<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 2-27514
Post-Effective Amendment No. 52
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-1550
Amendment No. 28
SELECTED SPECIAL SHARES, INC.
-----------------------------
124 East Marcy Street
Santa Fe, New Mexico 87501
Registrant's Telephone Number, Including Area Code
1-800-243-1575
Agent for Service:
Sheldon R. Stein
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(312) 580-2014
<PAGE>
It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b)
- -----
X on May 1, 1998, pursuant to paragraph (b)
- -----
60 days after filing pursuant to paragraph (a)
- -----
on , pursuant to paragraph (a) of Rule 485
- ----- --------------------------
Title of securities being registered: Selected Special Shares Fund,
common stock
FORM N-1A
SELECTED SPECIAL SHARES, INC.
POST-EFFECTIVE AMENDMENT NO. 52 TO REGISTRATION STATEMENT NO. 2-27514 UNDER
THE SECURITIES ACT OF 1933 AND AMENDMENT NO. 28 UNDER THE INVESTMENT COMPANY
ACT OF 1940 TO REGISTRATION STATEMENT NO. 811-1550.
CROSS REFERENCE
N-1A
Item No. Prospectus Caption or Placement
- -------- -------------------------------
1 Front Cover
2 Fund Expenses, Selected Funds - Summary
3 Financial Highlights; Fund Performance
4 Selected Funds - Summary; Investment
Objectives
5 Manager, Sub-Advisers, Distributor, and Portfolio Managers
5a Management's Discussion of Fund Performance
(contained in 1997 Annual Report)
6 Organization of the Funds;
Selected Funds Summary; Dividends;
Taxes; How to Reach Us.
7 Buying Shares; Determining the Price of
Shares - Net Asset Value; Exchanging Shares;
Manager, Sub-Advisers and Distributor
8 Selling Shares; Exchanging Shares
9 (Not Applicable)
Part B Caption or Placement
---------------------------
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Investment Restrictions; Lending Portfolio
Securities and Writing Cover Call Options
<PAGE>
14 Directors and Officers; Directors' Compensation Table
15 (Not Applicable)
16 Manager and Sub-Advisers; Custodian; Independent Auditors;
Distribution Plan
17 Portfolio Brokerage
18 *
19 Net Asset Value
20 Taxes
21 Distribution Plan
22 Performance Data
23 **
- ----------
* Included in Prospectus
** Financial Statements appearing in the December 31, 1997 Annual Report are
incorporated by reference.
<PAGE>
PROSPECTUS MAY 1, 1998
THE SELECTED FUNDS
124 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
1-800-243-1575
Welcome to the Selected Funds, a family of diversified no-load mutual
funds offering a variety of investment opportunities. The Funds pay
distribution fees pursuant to distribution plans adopted in accordance with
Rule 12b-1.
STOCK-ORIENTED FUNDS
Selected American Shares, Inc. -- a Growth and Income Fund.
Selected Special Shares, Inc. -- a Growth Fund.
BOND-ORIENTED FUND
Selected U.S. Government Income Fund -- an Income Fund.
MONEY MARKET FUND
Selected Daily Government Fund -- a U.S. Government Money Market Fund.
Selected Daily Government Fund and Selected U.S. Government Income
Fund are part of Selected Capital Preservation Trust.
This Prospectus concisely sets forth information about the Selected
Funds that you should know before investing. Please keep it handy for future
reference. Additional information is included in the Statements of Additional
Information of the Selected Funds dated May 1, 1998, and filed with the
Securities and Exchange Commission. The Statements of Additional Information
are incorporated herein by reference. You may obtain copies of the Statements
of Additional Information without charge by writing or calling us at the above
address or phone number.
AN INVESTMENT IN THE SELECTED U.S. GOVERNMENT INCOME FUND OR SELECTED
DAILY GOVERNMENT FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT SELECTED DAILY GOVERNMENT FUND WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES IN THE
SELECTED FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
SUMMARY
STOCK-ORIENTED FUNDS
Selected American Shares, Inc. ("Selected American") and Selected
Special Shares, Inc. ("Selected Special") are diversified, professionally
managed stock-oriented funds. Selected American seeks a combination of capital
growth and income and invests primarily in common stocks and other equity
securities. Selected Special seeks capital growth and invests primarily in
common stocks and securities convertible into common stocks. See "Investment
Objectives."
BOND-ORIENTED FUND
Selected U.S. Government Income Fund ("Selected Government Income")
seeks to obtain current income consistent with preservation of capital by
investing primarily in debt obligations of the U.S. Government, its agencies
or instrumentalities ("U.S. Government Securities").
MONEY MARKET FUND
Selected Daily Government Fund ("Selected Daily Government") seeks to
provide a high level of current income from short-term money market securities
consistent with prudent investment management, preservation of capital and
maintenance of liquidity. It invests in U.S. Government Securities and
repurchase agreements in respect thereto.
MANAGER, SUB-ADVISERS AND DISTRIBUTOR
Davis Selected Advisers, L.P. (the "Manager") serves as the
investment manager for Selected American, Selected Special, Selected
Government Income and Selected Daily Government (individually a "Fund" or
together the "Funds" or the "Selected Funds"). Davis Distributors, LLC (the
"Distributor") serves as the principal underwriter for the Funds. The Manager
has hired Bramwell Capital Management, Inc. (the "Sub-Advisor") to provide day
to day management of the portfolio of Selected Special. The Manager has
entered into a Sub-Advisory Agreement with its wholly-owned subsidiary, Davis
Selected Advisers-NY, Inc. ("DSA-NY"). DSA-NY performs research and other
services for the Funds on behalf of the Manager. There are management and Rule
12b-1 distribution fees payable by each Fund. For more information see "Fund
Expenses" and "Manager, Sub-Advisers and Distributor."
PURCHASES AND REDEMPTIONS
Shares of the Funds are sold and redeemed at net asset value without
any sales or redemption charge. The minimum initial investment in any of the
Selected Funds is $1,000 and subsequent investments are $25 or more. Please
see "Buying Shares" for more information on how easy it is to invest.
Please see "Selling Shares" for details on how to redeem shares.
FACTORS TO CONSIDER
An investment in any of our Funds, as with any mutual fund, includes
risks that vary depending upon the Fund's investment objectives and policies.
There is no assurance that the investment objective of any Fund will be
achieved. A Fund's return and net asset value will fluctuate, although
Selected Daily Government seeks to maintain a net asset value of $1.00 per
share.
2
<PAGE>
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------
Sales Load on Purchases............................................ None
Redemption Fee..................................................... None*
Sales Load on Reinvested Dividends................................. None
Exchange Fee....................................................... None
Deferred Sales Load................................................ None
- ----------
* A service fee of $5 is charged for each wire redemption.
Annual fund operating expenses after any expense reimbursements, as a
percentage of average net assets:
SELECTED SELECTED SELECTED GOV'T SELECTED DAILY
AMERICAN SPECIAL INCOME*** GOVERNMENT
-------- ------- --------- ----------
Management fees ............ 0.59% 0.69% 0.50% 0.30%
12b-1 Fees** ............... 0.25% 0.25% 0.25% 0.25%
Other Expenses ............. 0.12% 0.34% 0.75% 0.15%
----- ----- ----- -----
Total Operating Expenses ... 0.96% 1.28% 1.50% 0.70%
----- ----- ----- -----
- ----------
** The effect of a 12b-1 plan is that long-term shareholders may pay more
than the economic equivalent of the maximum front-end sales charge
permitted under applicable rules of the National Association of
Securities Dealers, Inc.
*** After contractual expense reimbursements.
The Manager agreed to absorb certain expenses for Selected Government
Income as reflected above. If the Manager had not done so, "Other Expenses"
for Selected Government Income in the table above would be 0.85%, and "Total
Operating Expenses" would be 1.60%. Please see "Manager, Sub-Advisers and
Distributor" and the Statements of Additional Information for more information
on fees.
We can illustrate these expenses with the examples below. You would
pay the following expenses on a $1,000 investment (assuming a 5% annual return
and redemption at the end of each period):
SELECTED SELECTED SELECTED GOV'T SELECTED DAILY
AMERICAN SPECIAL INCOME*** GOVERNMENT
-------- ------- --------- ----------
One Year .......... $ 10 $ 13 $ 15 $ 7
Three Years ....... $ 31 $ 41 $ 47 $22
Five Years ........ $ 53 $ 70 $ 82 $39
Ten Years ......... $118 $155 $179 $87
The tables are here to help you understand the various expenses that
you as an investor in a Fund will bear and are based on the Funds' expenses
for the year ended December 31, 1997, which reflect expense reimbursements in
respect to Selected Government Income as described above. The 5% rate used in
the example is only for illustration and is not intended to be indicative of
the future performance of the Funds, which may be more or less than the
assumed rate. Actual expenses may be greater or lesser than those shown.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide you with information about the history
of the Funds' shares, including periods prior to May 1, 1993 when Davis
Selected Advisers, L.P. became the Funds' Manager. The tables present the
financial highlights for a share outstanding throughout each respective
period. Such tables are included as supplementary information to the Funds'
financial statements which are included in the December 31, 1997 Annual Report
to Shareholders which may be obtained by writing or calling the Fund. The
Funds' 1997 financial statements including the financial highlights for each
of the five years in the period ended December 31, 1997, have been audited by
Tait, Weller & Baker serving as the Funds' independent certified public
accountants, whose unqualified opinion thereon is contained in the Annual
Report.
SELECTED AMERICAN
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(2) 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .... $ 21.53 $ 17.68 $13.09 $14.59 $17.13 $18.43 $12.79 $13.81 $13.67 $11.43
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income .. 0.16 0.18 0.22 0.20 0.24 0.19 0.23 0.26 0.48 0.26
Net Gains or Losses on
Securities (both
realized and
unrealized) .......... 7.72 5.15 4.74 (0.66) 0.70 0.89 5.65 (0.81) 2.21 2.24
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operation .......... 7.88 5.33 4.96 (0.46) 0.94 1.08 5.88 (0.55) 2.69 2.50
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net
investment income ... (0.17) (0.17) (0.22) (0.20) (0.24) (0.19) (0.23) (0.35) (0.45) (0.26)
Distributions (from
capital gains) ...... (2.05) (1.31) (0.15) (0.83) (3.24) (2.19) - (0.04) (2.10) -
Distributions in Excess
of Net Investment
Income .............. (0.01) - - (0.01) - - (0.01) (0.08) - -
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions.. (2.23) (1.48) (0.37) (1.04) (3.48) (2.38) (0.24) (0.47) (2.55) (0.26)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Period .............. $ 27.18 $ 21.53 $17.68 $13.09 $14.59 $17.13 $18.43 $12.79 $13.81 $13.67
======= ======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN .............. 37.25% 30.74% 38.09% (3.20)% 5.42% 5.78% 46.37% (3.90)% 20.08% 21.95%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000 omitted).. $2,221,655 $1,376,466 $925,512 $529,404 $451,392 $580,889 $711,905 $400,597 $360,366 $284,719
Ratio of Expenses to
Average Net Assets ... .96% 1.03% 1.09% 1.26% 1.01%(1) 1.17% 1.19% 1.35% 1.08% 1.11%
Ratio of Net Income
to Average Net Assets. .62% .87% 1.42% 1.42% 1.37% .95% 1.41% 2.04% 3.06% 2.07%
Portfolio Turnover
Rate ................. 26% 29% 27% 23% 79% 50% 21% 48% 46% 35%
Average Commission
Rate Per Share ....... $.0600 $.0580 - - - - - - - -
</TABLE>
- ----------
(1) Had the former manager not absorbed certain expenses, the ratio of
expenses for the year ended December 31, 1993 would have been 1.22%.
