other purpose
they deem appropriate. Under Maryland law, the Secretary is required to
call a special meeting of shareholders upon written request of the
holders of at least 25% of the shares entitled to be cast as votes as at the
meeting. The written request of the holders of a majority of such shares
is required if the same matter had been voted on at a meeting held within
12 months of the subject meeting.
Directors 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
Fund 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 director, the Fund has
undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
PERFORMANCE DATA
The Fund's average annual total return (as defined below) is as
follows:
<TABLE>
<S> <C>
One year ended June 30, 1995........................ 24.37%
Five years ended June 30, 1995...................... 9.12%
Ten years ended June 30, 1995....................... 11.55%
</TABLE>
Average annual total return measures both the net investment
income generated by, and the effect of any realized or unrealized
appreciation or depreciation of, the underlying investments in the Fund's
investment portfolio. The Fund's average annual total return figures are
computed in accordance with the standardized method prescribed by the
Securities and Exchange Commission by determining the average annual
compounded rates of return over the periods indicated, that would equate
the initial amount invested to the ending redeemable value, according to
the following formula:
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
<PAGE>
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.
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. The Fund's total
return for the one, five and ten year periods ended June 30, 1995 was
24.37%, 54.75% and 198.42%, respectively.
The Fund may also quote average annual total return and total return
performance data, including annualized or actual rates of return, for
various specified time periods other than one, five and ten years,
including periods of less than one year.
In reports or other communications to shareholders and in
advertising material, the Fund may compare its performance to the
Consumer Price Index, the Dow Jones Industrial Average, the Standard &
Poor's 500 Stock Index or the Russell 2000 Index and to the performance
of mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper") or CDA Investment Technologies, Inc. ("CDA"), two widely
recognized independent mutual fund reporting services.
Lipper and CDA performance calculations include reinvestment of
all capital gain and income dividends for the periods covered by the
calculations. The Consumer Price Index is generally considered to be a
measure of inflation. The Dow Jones Industrial Average and the Standard
& Poor's 500 Stock Index are unmanaged indices of common stocks which
are considered to be generally representative of the United States stock
market. The market prices and yields of these stocks will fluctuate. The
Russell 2000 is a subset of the Russell 3000. The Russell 3000
approximates 96% of the United States equity market. The largest
company on the index is capitalized at $67 million. The Russell 2000 is
the lower two-thirds of the larger index and is a widely recognized and
accepted small capitalization index.
The Fund may also use evaluations of the Fund published by
nationally recognized ranking services and financial publications such as
Business Week, Forbes, Institutional Investor and Money Magazine. Any
- ------------- ------ ---------------------- --------------
given performance comparison should not be considered
representative of the Fund's performance for any future period.