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
4
<PAGE>
SELECTED SPECIAL
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1997 1996 1995 1994(2,3) 1993(3) 1992(3) 1991(3) 1990(3) 1989(3) 1988(3)
---- ---- ---- --------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $10.89 $ 10.80 $ 9.02 $10.20 $10.40 $10.16 $9.04 $9.95 $ 8.52 $ 7.96
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income................. (0.07) - - (0.03) - 0.07 0.12 0.17 0.21 0.10
Net Gains or Losses
on Securities (both
realized and unrealized) 2.83 1.27 3.04 (0.22) 1.10 0.78 2.11 (0.85) 2.23 1.44
------ ------ ------ ------- ------ ------ ----- ------ ----- ------
Total From Investment
Operations........ 2.76 1.27 3.04 (0.25) 1.10 0.85 2.23 (0.68) 2.44 1.54
------ ------ ------ ------- ------ ------ ----- ------ ----- ------
LESS DISTRIBUTIONS
Dividends (from net
investment income)..... - - - - - (0.07) (0.13) (0.20) (0.18) (0.10)
Distributions (from
capital gains)......... (0.62) (1.18) (1.26) (0.93) (1.30) (0.54) (0.98) (0.03) (0.83) (0.88)
------ ------ ------ ------- ------ ------ ----- ------ ----- ------
Total Distributions (0.62) (1.18) (1.26) (0.93) (1.30) (0.61) (1.11) (0.23) (1.01) (0.98)
------ ------ ------ ------- ------ ------ ----- ------ ----- ------
Net Asset Value, End
of Period................ $ 13.03 $ 10.89 $10.80 $9.02 $10.20 $ 10.40 $ 10.16 $ 9.04 $ 9.95 $ 8.52
====== ====== ====== ======= ====== ====== ===== ====== ===== ======
TOTAL RETURN ............... 26.91% 11.86% 34.24% (2.56)% 10.81% 8.43% 25.53% (6.87)% 28.91% 19.51%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000 omitted) $74,930 $62,435 $58,975 $47,275 $53,257 $57,605 $60,216 $50,474 $49,887 $34,903
Ratio of Expenses to
Average Net Assets 1.28% 1.33% 1.48% 1.41% 1.24%(1) 1.41%(1) 1.39% 1.41% 1.22% 1.24%
Ratio of Net Income to
Average Net Assets (.60)% (.66)% (.58)% (.27)% (.07)% .56% 1.11% 1.81% 2.11% 1.09%
Portfolio Turnover
Rate................... 51% 98% 127% 99% 100% 41% 74% 87% 45% 71%
Average Commission
Rate Per Share......... $.0600 $.0600 - - - - - - - -
</TABLE>
- ----------
(1) Had the Manager not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1994 and 1993 would have been 1.62% and
1.51%, respectively. Had the former manager not absorbed certain
expenses, the ratio of expenses for the year ended December 31, 1992
would have been 1.47%.
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
(3) Per share data has been restated to give effect to a 2 for 1 stock split
to shareholders of record as of the close of January 4, 1994.
5
<PAGE>
SELECTED GOVERNMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(2) 1992 1991 1990 1989 1988
---- ---- ---- ---- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period .............. $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31 $ 9.70 $ 9.22 $ 9.20 $ 9.34 $10.01
------ ------ ------ ------- ------ ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income ............... .51 .53 .54 .50 .56 .61 .60 .63 .64 .63
Net Gains or Losses
on Securities (both
realized and
unrealized)........... .11 (.28) .78 (.75) .21 (.13) .58 .11 .21 (.32)
------ ------ ------ ------- ------ ------- ------- ------ ------ ------
Total From Investment
Operations......... .62 .25 1.32 (.25) .77 .48 1.18 .74 .85 .31
------ ------ ------ ------- ------ ------- ------- ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net
investment
income)............... (.51) (.53) (.54) (.50) (.56) (.61) (.60) (.63) (.64) (.63)
Distributions (from
capital gains)........ - (.02) (.03) - (.32) (.26) - - - -
Distributions in Excess
of Net Investment
Income................ - - - - - - (.10) (.09) (.35) (.35)
------ ------ ------ ------- ------ ------- ------- ------ ------ ------
Total Distributions.. (.51) (.55) (.57) (.50) (.88) (.87) (.70) (.72) (.99) (.98)
------ ------ ------ ------- ------ ------- ------- ------ ------ ------
Net Asset Value, End
of Period.............. $ 9.01 $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31 $ 9.70 $ 9.22 $ 9.20 $ 9.34
====== ====== ====== ======= ====== ======= ======= ====== ====== ======
TOTAL RETURN ............. 7.32% 2.85% 15.97% (2.71)% 7.99% 5.11% 13.46% 8.53% 8.47% 2.94%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000
omitted)............. $5,962 $6,934 $7,811 $10,263 $10,336 $13,945 $22,019 $21,153 $27,594 $14,611
Ratio of Expenses to
Average Net Assets... 1.50% 1.44%(1) 1.44%(1) 1.42%(1) 1.34%(1) 1.44%(1) 1.41% 1.44% 1.50%(1) 1.50%(1)
Ratio of Net Income to
Average Net Assets... 5.79% 5.96% 6.09% 5.70% 5.85% 6.26% 6.51% 6.95% 6.70% 6.30%
Portfolio Turnover
Rate.................. 16% 26% 76% 65% 29% 53% 36% 29% 75% 76%
</TABLE>
- ----------
(1) Had the Manager not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1997, 1996, 1995, 1994 and 1993 would have
been 1.60%, 1.67%, 1.58%, 1.69% and 1.88%, respectively. Had the former
manager not absorbed certain expenses, the ratio of expenses for the
years ended December 31, 1992, 1989 and 1988 would have been 1.72%, 1.59%
and 1.63%, respectively.
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
6
<PAGE>
SELECTED DAILY GOVERNMENT
<TABLE>
<CAPTION>
MAY 9, 1988
(COMMENCEMENT
OF OPERATIONS)
THROUGH
DECEMBER
YEAR ENDED DECEMBER 31, 31,
----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993(2) 1992 1991 1990 1989 1988
---- ---- ---- ---- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment
Income ........ .048 .046 .051 .034 .023 .030 .054 .074 .083 .051
LESS DISTRIBUTIONS
Dividends (from
net investment
income)........ (.048) (.046) (.051) (.034) (.023) (.030) (.054) (.074) (.083) (.051)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Period........ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN ....... 4.91% 4.70% 5.23% 3.51% 2.34% 3.07% 5.51% 7.66% 8.63% 8.17%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000
omitted)....... $117,471 $112,674 $184,603 $121,886 $ 8,732 $ 6,626 $30,706 $174,914 $100,517 $53,173
Ratio of Expenses to
Average Net Assets .70% .75% .75%(1) .75%(1) .75%(1) .75%(1) .68% .63% .74% .70%(1)
Ratio of Net Income
to Average
Net Assets .. 4.80% 4.62% 5.13% 3.44% 2.31% 3.02% 5.37% 7.39% 8.28% 7.86%
</TABLE>
- ----------
(1) Had the Manager not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1995, 1994 and 1993 would have been 0.78%,
1.07% and 2.29%, respectively. Had the former manager not absorbed
certain expenses, the ratio of expenses for the year ended December 31,
1992 would have been 1.23% and for the period May 9, 1988 through
December 31, 1988 would have been 0.78% (annualized).
(2) Effective May 1, 1993, Davis Selected Advisers, L.P. became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
7
<PAGE>
INVESTMENT OBJECTIVES
You probably have a variety of goals you want to reach, and these
goals will likely change over time. For that reason we offer a variety of
Funds with different objectives. In this way, you can balance your mix of
investments within one family of Funds. Of course, no mutual fund offered by
us, or by anyone else, can guarantee that its objective will be met or that
you will reach all of your goals.
STOCK-ORIENTED FUNDS
SELECTED AMERICAN -- A GROWTH AND INCOME FUND
Selected American seeks to provide its shareholders with both capital
growth and income. It invests primarily in common stocks and other equity
securities (including securities convertible into equity securities). The Fund
will normally invest at least 65% of its total assets in securities of U.S.
companies. The Fund diversifies its holdings among many companies and
industries, and although not required to do so, usually emphasizes "blue chip"
firms (companies that have market capitalizations of more than $1 billion and
long records of earnings growth and dividends). The Fund may also invest in
fixed-income securities for income or as a defensive strategy when the Manager
believes that existing economic or market conditions dictate such strategies.
Increases in interest rates tend to reduce the market value of fixed-income
securities and declines in interest rates tend to increase their value.
The Fund may invest in real estate investment trusts ("REITs").
Equity REITs invest directly in real property while mortgage REITs invest in
mortgages on real property. REITs may be subject to certain risks associated
with the direct ownership of real estate including declines in the value of
real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, and variations in rental income. REITs pay dividends to
their shareholders based upon available funds from operations. It is quite
common for these dividends to exceed the REIT's taxable earnings and profits
resulting in the excess portion of such dividends being designated as a return
of capital. The Fund intends to include the gross dividends from such REITs in
its distribution to its shareholders and, accordingly, a portion of the Fund's
distributions may also be designated as a return of capital.
The Fund may invest in high yield, high risk debt securities
(including convertible securities) rated BB or lower by Standard & Poor's
Corporation ("S&P") or Ba or lower by Moody's Investor Services ("Moody's") or
unrated securities deemed by the Manager to be of an equivalent rating.
Securities rated BB or lower by S&P and Ba or lower by Moody's are referred to
in the financial community as "junk bonds" and are considered speculative. The
Fund does not intend to purchase securities rated BB or Ba or lower if after
such purchase more than 30% of the Fund's net assets would be invested in such
securities (including downgraded securities). As of December 31, 1997, none of
the Fund's net assets were invested in high yield high risk securities. See
the Statement of Additional Information for more information regarding such
investments.
There is no other limitation on the percentage of assets that may be
invested in any particular type of security. Since Selected American invests
in common stocks and other securities that fluctuate in value, the price of
its shares will fluctuate.
SELECTED SPECIAL -- A GROWTH FUND
Selected Special seeks to provide capital growth. The Fund invests in
companies which the Sub-Adviser believes have capital growth potential because
of factors such as rapid growth of demand within their existing
8
<PAGE>
markets, expansion into new markets, new products and opportunities for
improving returns on sales and investments.
The Fund invests primarily in common stocks and other equity
securities (including convertible securities). Normally at least 65% of its
total assets are invested in equity securities. Investment income is only
incidental. The Fund invests primarily in securities of domestic companies.
However, the Fund may invest in the securities of foreign companies directly
or through registered closed-end investment companies that invest primarily in
foreign securities. An investment company invests primarily in foreign
securities if normally more than 50% of such company's assets are invested in
foreign securities. No such investment in other investment companies may be
made if it would cause more than 10% of Selected Special's total assets to be
invested in such companies. Such other investment companies usually have their
own expenses including management costs or fees and the Fund's Manager earns
its regular fee on such assets.
Generally, the Fund's holdings in equity securities are diversified
in a variety of industries and with companies of varying sizes, although the
investment emphasis is on companies with small and medium market
capitalizations (approximating $1 billion). The Fund may also invest in the
same types of high yield, high risk convertible securities as Selected
American; however, Selected Special will not invest in securities rated below
investment grade if such investment would cause more than 5% of net assets to
be so invested.
The price of the Fund's shares fluctuates because the value of the
securities in which the Fund invests also fluctuates. When the Sub-Adviser
believes that economic or investment conditions indicate the need for a
defensive strategy, the Fund may, to protect the interests of its
shareholders, temporarily and without limitation, hold assets other than
equity securities, including cash, U.S. Government Securities and other liquid
high-grade debt securities.
BOTH STOCK ORIENTED FUNDS
Both Selected American and Selected Special may invest in foreign
securities. Selected American will not make such an investment if it would
cause more than 35% of its total assets to be invested in foreign securities.
Selected Special does not currently have any investment restriction relative
to foreign securities. However, Selected Special's Sub-Adviser intends to
limit investments in foreign securities to 25% or less of the Fund's total
assets. As of December 31, 1997, Selected Special Shares did not have any
investments in foreign securities. Selected American Shares had 0.24% of net
assets invested in foreign securities.
The Funds will generally invest in securities of foreign companies
directly through trades of individual securities on recognized exchanges and
developed over-the-counter markets and through American Depository Receipts
("ADRs") covering such securities. In addition, Selected Special may invest in
foreign securities indirectly through registered closed-end investment
companies primarily investing in foreign securities.
Investments in foreign securities may involve a higher degree of risk
than investments in domestic issuers. Foreign securities are often denominated
in foreign currencies, which means that their value will be affected by
changes in exchange rates, as well as other factors that affect securities
prices. There generally is less publicly available information about foreign
securities and securities markets, and there may be less governmental
regulation and supervision of foreign issuers and securities markets. Foreign
securities and markets are also affected by political and economic
instabilities in such countries, and may be more volatile and less liquid than
domestic securities and markets. The risks of investment may include
expropriation or nationalization of assets, confiscatory taxation, exchange
controls and limitations on the use or transfer of assets, and significant
withholding taxes. Foreign economies may differ from the United States
favorably or unfavorably with respect to
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inflation rates, balance of payments, capital reinvestment, gross national
product expansion, and other relevant economic issues. When there are
significant foreign investments, the operating expense ratio of a Fund may be
higher than that of investment companies investing exclusively in U.S.
securities, since the management, custodial and certain other expenses are
expected to be higher.
The Funds may lend securities to broker/dealers or institutional
investors for their use in connection with short sales, arbitrages and other
securities transactions. The Funds may earn interest on cash collateral or
receive a fee from broker/dealers for lending its portfolio securities. The
Funds will not lend portfolio securities unless the loan is secured by
collateral (consisting of any combination of cash, United States Government
securities or irrevocable letters of credit) in an amount at least equal (on a
daily market-to market basis) to the current market value of the securities
loaned. In the event of a bankruptcy or breach of agreement by the borrower of
the securities, the Funds could experience delays and costs in recovering the
securities loaned. Neither Fund may lend securities with an aggregate market
value of more than 10% of each Fund's total assets.
For income purposes (which is only incidental with respect to
Selected Special) the Funds may write covered call options on portfolio
securities. Selected American may not write covered call options if more than
20% of its net assets would be subject to covered call options. Selected
Special may not write covered call options if more than 10% of its net assets
would be subject to covered call options.
The Funds may not invest in commodities or futures contracts. Until
this restriction is changed by shareholder vote, the Funds will not enter into
currency exchange contracts (agreements to buy or sell foreign currency
transactions at a future date) or other hedging transactions designed to
reduce overall investment risks, including the risks of currency fluctuation
with respect to foreign investments. Such techniques depend upon a portfolio
manager's ability to predict future foreign currency values, interest rates
and other relevant investment measures. The Manager and the Sub-Adviser
believe that the use of such techniques, which are not assured to work,
involves certain risks and costs. However, the failure to use such hedging
procedures may result in greater volatility, particularly with respect to
foreign currency fluctuations, than if such procedures were successfully
employed. Nevertheless, to the extent that the Funds' foreign investments are
globally diversified, fluctuations in one particular currency may be offset by
fluctuations in other currencies in which the Funds' investments are
denominated.
Selected American and Selected Special do not usually trade actively
for short-term profits. However, when the investment manager believes that it
would benefit the Funds, short-term profits may be taken.
SELECTED GOVERNMENT INCOME
The investment objective of Selected Government Income is to obtain
current income consistent with preservation of capital by investing primarily
in U.S. Government Securities. A shareholder's investment in the Fund is not
insured or guaranteed by the U.S. Government, its agencies or
instrumentalities. The net asset value of the Fund will fluctuate. A material
factor in such fluctuations is the fact that increases in interest rates tend
to reduce the market value of U.S. Government Securities owned by the Fund and
declines in interest rates tend to increase their value.
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INVESTMENTS
The Fund invests primarily in U.S. Government Securities, without
limitation on their maturities, and repurchase agreements secured by U.S.
Government Securities. Under normal market circumstances, at least 65% of the
Fund's total assets will be invested in U.S. Government Securities or
repurchase agreements related thereto.
Some U.S. Government Securities are supported by the full faith and
credit of the United States, such as Government National Mortgage Association
("GNMA") Certificates and obligations of the Farmers Home Administration and
the Export-Import Bank. Others are supported solely by the credit of the
issuing agency or instrumentality with limited rights to borrow from the U.S.
Treasury, such as obligations of the Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). With respect to
securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury,
there is no guarantee that the U.S. Government will provide financial support
to such agencies or instrumentalities. The government guarantee of the
securities owned by the Fund does not guarantee the yield to the Fund, the
market value of the securities owned by the Fund or the net asset value of the
Fund's shares.
The Fund may purchase collateralized mortgage obligations ("CMOs"),
including residual interests. A CMO is a debt security issued by a trust,
corporation or a U.S. Government instrumentality that is backed
("collateralized") by a portfolio of mortgages, mortgage-backed securities or
U.S. Government Securities. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of securities or
mortgages. The Fund may invest only in CMOs issued by FHLMC, FNMA, or GNMA and
privately-issued CMOs that are (i) fully collateralized by mortgage-backed
securities issued by GNMA, FNMA or FHLMC and (ii) rated AAA by S&P or Aaa by
Moody's or are unrated but in the opinion of the Manager, are of comparable
quality. "Fully collateralized" means that the collateral will generate cash
flows sufficient to meet obligations to holders of the collateralized
obligations under even the most conservative prepayment and interest rate
scenario. CMOs issued by FHLMC, FNMA and GNMA are considered U.S. Government
Securities for purposes of the above described 65% test; privately issued CMOs
are not.
In the case of CMOs, payments of principal and interest on the
underlying collateral securities are not passed through directly and equally
to all the holders of the collateralized obligations. Collateralized
obligations are often issued in two or more classes with varying maturities
and stated rates of interest. The payments are directed to different classes
of the CMO at unequal rates. This results in varying maturities among the
classes. This also may in effect "strip" the interest payments from principal
payments of the underlying securities and allow for the separate purchase of
either the interest or the principal payments (sometimes called "interest
only" and "principal only" securities). Such "stripped" CMOs are currently
considered by the staff of the Securities and Exchange Commission to
constitute illiquid securities and as such are to be included in the
calculation of the Fund's 10% limitation on illiquid securities. See "All
Funds -- Restricted or Illiquid Securities."
Mortgage prepayments at rates which are more rapid than those rates
projected at the time mortgage related U.S. Government Securities are
purchased at a premium can be expected to result in a decline in the value of
mortgage related securities because prepayments reduce the yield to maturity
on such securities. Conversely, the value of mortgage related securities
purchased at a discount can be expected to increase under the same
circumstances. Prepayments typically increase during periods of rapidly
declining interest rates.
Investment in such securities could also subject the Fund to
"maturity extension risk" which is the possibility that rising interest rates
may cause prepayments to occur at a slower than expected rate. This particular
risk may effectively change a security which was considered a short or
intermediate-term security at the time of purchase
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into a long term security. Long-term securities generally fluctuate more
widely in response to changes in interest rates than short or
intermediate-term.
Since the collateralized obligations may be issued in classes with
varying maturities and interest rates, the investor may obtain varying degrees
of predictability of maturity as opposed to direct investments in
mortgage-backed securities. With respect to the interest only securities and
the principal only securities, an investor has the option to select from the
pool of underlying collateral the portion of the cash flows that most closely
corresponds to the investor's forecast of interest rate movements. These
instruments tend to be highly sensitive to prepayment rates on the underlying
collateral and thus place a premium on accurate prepayment projections by the
investor.
The Fund may invest in FHLMC, FNMA and GNMA certificates, which are
mortgage-backed securities representing part ownership in a pool of mortgage
loans. These mortgages are assembled by financial institutions and, after
being approved by the government agency, are guaranteed by that agency and
some are backed by the full faith and credit of the U.S. Government. These
certificates are called "pass-through" securities, because both interest and
principal payments are passed through to the holder. As with CMOs, the Fund's
ability to maintain a portfolio of high-yielding securities will be adversely
affected to the extent that prepayments of mortgages must be reinvested in
securities which have lower yields than the mortgages.
These securities may also be subject to maturity extension risk, described
above.
INVESTMENT POLICIES
Selected Government Income is managed with a view to obtaining
current income while seeking to preserve capital. Consistent with its
investment objective and policies, the Fund may invest in the full range of
maturities of U.S. Government Securities. The Manager may adjust the average
maturity of the Fund's portfolio from time to time, depending on its
assessment of the relative yields available on securities of different
maturities and its assessment of future interest rate patterns and market
risk. Thus, at various times the average maturity of the portfolio may be
relatively short (from one year to five years, for example) and at other times
may be relatively long (over 10 years, for example). Fluctuations in portfolio
values and therefore fluctuations in the net asset value of the Fund's shares
are more likely to be greater when the portfolio average maturity is longer.
At times, for defensive purposes, the portfolio may be comprised substantially
of securities maturing in one year or less.
The Fund may sell portfolio securities without regard to the length
of time they have been held in order to take advantage of new investment
opportunities or yield differentials or to preserve gains or limit losses due
to changing economic conditions. This may cause the Fund to incur a relatively
high annual rate of portfolio turnover in some years. However, there are
usually no brokerage commissions paid in connection with transactions in U.S.
Government Securities.
The Fund may from time to time make commitments to purchase
securities on a "when-issued" or delayed delivery basis; that is, delivery and
payment for the securities normally takes place in the future. The Fund will
not invest in excess of 50% of its assets, determined at the time of
investment, in "when-issued" securities. Sometimes the purchase price of the
securities is not fixed until the date such securities are issued. The
securities so purchased are subject to market fluctuation and no interest
accrues to the Fund until delivery and payment take place. The Fund intends to
make commitments to purchase securities with the intention of actually
acquiring such securities, but it may sell the securities before the
settlement date if it is advisable or necessary as a matter of investment
strategy. At the time the Fund first makes a commitment to purchase a
security, it will record the transaction and reflect the value of the
obligation in determining its net asset value. The Custodian will maintain on
a daily basis a separate Fund account consisting of cash, U.S. Government
Securities or other high grade debt securities with a
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<PAGE>
value at least equal to the amount of the commitments to purchase
"when-issued" securities. When payment is made for "when-issued" securities,
the Fund will meet its obligations from then available cash flow, sale of
securities held in the separate account, sale of other securities or, although
it would normally not expect to do so, sale of the "when-issued" securities
themselves (which may have a market value greater or lesser than the Fund's
obligation). If the Fund chooses to dispose of the right to acquire a
"when-issued" security prior to its acquisition, it could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation.
SELECTED DAILY GOVERNMENT -- A U.S. GOVERNMENT MONEY MARKET FUND
Selected Daily Government seeks to provide as high a level of current
income as possible from the type of short-term investments (i.e., with
maturities of one year or less) in which it invests, consistent with prudent
investment management, stability of principal and maintenance of liquidity.
Although there can be no guarantee, Selected Daily Government seeks to
maintain a share price of $1.00 per share and has done so since inception.
Selected Daily Government may invest in U.S. Government Securities
and repurchase agreements fully collateralized by such securities. See
"Selected Government Income-Investments" for a more detailed description of
U.S. Government Securities.
Selected Daily Government may invest in securities that have interest
rates that are adjusted periodically or that float continuously in relation to
an index such as the prime rate ("variable or floating rate securities"), and
in participation interests of such securities. The value of such securities
may change when interest rates change, although the variable or floating rate
nature of these securities should reduce the degree of fluctuation in the
value of portfolio investments.
Selected Daily Government limits its investments to securities that
meet the quality and diversification requirements of Rule 2a-7 under the
Investment Company Act of 1940. See "Determining the Price of Shares -- Net
Asset Value" for more information. For more information on Selected Daily
Government's investments, please see the Statement of Additional Information.
ALL FUNDS
BORROWING. The Funds may borrow money from banks for temporary or
emergency purposes in an amount not exceeding 10% of the value of a Fund's
total assets, and may pledge an amount not exceeding 15% of total assets to
secure such borrowing. No Fund will purchase portfolio securities while any
outstanding borrowing exceeds 5% of such Fund's total assets.
INDUSTRY CONCENTRATION. No Fund will make any investment (other than
U.S. Government Securities) which would cause 25% or more of its total assets
to be invested in any one industry.
REPURCHASE AGREEMENTS. The Funds may enter into repurchase
agreements, but normally do not enter into repurchase agreements maturing in
more than seven days, and may make repurchase agreement transactions through a
joint account with other funds managed by the Manager. A repurchase agreement
involves a sale of securities to the Funds, with the concurrent agreement of
the seller (a member bank of the Federal Reserve System, or securities dealer,
which the Manager or Sub-Adviser determines to be financially sound at the
time of the transaction) to repurchase the securities at the same price plus
an amount equal to accrued interest at an agreed-upon interest rate, within a
specified time, usually less than one week, but, on occasion, at a later time.
The repurchase obligation of the seller is, in effect, secured by the
underlying securities. In the event of a bankruptcy or other default of a
seller of a repurchase agreement, the Funds could experience both delays in
liquidating the
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underlying securities and losses, including possible decline in the value of
the collateral during the period while the Funds seek to enforce their rights,
possible loss of all or a part of the income during such period and expenses
of enforcing their rights.
RESTRICTED OR ILLIQUID SECURITIES. The Funds may invest in restricted
securities, i.e. securities which, if sold, would cause the Funds to be deemed
"underwriters" under the Securities Act of 1933 (the "1933 Act") or which are
subject to contractual restrictions on resale. No investment will be made in
illiquid securities (which may include restricted securities that are
illiquid) if such investment would cause more than 15% of the net assets of
Selected American or Selected Special or more than 10% of the net assets of
Selected Government Income or Selected Daily Government, to be so invested. In
the event that market fluctuations cause a Fund to be invested in illiquid
securities exceeding 15% of net assets, steps will be taken as soon as
practicable to reduce the amount of illiquid securities held by such Fund.
The restricted securities which the Funds may purchase include
securities which have not been registered under the 1933 Act but are eligible
for purchase and sale pursuant to Rule 144A ("Rule 144A Securities"). This
Rule permits certain qualified institutional buyers, such as the Funds, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Manager or Sub-Adviser will consider
whether Rule 144A Securities being purchased or held by a Fund are illiquid
and thus subject to that Fund's policies limiting investments in illiquid
securities. In making this determination, the Manager or Sub-Adviser will
consider the frequency of trades and quotes, the number of dealers and
potential purchasers, dealer undertakings to make a market, and the nature of
the security and the market place trades (for example, the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A Securities will also be monitored by the
Manager or Sub-Adviser and, if as a result of changed conditions, it is
determined that a Rule 144A Security is no longer liquid, a Fund's holding of
illiquid securities will be reviewed to determine what, if any, action is
appropriate in light of the policy limiting investments in such securities.
There is no limitation on the percentage of a Fund's assets that can be
invested in liquid Rule 144A Securities. Investing in Rule 144A Securities
could have the effect of increasing the amount of investments in illiquid
securities if qualified institutional buyers are unwilling to purchase such
securities.
PORTFOLIO TRANSACTIONS. Subject to an overall policy to place
portfolio transactions as efficiently as possible and at favorable prices,
research services and sales of Fund shares may be considered as factors in
placing portfolio transactions for a Fund. Usually the portfolio transactions
of Selected Government Income and Selected Daily Government are principal
transactions without brokerage commissions, although a profit or loss to a
dealer may be incurred. In principal transactions the sole consideration in
determining the amount paid is efficient execution at a favorable price. The
Adviser and Sub-Advisers are authorized to place portfolio transactions with
Shelby Cullom Davis & Co., a member of the New York Stock Exchange, which may
be deemed to be an affiliate of the Adviser, if the commissions are fair and
reasonable and comparable to commissions charged by non-affiliated qualified
brokerage firms for similar services. Due to differences in the investment
objectives of the Funds, portfolio turnover rates may vary. At times it could
be high, which, for Selected Special and Selected American, would require the
payment of larger amounts in brokerage commissions. Each Fund's portfolio
turnover rates are set forth in "Financial Highlights."
FUNDAMENTAL POLICIES. The investment objectives of the Funds and the
restrictions set forth in the Statements of Additional Information, including
those set forth in respect to borrowing and diversification as discussed
above, are fundamental policies. The policies with respect to permissible
investments are fundamental policies of Selected Government Income and
Selected Daily Government. All other investment objectives and policies of the
Selected Funds are not fundamental and may be changed without shareholder
approval.
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Any percentage restrictions set forth in this Prospectus or in the
Statements of Additional Information, other than the restriction with respect
to illiquid securities, apply as of the time of investment without regard to
later increases or decreases in the values of securities or total net assets.
MANAGER, SUB-ADVISERS AND DISTRIBUTOR
Davis Selected Advisers, L.P., whose principal office is at 124 E.
Marcy Street, Santa Fe, New Mexico 87501, (the "Manager") serves as the
manager for the Selected Funds. The sole general partner of the Manager is
Venture Advisers, Inc. (the "General Partner"). Shelby M.C. Davis is the
controlling shareholder of the General Partner. Subject to the direction and
supervision of the Board of Directors/Trustees, the Manager is responsible for
investment management and administration activities for the Selected Funds.
Davis Distributors, LLC (the "Distributor") a subsidiary of the Manager,
serves as the distributor or principal underwriter of the Funds' shares. As
discussed below, the Manager has hired Bramwell Capital Management, Inc. as
the Sub-Adviser for Selected Special. Davis Selected Advisers-NY, Inc.
("DSA-NY"), a wholly-owned subsidiary of the Manager, performs research and
other services for the Funds on behalf of the Manager under a sub-Advisory
Agreement with the Manager. This Agreement does not affect the services
provided by Bramwell Capital Management. The Manager also acts as investment
adviser of Davis New York Venture Fund, Inc., Davis High Income Fund, Inc.,
Davis Tax Free High Income Fund, Inc., Davis Series, Inc. and Davis
International Series, Inc. (collectively the "Davis Funds"). The Distributor
also serves as the principal underwriter for the Davis and Selected Funds.
The Manager receives advisory fees monthly based upon each Fund's
average daily net assets at the following annual rates: Selected American --
0.65% on the first $500 million, 0.60% on the next $500 million, and 0.5% on
amounts over $1 billion; Selected Special -- 0.70% on the first $50 million,
0.675% on the next $100 million, 0.65% on the next $100 million and 0.60% on
amounts over $250 million; Selected Government Income -- 0.50% on all amounts;
Selected Daily Government -- 0.30% on all amounts. Under the Sub-Advisory
Agreement with DSA-NY, the Manager pays all of DSA-NY's direct and indirect
costs of operations. All the fees paid to DSA-NY are paid by the Manager and
not the Funds.
The Manager has agreed to absorb Fund operating expenses during 1998
to the extent that the ratio of expenses to average net assets exceeds 1.50%
for Selected Government Income.
Bramwell Capital Management, Inc. (the "Sub-Adviser"), is the
Sub-Adviser for Selected Special. The Sub-Adviser is employed by the Manager
to manage the day to day investment operations for Selected Special subject to
the Manager's responsibility to monitor the performance and effectiveness of
the Sub-Adviser. Selected Special pays no fees directly to the Sub-Adviser.
The Sub-Adviser receives from the Manager a fee in an amount equal to 50% of
the advisory fees received by the Manager from Selected Special less 50% of
any trail commissions paid to dealers by the Manager in excess of 0.25% of the
Fund's net assets per annum, with a minimum annual fee of $150,000. The
Sub-Adviser also provides investment advisory services to individuals and
institutional investors as well as the Bramwell Funds, Inc. The Sub-Adviser's
offices are located at 745 Fifth Avenue, New York, New York 10151.
Elizabeth R. Bramwell is the controlling shareholder of the Sub-Adviser.
The shares of the Selected Funds are distributed by the Distributor.
The Distributor is paid a fee provided by Distribution Plans adopted and
approved by the Funds' Boards and shareholders in accordance with Rule 12b-1
under the Investment Company Act of 1940. This Rule regulates the manner in
which a mutual fund may assume the costs of distributing and promoting the
sale of its shares. The Distributor provides office space and equipment,
personnel, literature distribution and advertising to promote the sale of the
Funds' shares. Each Fund pays a monthly distribution fee at the annual rate of
0.25% of average daily net assets. In addition, the Plans provide that
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the Manager, in its sole discretion, may utilize its own resources for
distributing and promoting sales of Fund shares, including any profits from
its management fees.
The Distributor has agreements with securities dealers for
distributing shares of the Funds and providing services to shareholders. The
Manager may pay such firms service fees of up to 0.55% of the average net
asset value of the shares of Selected American and Selected Special and up to
0.25% of the average net asset value of the shares of Selected Government
Income and Selected Daily Government in accounts for which representatives of
the dealers are responsible and provide services.
Shares of the Selected Funds may be sold through banks or
bank-affiliated dealers. If it is determined that the Glass-Steagall Act
(which limits the ability of a bank to be an underwriter of securities)
prohibits banks or bank affiliates from selling shares of the Funds, there
would be no material adverse effects on the Funds. State securities laws may
require such firms to be licensed as securities dealers in order to sell
shares of the Selected Funds.
PORTFOLIO MANAGERS
Effective May 1, 1998, Christopher C. Davis is a co-portfolio manager
for Selected American. He was portfolio manager of Selected American from
February 19, 1997 through April 30, 1998. He was co-portfolio manager of
Selected American, with Shelby M.C. Davis, from December, 1994 until February
19, 1997. Prior thereto, Christopher C. Davis worked closely with Shelby M.C.
Davis as an assistant portfolio manager and research analyst beginning in
September, 1989. Christopher C. Davis also co-manages other equity funds
managed by the Adviser.
Effective May 1, 1998, Kenneth Charles Feinberg is a co-portfolio
manager for Selected American. He also co-manages other equity funds managed
by the Adviser. He has been associated with the Adviser since December, 1994
as a research analyst. He previously served as Assistant Vice President of
Investor Relations for the Continental Corporation from 1988 to 1994.
Shelby M.C. Davis is Chief Investment Officer of the Manager. As
Chief Investment Officer, he is active in providing investment themes,
strategies and individual stock selection to Selected American. He was the
primary portfolio manager for Selected American from May 1, 1993 until
February 19, 1997. He is an officer of all investment companies managed by the
Manager and was the portfolio manager of a growth fund from its inception in
1969 until February 19, 1997. He has been a director of the Manager's general
partner since 1969.
Elizabeth R. Bramwell is the primary portfolio manager of Selected
Special. Since February, 1994, Ms. Bramwell has been the Chief Executive
Officer and sole director of the Sub-Adviser. Prior to February, 1994, Ms.
Bramwell was President, Chief Investment Officer, Portfolio Manager and a
Trustee of The Gabelli Growth Fund from its inception, April 10, 1987.
Carolyn H. Spolidoro is the primary portfolio manager of Selected
Government Income and Selected Daily Government. She has been employed by the
Adviser since August, 1985. She is a Vice President of the Manager's General
Partner and Vice President of all of the investment companies managed by the
Manager, except the Selected Funds. She is also portfolio manager of the Davis
Series, Inc., Davis Government Bond Fund and Davis Government Money Market
Fund.
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BUYING SHARES
Shares of the Funds may be purchased through a securities dealer
having a sales agreement with the Manager (a "Qualified Dealer") or directly
from the Funds. No matter how you purchase your shares, you pay no sales load.
You buy shares at the net asset value computed after receipt of your
investment in proper form. This procedure is described below. Shares purchased
through a Qualified Dealer may be subject to administrative charges or
transaction fees imposed by the Dealer.
INITIAL INVESTMENT ($1,000 MINIMUM)
You may make an initial investment in any of the Selected Funds for
$1,000 or more.
DIRECTLY BY WIRE. Opening an account directly by wire means that your
money is invested earlier than if you mail a check and will go to work for you
sooner.
Shares may be purchased at any time by wiring federal funds directly
to State Street. Prior to an initial investment by wire, the shareholder
should telephone Davis Distributors, LLC at 1-800-243-1575 to advise them of
the investment and class of shares and to obtain an account number and
instructions. A completed Application Form should be mailed to State Street
after the initial wire purchase. To assure proper credit, the wire
instructions should be made as follows:
State Street Bank & Trust Co.
Boston, MA 02210
Attn: Mutual Fund Services
Fund Name
Shareholder Name
Shareholder Selected Account Number
Federal Routing Number 011000028
DDA 9905-325-8
We accept wires at no charge. However, your bank may charge you for
this service.
DIRECTLY BY MAIL. All it takes to open an account is a check and the
enclosed application. Once you've completed the application, mail it along
with your check to:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
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Please make your check payable to the Selected Funds, and do not
forget to indicate on the application the Fund(s) and amount(s) you are
investing. An investment in Selected American, Selected Special or Selected
Government Income will be effected at the next net asset value computed after
your order is received in good form. Your investment in Selected Daily
Government will be effected when your check is converted to federal funds
(money credited to a financial institution's account at a Federal Reserve
Bank), which usually takes at least two business days.
SUBSEQUENT INVESTMENTS ($25 MINIMUM)
DIRECTLY BY WIRE. Follow the instructions above for initial
investments directly by wire. There is no need to call us first. Just contact
your financial institution.
DIRECTLY BY MAIL. To add to your account by mail, please send your
check or money order with the detachable stub which you'll find at the bottom
of your most recent account statement, or you may drop us a note that includes
the registered account name, name of the Fund, account number, and amount you
wish to invest. Please remember that purchases should be sent to:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
AUTOMATIC INVESTING THROUGH YOUR BANK
Whether you purchase through a Qualified Dealer or directly, you may
arrange for automatic monthly investing by authorizing State Street Bank &
Trust Co. to initiate a debit to your bank account of a specific amount
(minimum $25) each month to be used to purchase Fund shares. The account
minimums of $1,000 for non-retirement accounts and $250 for retirement
accounts will be waived if, pursuant to the automatic investment plan, the
account balance will meet the minimum investment requirements within twelve
months of the initial investment. After each automatic investment, you will
receive a transaction confirmation and the debit should be reflected on your
next bank statement. You may terminate the plan at any time, and we may modify
or terminate the plan at any time. If you desire to utilize this investment
option, complete the Automatic Investment Plan portion of the Application form
enclosed with this Prospectus.
PROTOTYPE RETIREMENT PLANS
The Manager has available various types of prototype Individual
Retirement Account ("IRA") plans (deductible IRAs, non-deductible IRAs,
including "Roth IRAs", and educational IRAs) and SIMPLE IRA plans for both
individuals and employers. These plans utilize the shares of the Selected
Funds as their investment vehicle. State Street acts as custodian or trustee
for the plans and charges the participant $10 to establish each
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<PAGE>
account and an annual maintenance fee of $10 per social security number. Such
fees will be redeemed automatically at year end from your account, unless you
elect to pay the fee directly.
GENERAL
Selected American, Selected Special and Selected Government Income do
not issue share certificates unless you specifically request one each time you
make a purchase. We do not issue certificates for Selected Daily Government
shares, for fractional shares, or to shareholders who have elected the
Automatic Withdrawals plan. Also, shares represented by certificates may not
be redeemed by wire or by telephone. See "Selling Shares" for information on
how to sell shares.
Because clearance of foreign checks generally takes longer than
checks drawn on domestic banks, shares will not be purchased until the Funds
have collected funds from checks drawn on foreign banks. Therefore, all
purchases made by check should preferably be in U.S. dollars and made payable
to the Selected Funds. Any fees involved in collecting on foreign checks will
be charged to the shareholder. THIRD PARTY CHECKS WILL NOT BE ACCEPTED. When
purchases are made by check or periodic automatic investment, redemption will
not be allowed until the investment being redeemed has been in the account for
15 business days.
SELLING SHARES
With any of our Funds, you can access all or part of your account by
selling (redeeming) your shares through your securities dealer (who may charge
you a fee for this service) or directly by using one of the methods described
below. You can sell shares at the net asset value computed after receipt of
your redemption request in proper form. Please refer to "Dividends" and
"Determining the Price of Shares -- Net Asset Value" for information on
dividends and redemptions and the price you will receive for your shares upon
redemption.
Redemptions are ordinarily paid to you in cash. However, the Funds'
Boards of Directors are authorized to decide that conditions exist making cash
payments undesirable, although the Boards have never reached such a decision.
If the Boards should decide to make payment in other than cash, redemptions
could be paid in securities, valued at the value used in computing a Fund's
net asset value. There would be brokerage costs incurred by the shareholder in
selling such redemption proceeds. The Funds must, however, redeem shares
solely in cash up to the lesser of $250,000 or 1% of a Fund's net asset value,
whichever is smaller, during any 90-day period for any one shareholder.
To keep expenses low, we reserve the right to redeem any single Fund
account that falls below $750. Because we value you as a shareholder, before
your account is redeemed, you will be notified in writing and we will allow
you 30 days to make additional share purchases to bring your account value up
to the minimum level.
You may not sell shares by wire or through the Automatic Withdrawals
plan or write checks against a Selected Daily Government account until the
shares have been on the Fund's books for at least 15 days, although there is
no delay for selling shares which have been purchased by wire.
BY WIRE OR ELECTRONIC FUNDS TRANSFER
You can sell shares by wire or electronically through the Automated
Clearing House system (ACH), if you have selected this option in your
application, have named a commercial bank or savings institution and have
attached a voided check or encoded deposit slip to which we can send your
money. You will be charged a service fee of $5 for each wire redemption. There
is a $25,000 maximum for all the Funds if you utilize ACH.
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<PAGE>
Once you elect this redemption privilege, you or any other person can
make a request to use this privilege by calling 1-800-243-1575. You may also
use your privilege by mailing to the Funds a signed request that includes the
Fund name, account number and amount you wish to have wired. The proceeds will
be sent only to the financial institution you have designated on your
application. You may terminate this redemption privilege by notifying us in
writing. See "Please Note" following "By Telephone," as the conditions set
forth in the note also apply to wire and ACH redemptions.
Changes in your bank account ownership or bank account number
(including the name of the financial institution) may be made by written
notice to us with your signature and those of the new owner(s) signature
guaranteed. See "By Mail" for signature guarantee instructions. Additional
documents may be required when shares are held by a corporation, partnership,
executor, administrator, trustee or guardian.
Requests for wire redemptions are normally paid by the next business
day. However, in the event that the Manager determines that such redemptions
would adversely affect the Funds by requiring untimely disposition of
portfolio securities, such payment may be delayed for up to seven calendar
days.
AUTOMATIC WITHDRAWALS PLAN
This Plan may be appropriate if you have special income needs or
recurring major expenses and your account balance is $10,000 or more. Under
the Automatic Withdrawals Plan, you may choose to have your shares redeemed
from your account monthly, quarterly or semi-annually and a check will be sent
to you or to anyone you choose. Just let us know what the amount of the check
should be, although there is a $25 minimum for the Plan. Withdrawals can also
be processed electronically as described in the preceding section. Any income
and capital gains dividends will be automatically reinvested in your account
on the dividend reinvestment date. Shares are redeemed and checks are issued
at the end of the month of the time period selected.
Therefore, you should receive your check during the first week of the next
month.
As these withdrawals involve redemption of shares, they may result in
a gain or loss for income tax purposes (although generally no gain or loss
results from redemption of shares of Selected Daily Government). Purchases of
Selected American, Selected Special or Selected Government Income shares at
the same time you are selling shares may not be advantageous because of tax
consequences. In addition, depending upon the size of the requested payment
and fluctuations in the share price, you may exhaust your account.
BY TELEPHONE
You can sell shares by calling 1-800-243-1575 (see "How to Reach Us")
and receive a check by mail, but please keep in mind:
The check can be issued only in amounts up to a maximum $25,000;
The check can be issued only to the registered owner (who must be an
individual);
The check can be sent only to the address of record; and
Your current address of record must have been on file for 30 days.
PLEASE NOTE:
UNLESS YOU HAVE PROVIDED IN YOUR APPLICATION THAT THE TELEPHONE
PRIVILEGE IS NOT TO BE AVAILABLE, THE TELEPHONE PRIVILEGE IS AUTOMATICALLY
AVAILABLE FOR SELLING OR EXCHANGING SHARES. By exercising the telephone
privilege to sell or exchange shares, you agree that the Fund will not be
liable for following telephone instructions
20
<PAGE>
reasonably believed to be genuine. Reasonable procedures will be employed to
confirm that such instructions are genuine and if not employed, the Fund may
be liable for unauthorized instructions. Such procedures will include a
request for personal identification (account or social security number) and
tape recording of the instructions. You should be aware that during unusual
market conditions we may experience difficulty accepting telephone requests,
in which case you should mail your redemption request. See "By Mail" below.
BY MAIL
Simply send your written request to redeem your shares as follows:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
This written request must: (1) be signed by all account owners
exactly as the account is registered (both parties must sign in the case of
joint accounts); (2) state the dollar amount or number of shares to be
redeemed; and (3) specify the Fund and account number from which shares are to
be redeemed. Please remember that you cannot place any conditions on your
request. If any share certificates were issued, they must also be returned
duly endorsed or accompanied by a separate stock assignment. For your
protection, you should send your share certificates by registered mail.
If the redemption proceeds are $50,000 or less and are to be paid to
an individual shareholder of record at the address of record, a signature
guarantee is not required (unless there has been an address change within 30
days). All other redemption requests must have signatures guaranteed.
Signatures may be guaranteed by a commercial bank, trust company, savings and
loan association, federal savings bank, a member firm of a national stock
exchange, credit union or other eligible financial institution. An
acknowledgment by a notary public is not acceptable. Certain shareholders,
such as corporations, trusts and estates, may be required to submit additional
documents.
Normally, payment by check is made within seven days after the
redemption request is received with all required documents in proper form.
However, if you bought your shares by check, a Fund will delay sending
redemption proceeds until it has determined that your check has cleared, which
is generally within 15 days.
BY CHECK -- SELECTED DAILY GOVERNMENT ONLY
If you are a shareholder in Selected Daily Government, you can also
redeem shares by check. If you choose this free check writing privilege in
your account application (or request it later), you will be provided with a
supply of checks. These checks will be imprinted with your name, the Fund name
and your account number, and can be made payable to any person with a $100
minimum. You may not sell shares by writing checks against your Selected Daily
Government account until the shares have been on the Fund's books for at least
15 days.
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<PAGE>
When a check is presented for payment, a sufficient number of shares
in your account will be redeemed to cover the amount of the redemption check.
You will continue to earn dividends on these shares until the check clears.
All checks must be signed exactly as the account is registered so that, unless
only one signer is authorized on the account application, these redemption
checks must be signed by all account owners. You should not write a check to
close your account because the amount in your account varies daily (due to the
daily declaration of dividends). If you wish to close your account, you should
do so by the other redemption procedures described above.
IRA or other retirement plan accounts and certain accounts
established through brokers may not use the check redemption feature.
The Fund will not honor checks when the right to redeem shares has
been suspended or postponed, or whenever the account has been otherwise
restricted.
PLEASE NOTE:
The Funds reserve the right to terminate, suspend or modify the
Automatic Withdrawals plan, check-writing privilege or telephone redemption
privilege. A Fund may suspend the right of redemption or delay payment (1)
during any period when the New York Stock Exchange is closed (other than
customary weekend and holiday closings), (2) when trading in the markets that
a Fund normally utilizes is restricted, or an emergency exists, as determined
by the Securities and Exchange Commission, so that the disposal of any of a
Fund's investments or the determination of its net asset value is not
reasonably practicable, or (3) for such other periods as the Securities and
Exchange Commission by order may permit for protection of a Fund's
shareholders. In case of suspension of the right of redemption, you may either
withdraw your request for redemption or, if your request is not withdrawn,
receive payment based on the next net asset value computed after termination
of the suspension.
EXCHANGING SHARES
You may exchange your shares in one Selected Fund for shares of
another Selected Fund. Please remember that you cannot place any conditions on
your request. Simply send us a written request that includes:
Your name;
Your account number;
The name of the Fund you currently own;
The name of the Fund you wish to exchange into; and
The dollar amount or number of shares you wish to exchange.
If you have any share certificates, you must include them with your
request. A signature guarantee is not required except in cases where shares
are also redeemed for cash at the same time. For certificate delivery and
signature guarantee instructions, please see "Selling Shares -- By Mail."
You may also make exchanges by calling 1-800-243-1575 (see "How to
Reach Us"). Please remember that during unusual market conditions, we may
experience difficulty accepting telephone requests, in which case you should
mail your request. In addition, exchanges may also be made through securities
dealers who may charge you a fee for effecting an exchange. See "Please Note"
following "Selling Shares-By Telephone," as the conditions set forth in the
note also apply to exchanges.
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<PAGE>
An exchange of shares is considered a sale for federal income tax
purposes. A shareholder may realize a gain or loss depending upon whether the
value of the shares being exchanged is more or less than the adjusted cost
basis. This is usually the case except when exchanging shares of Selected
Daily Government for shares of another Selected Fund.
Since excessive trading may hurt Fund performance, disrupt portfolio
management and increase transaction costs, the Funds have decided to limit
excessive exchange activity. EXCHANGES OUT OF A FUND ARE LIMITED TO FOUR PER
CALENDAR YEAR. This exchange limitation may be terminated or amended at any
time upon such notice as is required by applicable regulatory authorities.
Exchanges are available only in states where shares of a particular
Fund being acquired may legally be sold. The Funds reserve the right to
suspend, terminate or modify the exchange privilege at any time, but will
normally give you advance notice.
FUND PERFORMANCE
The Funds may quote information from publications including, but not
limited to, The Wall Street Journal, Money Magazine, Forbes, Barron's,
Newsweek, Chicago Tribune, The New York Times, U.S. News and World Report, USA
Today, Fortune, Investors Business Daily, Financial World, Smart Money,
No-Load Fund Investor and Kiplinger's and may cite information from
Morningstar, Value Line or the Investment Company Institute. Selected
American, Selected Special and Selected Government Income may compare their
performance to the Consumer Price Index, Dow Jones Industrial Average,
Standard & Poor's 500 Stock Index, the Russell 2,000 Index or Wilshire 5,000
and to the performance of mutual fund indexes as reported by Lipper Analytical
Services, Inc. or CDA Investment Technologies, Inc., two widely recognized
independent mutual fund reporting services. We invite you to compare the
performance of the Selected Funds to the historical returns of various
investments, performance indexes or economic indicators such as stocks, bonds,
certificates of deposit, money market funds and U.S. Treasury Bills. Some of
these investments may offer fixed rates of return and guaranteed principal and
may be insured. For more information on the Funds' performance, and
performance advertising see "Performance Data" in the Statements of Additional
Information. Please remember that performance information is based upon
historical results and is not necessarily indicative of future performance.
The Funds' Annual Report contains additional performance information.
Such Annual Report will be made available upon request and without charge.
STOCK-ORIENTED FUNDS
We may advertise the performance of Selected American or Selected
Special expressed in terms of "total return" or "average annual total return."
Average annual total return (which is standardized in accordance with
Securities and Exchange Commission regulations) and total return reflect the
change in the value of an investment in a Fund over a stated period. Total
return and average annual total return measure both the net investment income
from, and any realized or unrealized appreciation of, a Fund's holdings for a
stated time period and assume that all dividends were reinvested. The average
annual total return calculation is annualized and is shown as a percentage
change over the time period. Total return represents the aggregate percentage
or dollar value change over the stated period. Performance data will generally
be stated for one, five and ten year periods, but may also be quoted for other
longer or shorter periods.
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<PAGE>
SELECTED GOVERNMENT INCOME
In addition to advertising "total return" or "average annual total
return" (see discussion under "Fund Performance--Stock-Oriented Funds"), we
may also advertise Selected Government Income's "yield." "Yield" with respect
to Selected Government Income refers to the net investment income generated by
a hypothetical investment in the Fund during a thirty day or one month period.
The income is then annualized by assuming the same income was generated each
month for a twelve month period, and is shown as a percentage of the
investment.
SELECTED DAILY GOVERNMENT
We may, from time to time, advertise Selected Daily Government's
"yield," and "compounded yield."
"Yield" with respect to Selected Daily Government refers to the net
investment income generated by a hypothetical investment in the Fund during a
seven-day period. The income is then annualized by assuming the same income
was generated each week during a 52-week period, and is shown as a percentage
of the investment. "Compounded yield" is determined similarly but, when
annualized, the income earned by an investment is assumed to be compounded
weekly. Compounded yield will be slightly higher than the yield because of the
effects of compounding.
The performance of Selected Daily Government may be compared to that
of other money market mutual funds tracked by Lipper or rated by Donaghue's
Money Fund Report, a money market fund reporting service. Investors may want
to compare the Fund's performance to that of various bank products as reported
by BANK RATE MONITOR<A174>, a financial reporting service that publishes each
week average rates of bank and thrift institution money market deposit
accounts, Super N.O.W. accounts and certificates of deposit.
DETERMINING THE PRICE OF SHARES -- NET ASSET VALUE
The price you pay when you buy shares in a Fund and the price you
receive if you redeem is the next net asset value computed after we receive
your order to buy or redeem in proper form.
NET ASSET VALUE. The net asset value per share of each Fund is
determined daily by dividing the total value of investments and other assets,
less any liabilities by the total outstanding shares. The net asset value of
the Fund is determined daily as of the earlier of the close of the New York
Stock Exchange (the "Exchange") or 4:00 p.m., Eastern Time, on each day that
the Exchange is open for trading.
The price per share for purchases or redemptions made directly
through State Street normally is such value next computed after State Street
receives the purchase order or redemption request. In order for your purchase
order or redemption request to be effective on the day you place your order
with a Qualified Dealer (your broker-dealer or other financial institution),
such Qualified Dealer must (i) receive your order before 4:00 p.m. Eastern
time and (ii) promptly transmit the order to State Street. The Qualified
Dealer is responsible for promptly transmitting purchase orders or redemption
requests to State Street so that you may receive the same day's net asset
value. Note that in the case of redemptions and repurchases of shares owned by
corporations, trusts or estates, or shares represented by outstanding
certificates, State Street may require additional documents to effect the
redemption and the applicable price will be that next determined following the
receipt of the required documentation or outstanding certificates. See
"Redemption of Shares."
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<PAGE>
VALUATION OF PORTFOLIO SECURITIES
Selected American, Selected Special and Selected Government Income
each value their security holdings on the basis of market value. Securities
traded on a national securities exchange are valued at the last published
sales price on the exchange, or, in the absence of recorded sales, at the
closing bid price on such exchange. Over-the-counter securities are valued at
the closing bid price. Fixed-income securities may be based on prices provided
by a pricing service. Debt securities maturing in 60 days or less are usually
valued at amortized cost and longer term debt securities may be valued by an
independent pricing service. Securities for which market quotations are not
readily available and other assets will be valued at fair value as determined
by or at the direction of the Board of Directors.
Selected Daily Government investments are normally valued at
amortized cost, which means that they are valued at acquisition cost (and
adjusted for amortization of premium or discount) rather than current market
value. This enables Selected Daily Government to maintain a stable net asset
value or share price of $1.00, although there can be no assurance that a
stable price of $1.00 will always be maintained.
If a deviation of 1/2 of 1% or more were to occur between Selected
Daily Government's net asset value per share calculated at current market
values and amortized cost, or if there were any other deviations that the
Board of Trustees believed would result in a material dilution to
shareholders, the Board of Trustees would promptly consider what action, if
any, should be taken. Please see "Net Asset Value" in the Statement of
Additional Information for further discussion.
DIVIDENDS
To help keep your account growing, income and capital gains dividends
from any Fund are automatically reinvested on the payment date for you as
additional shares of that Fund, unless you request that dividends be paid by
check. You may make such an election on your account application or make such
a request later by writing to the Funds. Your request will be effective for
the current dividend or distribution if it is received before the record date.
Requests received after that time will be effective beginning with the next
dividend or distribution.
If you elect to have dividends and/or distributions paid in cash, and
the U.S. Postal Service cannot deliver the check, or if it remains uncashed
for six months, it, as well as future dividends and distributions, will be
reinvested in additional shares.
STOCK-ORIENTED FUNDS
Selected American pays any income dividends quarterly and any capital
gains dividends at least annually. Selected Special pays any income and
capital gains dividends at least annually.
SELECTED GOVERNMENT INCOME
Net income dividends are accrued daily and paid monthly. Shares earn
dividends as of the day after the effective purchase date up to, but not
including, the date of redemption. Capital gains dividends, if any, are paid
at least annually.
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<PAGE>
SELECTED DAILY GOVERNMENT
Dividends from the net income of Selected Daily Government are
accrued daily and paid monthly. Shares earn dividends as of the first business
day after the effective purchase date up through the date of redemption.
ALL FUNDS
As a protection, if two of your dividend checks are returned as
undeliverable, those undelivered dividends will be invested in additional
shares at the then current net asset value, and the account will be
redesignated as a dividend reinvestment account.
TAXES
The Funds intend to continue qualifying as "regulated investment
companies" under the Internal Revenue Code (the "Code"). The Funds distribute
all of their taxable net income and net realized capital gains to shareholders
so that the Funds themselves do not pay any income taxes. You should consult
your tax adviser about the effects of federal, state and local tax laws on
investments in the Funds.
Distributions of net investment income from a Fund are taxable to
shareholders as ordinary income. A portion of the income dividends received by
the Funds from U.S. corporations may qualify for the "dividends received"
deduction available to corporate shareholders. Distributions from net
long-term capital gains are taxable as long-term capital gains regardless of
how long Fund shares are owned. Distributions from net short-term capital
gains are taxable as ordinary income. Shareholders are informed annually of
the amount and nature of any income or gain. Distributions are taxable whether
received in cash or reinvested in additional shares.
If for any reason you do not provide us with your correct Social
Security or Tax I.D. number (or certify that you are not subject to backup
withholding), we are required by the Code to withhold a portion of taxable
dividends and proceeds of certain exchanges and redemptions.
If a Fund distributes less than the amount it is required to
distribute during any year, a 4% excise tax will be imposed on the
undistributed amount. The Funds intend to declare and distribute dividends
during each year sufficient to prevent imposition of the excise tax.
RETIREMENT PLANS
The Selected Funds offer prototype retirement plans (e.g. 401(k),
profit sharing, money purchase, Simplified Employee Pension ("SEP") plans,
model "SEP" plans, model 403(b) and 457 plans for charitable, educational and
governmental entities) for corporations and self-employed individuals and
prototype Individual Retirement Account ("IRA") plans and SIMPLE IRA plans for
both individuals and employers. These plans utilize the shares of the Selected
Funds as their investment vehicle. State Street acts as custodian or trustee
for the plans and charges the participant $10 to establish each account and an
annual maintenance fee of $10 per Social Security number. Such fees will be
redeemed automatically at year end from your account, unless you elect to pay
the fee directly.
The Funds' custodian, State Street Bank and Trust Co., acts as the
trustee or custodian under the IRA, SEP and 403(b) plans and may act as
trustee or custodian under the other plans. For information, please call
1-800-243-1575, or write us at Selected Funds, P.O. Box 8243, Boston, MA
02266-8243.
26
<PAGE>
Please do not use the application included with this prospectus to
open your retirement plan account. Instead, call 1-800-243-1575 for a
retirement plan account application. Please consult your tax adviser to
determine the effect of any of the plans on your financial picture.
ORGANIZATION OF THE FUNDS
STOCK-ORIENTED FUNDS
Selected American, organized in 1933, and Selected Special, organized
in 1939, are Maryland corporations and are both diversified, open-end
management investment companies. Selected American and Selected Special each
issue one series of common stock. Shares when issued are fully paid,
non-assessable, and freely transferable. Shares of each Fund have equal
non-cumulative voting rights and equal rights with respect to dividends,
assets and liquidation.
SELECTED GOVERNMENT INCOME AND SELECTED DAILY GOVERNMENT
Selected Government Income and Selected Daily Government are each
separate series of Selected Capital Preservation Trust. The Trust is a
diversified open-end management investment company organized as a business
trust under the laws of Ohio in 1987. Shares of the Trust when issued are
fully paid, non-assessable and freely transferable.
Shares of each series have equal voting rights with other shares of
that series and each share is entitled to one vote at a shareholder meeting.
On certain matters, such as election of the Board of Trustees and ratification
of the selection of independent auditors, all series vote together. However,
on certain matters affecting a particular series, such as changes in
investment restrictions, the shares of that series vote separately.
ALL FUNDS
The Funds do not have annual shareholder meetings but do have special
shareholder meetings when the Boards believe it is necessary or when required
by law. A Fund will have a special meeting when requested in writing by the
holders of at least 10% of the shares entitled to vote at a meeting.
In the opinion of the staff of the Securities and Exchange
Commission, the use of this combined Prospectus may make each Fund liable for
any misstatement or omission in this Prospectus regardless of the particular
Fund to which it pertains.
DIRECTORS AND TRUSTEES
The management and affairs of the Funds are under the direction and
supervision of the Boards of Directors and Trustees.
The following persons serve as Directors and Trustees of the Selected
Funds:
William P. Barr Katherine L. MacWilliams
Floyd A. Brown James J. McMonagle
Andrew A. Davis Richard C. O'Brien
Christopher C. Davis Larry Robinson
Jerome E. Hass Marsha Williams
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<PAGE>
More information concerning the Directors and Trustees is contained
in the Statements of Additional Information.
HOW TO REACH US
You can have your questions answered about any of the Selected Funds
or the status of your account simply by calling 1-800-243-1575 Monday through
Friday from 7:00 a.m. to 4:00 p.m. Mountain time. The Funds are closed on days
on which the New York Stock Exchange is closed. Whenever you want to contact
us by mail, please write to us at:
State Street Bank & Trust Co.
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
For overnight delivery:
State Street Bank & Trust Co.
c/o Selected Funds
2 Heritage Drive 5th Floor
North Quincy, MA 02171
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<PAGE>
INFORMATION CONCERNING THE DRAFTS USED FOR CHECK WRITING PRIVILEGE:
Selected Daily
Government Check
Writing Privilege:
[ ] If you wish to use
this privilege please
check the box to the
left and complete the
signature card below.
1. Your Selected Daily Government Fund drafts are
paid from an account at State Street Bank & Trust
Company ("State Street").
2. In connection with this account, you will have
the same rights and duties with respect to stop
payment orders, "stale" drafts, unauthorized
signatures, alterations, and unauthorized
endorsements as bank checking account customers do
under the Massachusetts Uniform Commercial Code.
All notices with regard to those rights and duties
must be given to State Street.
3. Stop payment instructions must be given to
State Street by calling their service telephone
number for the Selected Funds, (800) 243-1575.
State Street Bank & Trust Company, c/o The
Selected Funds.
4. These rules may be amended from time to time.
THE SELECTED DAILY GOVERNMENT FUND SIGNATURE CARD
(TYPE OR PRINT)
Account
number_____________________________________________
Shareholder
Name_______________________________________________
Co-Shareholder
Name_______________________________________________
BY SIGNING THIS SIGNATURE CARD THE UNDERSIGNED
AGREE(S) TO BE SUBJECT TO THE INSTRUCTIONS AND
RULES, AS NOW IN EFFECT AND AS AMENDED FROM TIME
TO TIME, OF THE SELECTED DAILY GOVERNMENT FUND,
THAT PERTAIN TO THE USE OF REDEMPTION CHECKS.
(SOME OF THE CURRENT RULES APPEAR ABOVE.) EACH
SIGNATORY GUARANTEES THE OTHER'S SIGNATURE.
(Signature)________________________________________
(Signature of Co-Shareholder)______________________
[ ] Check here if both signatures are required on
checks.
[ ] Check here if only one signature is required on
checks.
If neither box is checked, all checks will require
both signatures.
29
<PAGE>
DAVIS SELECTED ADVISERS, L.P.
GROUP OF FUNDS
Selected American Shares
Selected Special Shares
Selected U.S. Government Income Fund
Selected Daily Government Fund
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
124 E Marcy Street
Santa Fe, NM 87501
DISTRIBUTOR
Davis Distributors LLC
124 East Marcy Street
Santa Fe, NM 87501
LEGAL COUNSEL
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, IL 60202-2502
AUDITORS
KPMG Peat Marwick
1707 17th St., Suite 2300
Denver, Colorado 80202
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TABLE OF CONTENTS
PAGE
----
Summary.......................................................... 2
Fund Expenses.................................................... 3
Financial Highlights............................................. 4
Investment Objectives............................................ 8
Manager, Sub-Advisers and Distributor............................ 15
Portfolio Managers............................................... 16
Buying Shares.................................................... 17
Selling Shares................................................... 19
Exchanging Shares................................................ 22
Fund Performance................................................. 23
Determining the Price of Shares-Net Asset Value.................. 24
Dividends........................................................ 25
Taxes............................................................ 26
Retirement Plans................................................. 26
Organization of the Funds........................................ 27
Directors and Trustees........................................... 27
How to Reach Us.................................................. 28
31
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MAY 1, 1998
SELECTED SPECIAL SHARES, INC.
124 East Marcy Street
Santa Fe, New Mexico 87501
Call Toll-Free l-800-243-1575
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1998. THE PROSPECTUS MAY
BE OBTAINED FROM THE FUND.
THE DECEMBER 31, 1997 ANNUAL REPORT ACCOMPANIES THIS STATEMENT OF ADDITIONAL
INFORMATION. THE FINANCIAL STATEMENTS APPEARING IN THIS REPORT ARE
INCORPORATED HEREIN BY REFERENCE.
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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..................................................... 7
Directors and Officers.............................................. 7
Directors' Compensation Schedule.................................... 9
Manager and Sub-Advisers............................................ 10
Custodian........................................................... 11
Independent Auditors................................................ 11
Distribution Plan................................................... 11
Portfolio Transactions.............................................. 11
Taxes............................................................... 12
Major Shareholders.................................................. 12
Shareholder Meetings................................................ 13
Performance Data.................................................... 13
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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. 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.
3. 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.
4. 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.
5. 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.
6. Underwrite securities of other issuers (although the Fund may
technically be considered an underwriter if it sells restricted
securities).
7. 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.
8. 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.
9. 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
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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.
10. Concentrate more than 25% of its assets in securities of any one
industry.
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. Income may be earned on
collateral received to secure the loans. Cash collateral would be invested in
money market instruments or in a pooled account investing 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
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.
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
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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. Economic downturns and/or significant increases in interest
rates are likely to have a negative effect on the high yield, high risk bond
market and consequently on the value of these bonds, as well as increase the
incidence of defaults on such bonds.
High yield, high risk bonds may be issued in a variety of
circumstances. Some of the more common circumstances are issuance by
corporations in the growth stage of their development, in connection with a
corporate reorganization or as part of a corporate takeover. Companies that
issue such high yielding, high risk bonds often are highly leveraged and may
not have 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
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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.
The debt securities (including convertible securities) in which the
Fund 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 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 Fund to dispose of particular issues and
may cause the Fund to incur special securities registration responsibilities,
liabilities and costs and liquidity and valuation difficulties. Unexpected net
redemptions may force the Fund 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
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extent that the Fund invest 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 taxable distribution requirements.
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, Martin
Luther King, Jr., Day, 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., Davis High Income Fund, Inc.,
Davis Tax-Free High Income Fund, Inc., Davis Series, Inc. and Davis
International Series, Inc. (collectively the "Davis Funds").
William P. Barr (5/23/50) - 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.
Andrew A. Davis (6/25/63),* 124 East Marcy Street, Santa Fe, NM 87501.
Director. Director and Vice President of each of the Davis Funds (except Davis
International Series, Inc.), Director and President, Venture Advisers, Inc.;
Director and Vice President Davis Selected Advisers-NY, Inc.; Consultant to
Shelby Cullom Davis & Co.;
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Consultant to Capital Ideas, a private financial consultant. Former Vice
President and head of convertible security research, PaineWebber,
Incorporated.
Christopher C. Davis (7/13/65),* 609 Fifth Ave, New York, NY 10017. Director..
Director and Vice President of each of the Davis Funds; Director, Vice
Chairman, Venture Advisers, Inc.; Director, Chairman, Chief Executive Officer,
Davis Selected Advisers-NY, Inc.; Chairman and Director, Shelby Cullom Davis
Financial Consultants, Inc.; employee of Shelby Cullom Davis & Co., a
registered broker/dealer; Director, Rosenwald, Roditi and Company, Ltd., an
offshore investment management company.
Jerome E. Hass (6/1/40) - Director. Professor of Finance and Business Strategy
Johnson Graduate School of Management, Cornell University. Consultant National
Economic Research Associates. Formerly Chief of Research of the Federal Power
Commission and Special Assistant to James R. Schlesinger at the Executive
Office of the President of the United States.
Katherine L. MacWilliams (1/19/56) - Director. Vice President, Treasurer Coors
Brewing Company and Adolph Coors Company. Formerly Vice President of Capital
Markets for UBS Securities in New York. Former member of the Board of
International Swaps and Derivatives Association, Inc.
James J. McMonagle (10/1/44) - Chairman and 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.
Richard O'Brien (9/12/45) - Director. Corporate Economist for Hewlett-Packard
Company. Director, National Association of Business Economists, former
President of the Northern California High Technology Council and former
Chairman of the Economic Advisory Council of the California Chamber of
Commerce.
Larry Robinson (10/28/28) - 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.
Marsha Williams (3/28/51) - Director. Treasurer, Amoco Corporation. Director,
Illinois Benedictine College, The Conference Board Council of Corporate
Treasurers, Illinois Council on Economic Education, Chicagoland Chamber of
Commerce; Formerly, Director, Fertilizers of Trinidad and Tobago from
1989-1993, Ok Tedi Mining Limited from 1992-1993, Just Jobs from 1988-1992.
Her address is 200 E. Randolph Dr., Chicago, IL 60601.
**Kenneth C. Eich (8/14/53), 124 East Marcy Street, Santa Fe, NM 87501. Vice
President. Vice President of each of the Davis Funds, Chief Operating Officer,
Venture Advisers, Inc.; Vice President, Davis Selected Advisers-NY, Inc.;
President, Davis Distributors, L.L.C. Former President and Chief Executive
Officer of First of Michigan Corporation. Former Executive Vice President and
Chief Financial Officer of Oppenheimer Management Corporation.
**Eileen R. Street (3/11/62), 124 East Marcy Street, Santa Fe, NM 87501. Vice
President, Treasurer and Assistant Secretary. Vice President, Treasurer and
Assistant Secretary of each of the Davis Funds, Senior Vice President and
Chief Financial Officer, Venture Advisers, Inc.; Vice President and Treasurer,
Davis Selected Advisers-NY, Inc.; Senior Vice President and Treasurer, Davis
Distributors, L.L.C.
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**Sharra L. Reed (9/25/66), 124 East Marcy Street, Santa Fe NM 87501.
Assistant Treasurer and Assistant Secretary. Assistant Treasurer and assistant
Secretary of each of the Davis Funds, Vice President of Venture Advisers, Inc.
Former Unit Manager with Investors Fiduciary Trust Company.
**Thomas D. Tays (3/7/57), 124 East Marcy Street, Santa Fe NM 87501. Vice
President and Secretary. Vice President and Secretary of the Company and each
of the Davis Funds, Vice President and Secretary, Venture Advisers, Inc.,
Davis Selected Advisers-NY, Inc., and Davis Distributors, L.L.C. Former Vice
President and Special Counsel of U.S. Global Investors, Inc.
**Arthur Don (9/24/53) - Assistant Secretary of each of the Selected Funds.
Assistant Secretary of each of the Davis Funds. Partner, D'Ancona & Pflaum,
Fund Legal Counsel. His address is 30 North LaSalle Street, Suite 2900,
Chicago, Illinois 60602.
**Sheldon R. Stein (11/29/28) - Assistant Secretary of each of the Selected
Funds. Assistant Secretary of each of the Davis Funds. Partner, D'Ancona &
Pflaum, Fund Legal Counsel. His address is 30 North LaSalle Street, Suite
2900, Chicago, Illinois 60602.
As of March 31, 1998, the directors and officers of the Fund as a group owned
0.662% 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 Special Shares, Inc. and
Selected Capital Preservation Trust.
DIRECTORS' COMPENSATION SCHEDULE
During the fiscal year ended December 31, 1997 the compensation paid
to directors who are not considered to be interested persons of the Fund was
as follows:
Name Aggregate Fund Total Complex
Compensation Compensation*
William P. Barr 712 23,000
Floyd A Brown 991 32,000
William G. Cole** 991 32,000
Robert J. Greenebaum** 1,455 47,000
Jerome E. Hass 790- 25,500
Katerine L. MacWilliams 867 28,000
James J. McMonagle 1,099 35,500
Richard C. O'Brien 867 28,000
Larry Robinson 712 23,000
Marsha Williams 790 25,500
* Complex compensation is the aggregate compensation paid, for services
as a Director, by all mutual funds with the same investment adviser.
** Mr. William G. Cole and Mr. Robert J. Greenebaum retired from the Board
of Directors effective December 31, 1997.
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MANAGER AND SUB-ADVISERS
Davis Selected Advisers, L.P., 124 East Marcy Street, Santa Fe, New
Mexico 87501, a Colorado limited partnership, has served as the Manager since
May 1, 1993. The Manager's 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.
Davis Selected Advisers-NY, Inc. ("DSA-NY"), a wholly-owned subsidiary
of the Manager, performs research and other services for the Funds on behalf
of the Manager under a sub-Advisory Agreement with the Manager. This Agreement
does not affect the services provided by Bramwell Capital Management.
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 years ended December 31, 1997, 1996, and 1995 the Fund paid
management fees of, $466,352, $377,851 and $343,348, respectively.
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. All the fees paid
to DSA-NY are paid by the Manager and not the Fund.
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. DSA-NY has adopted a Code of Ethics that is
identical to the Manager's Code.
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CUSTODIAN
The Custodian of the Fund's assets is State Street Bank and Trust
Company, One Heritage Drive, North Quincy, Massachusetts 02171. The Custodian
maintains all of the instruments representing the investments of the Fund and
all cash. The Custodian delivers securities against payment upon sale and pays
for securities against delivery upon purchase. The Custodian also remits Fund
assets in payment of Fund expenses, pursuant to instructions of officers or
resolutions of the Board of Directors.
INDEPENDENT AUDITORS
The Fund's auditors are KPMG Peat Marwick, 707 17th St. Suite 2300,
Denver, Colorado 80202. The services of KPMG Peat Marwick include an audit of
annual financial statements included in the annual reports to shareholders,
amendments to the registration statement filed with the Securities and
Exchange Commission, consultation on financial accounting and reporting
matters, and meeting with the Audit Committee of the Board of Directors. In
addition, the auditors normally provide assistance in preparation of federal
and state income tax returns and related forms.
DISTRIBUTION PLAN
Davis Distributors, LlC (the "Distributor") is the principal
underwriter of the Fund's shares. 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 Distributor 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 Distributor's own resources and not by the
Fund.
During the year ended December 31, 1997, the Fund's distribution fees
were $168,093. The Distributor reported that the following amounts were spent
on the indicated items: $234,555 on advertising; $56,138 on printing and
mailing prospectuses and sales literature to other than current shareholders;
$30,726 on fees to brokers.
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.
11
<PAGE>
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 years ended December 31, 1997, 1996 and 1995, the Fund paid
brokerage commissions of $54,724, $117,165 and $163,080, respectively. Of this
amount, 97% and 95%, respectively, was paid to brokers providing research
services to the Fund.
During the years ended December 31, 1997, 1996, and 1995 the Fund paid
brokerage commissions to Shelby Cullom Davis & Co. (an affiliated person of
the Adviser) of $0, $0 and $0, respectively. During the year ended December
31, 1997 these commission represented 0% of total commissions paid and 0% of
the Fund's aggregate dollar amount of transactions involving the payment of
commissions.
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
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 March 31, 1998, Shelby Cullom Davis & Co., 609 5th Avenue, Floor
11, New York, NY 10017-1021, owned of record 451,102.470 shares of the Fund's
common stock, constituting 7.50% of the outstanding shares of
12
<PAGE>
such stock. Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco,
CA 94104-4122 owned of record 321,132.361 shares of the Fund's common stock,
constituting 5.34% 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. The Secretary is required to call a special meeting of
shareholders upon written request of the holders of at least 10% of the shares
entitled to be cast as votes as at the 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:
One year ended December 31, 1997........................... 26.90%
Five years ended December 31, 1997......................... 15.54%
Ten years ended December 31, 1997.......................... 14.93%
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
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.
13
<PAGE>
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 December 31, 1997 was 26.90%, 105.86% and 302.24%, 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 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.
14
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial statements:
Included in Part A:
Financial Highlights.
Included in Part B by incorporation from the
December 31, 1997 Annual Report:
(i) Schedule of Investments.
(ii) Statement of Assets and Liabilities.
(iii) Statement of Operations.
(iv) Statement of Changes in Net Assets
(v) Notes to Financial Statements.
(vi) Report of Tait, Weller & Baker.
(b) Exhibits:
(1) Articles of Incorporation, incorporated by
reference to Exhibit (1) (a) to
Post-Effective Amendment No. 40 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(2) Amended and Restated Bylaws as of January
27, 1994, incorporated by reference to
Exhibit (2) to Post-Effective Amendment
No. 46 to Registrant's Registration
Statement on Form N-1A, File No. 2-27514.
(3) Not applicable.
(4) Not applicable.
(5)(a) Management Agreement dated May 1, 1993,
incorporated by reference to Exhibit (5)
to Post-Effective Amendment No. 43 to
<PAGE>
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(5)(b) Sub-Advisory dated November 1, 1994,
incorporated by reference to Exhibit 5(b)
to Post-Effective Amendment No. 47 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(5)(c) Sub-Advisory Agreement dated December 1,
1996, incorporated by reference to Exhibit
(5)(b) to Post-Effective Amendment No. 50
to Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(6) Distribution Services Agreement and Plan
of Distribution dated May 1, 1993,
incorporated by reference to Exhibit
(6)/(15) to Post-Effective Amendment No.
43 to Registrant's Registration Statement
on Form N-1A, File No. 2-27514.
(7) Not applicable.
(8)(a) Custody Agreement dated November 25, 1991,
incorporated by reference to Exhibit (8)
(a) to Post-Effective Amendment No. 41 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(8)(b) Agency Agreement dated November 25, 1991,
incorporated by reference to Exhibit (8)
(b) to Post-Effective Amendment No. 41 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(9) Not Applicable
(10)* Opinion and Consent of Counsel (D'Ancona &
Pflaum).
(11)* Consent of Tait, Weller & Baker.
(12) Financial Statements, included in
Statement of Additional Information.
(13) Not applicable.
(14)(a) Individual Retirement Account Plan
Documents, incorporated by reference to
Exhibit (14) (a) to Post-Effective
Amendment No. 42 to Registrant's
Registration Statement on Form N-1A, File
No. 2-27514.
<PAGE>
(14)(b) Money Purchase Pension and Profit Sharing
Plan Basic Document, incorporated by
reference to Exhibit (14) (b) to
Post-Effective Amendment No. 43 to
Registrant's Registration Statement on
form N-1A, File No. 2-27514.
(14)(c) Money Purchase Pension Adoption Agreement,
incorporated by reference to Exhibit (14)
(c) to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(14)(d) Profit-Sharing Adoption Agreement,
incorporated by reference to Exhibit (14)
(d) to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(14)(e) Profit-Sharing 401(k) Plan, incorporated
by reference to Exhibit (14) (e) to
Post-Effective Amendment No. 43 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(14)(f) 403 (b) Plan Documents, incorporated by
reference to Exhibit (14) (f) to
Post-Effective Amendment No. 40 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(14)(g) Prototype Simplified Employee Pension Plan
Documents, incorporated by reference to
Exhibit (14) (g) to Post-Effective
Amendment No. 40 to Registrant's
Registration Statement on Form N-1A, File
No. 2-27514.
(14)(h) Deferred Compensation Section 457 Savings
Plan, incorporated by reference to Exhibit
(14) (h) to Post-Effective Amendment No.
40 to Registrant's Registration Statement
on Form N-1A, File No. 2-27514.
(14)(i) Defined Contribution Trust, incorporated
by reference to Exhibit (14) (i) to
Post-Effective Amendment No. 43 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
(15) Distribution Services Agreement and Plan
of Distribution dated May 1, 1993,
incorporated by reference to Exhibit
(6)/(15) to Post-Effective Amendment No.
43 to Registrant's Registration Statement
on Form N-1A, File No. 2-27514.
(16) Sample Computation of Performance Data,
incorporated by reference to Exhibit (16)
to Post-Effective Amendment No. 40 to
Registrant's Registration Statement on
Form N-1A, File No. 2-27514.
<PAGE>
(17)(a) Powers of Attorney, incorporated by
reference to Exhibit (17) to
Post-Effective Amendment No. 48 and
Exhibit (17)(b) to Post-Effective
Amendment No. 50 to Registrant's
Registration Statement on Form N-1A, File
No. 2-27514.
(17)(b)* Power of attorney for Andrew A. Davis and
Christopher C. Davis.
(17)(c)* Power of attorney for Shelby M.C. Davis
and Eileen R. Street..
* Filed herein
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of March 31, 1998
-------------- --------------------
Common Stock 4,413
Item 27. Indemnification
Information concerning indemnification is incorporated by reference
herein from Item 4, Part II of Registrant's Post-Effective Amendment No. 27,
and from Item 27 of Post-Effective Amendment No. 36 under the Securities Act
of 1933. Officers and Directors of Registrant are insured against liability by
reason of acts, errors or omissions in such capacities.
Item 28. Business and Other Connections of Investment Adviser
Information pertaining to business and other connections of
Registrant's investment adviser is incorporated by reference to the Prospectus
and Statement of Additional Information contained in Parts A and B of this
Registration Statement at the sections entitled "Adviser, Su-Advisers, and
Distributor" in the Prospectus and "Investment Advisory Services" in the
Statement of Additional Information.
Item 29. Principal Underwriters
(a) Davis Distributors, L.L.C., a wholly owned subsidiary of the
Adviser, located at 124 East Marcy Street, Santa Fe, NM 87501, is the
principal underwriter for the Registrant and also acts as principal
underwriter for Davis New York Venture Fund, Inc., Davis Tax-Free High Income
Fund, Inc., Davis Series, Inc., Davis High Income Fund, Inc., Davis
International Series, Inc., Selected American Shares, Inc. and Selected
Capital Preservation Trust.
(b) Management of the Principal Underwriter:
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
- ------------------ -------------------------- ---------------------
<S> <C> <C>
Kenneth C. Eich President Vice President
124 East Marcy Street
Santa Fe, NM 87501
Eileen R. Street Senior Vice President, Treasurer Vice President, Treasurer and
124 East Marcy Street and Assistant Secretary Assistant Secretary
Santa Fe, NM 87501
Thomas D. Tays Vice President and Secretary Vice President and Secretary
124 East Marcy Street
Santa Fe, NM 87501
Russell O. Wiese Senior Vice President None
124 East Marcy Street
Santa Fe, NM 87501
Sharra Reed Assistant Treasurer Assistant Treasurer and
124 East Marcy Street Assistant Secretary
Santa Fe, NM 87501
</TABLE>
Item 30. Location of Accounts and Records
Accounts and records are maintained at the offices of Davis Selected
Advisers, L.P., 124 East Marcy Street, Santa Fe, New Mexico 87501, and at the
officers of the Registrant's custodian, State Street Bank and Trust Company,
One Heritage Drive, North Quincy, Massachusetts 02171, and the Registrant's
transfer agent State Street Bank and Trust Company, c/o Service Agent, BFDS,
Two Heritage Drive, 7th Floor, North Quincy, Massachusetts 02171.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of Registrant's latest annual report to shareholders upon
request and without charge.
<PAGE>
SELECTED SPECIAL SHARES, INC.
SIGNATURES
Registrant certifies that this Amendment meets all of the
requirements for effectiveness pursuant to Rule 485(b).
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago and State of Illinois on the 27th day of
April, 1998
SELECTED SPECIAL SHARES, INC.
*By: /s/ Sheldon R. Stein
--------------------------------
Sheldon R. Stein,
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
Shelby M.C. Davis* President, April 27, 1998
------------------------ Chief Executive
Shelby M.C. Davis Officer and Director
Eileen R. Street* Vice President, April 27, 1998
------------------------ principal accounting
Eileen R. Street officer
*By: /s/ Sheldon R. Stein
-----------------------
Sheldon R. Stein,
Attorney-in-Fact
*Sheldon R. Stein signs this document on behalf of the Registrant and
the foregoing officers pursuant to the powers of attorney filed as Exhibit 17
to Post-Effective Amendment No. 48 to Registrant's Registration Statement on
Form N-1A and Exhibit 17(b) to this Registration Statement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed on
April 27, 1998 by the following persons in the capacities indicated.
Signature Title
William P. Barr* Director
-------------------------
William P. Barr
Floyd A. Brown* Director
-------------------------
Floyd A. Brown
Andrew A. Davis* Director
-------------------------
Andrew A. Davis
Christopher C. Davis* Director
-------------------------
Christopher C. Davis
Jerome E. Hass* Director
-------------------------
Jerome E. Hass
Katherine L. MacWilliams* Director
-------------------------
Katherine L. MacWilliams
James J. McMonagle* Director
-------------------------
James J. McMonagle
Richard C. O'Brien* Director
-------------------------
Richard C. O'Brien
Larry J.B. Robinson* Director
-------------------------
Larry J.B. Robinson
Marsha Williams* Director
-------------------------
Marsha Williams
*By: /s/ Sheldon R. Stein
Sheldon R. Stein,
Attorney-in-Fact
<PAGE>
*Sheldon R. Stein signs this document on behalf of the foregoing
persons pursuant to the powers of attorney filed as Exhibit 17 to
Post-Effective Amendment No. 48; Exhibit 17 (b) to Post-Effective Amendment
No. 49; Exhibit 17 (b) to Post-Effective Amendment No. 50; and Exhibit 17(b)
to this Registration Statement.
<PAGE>
EXHIBIT 10
[LETTERHEAD OF D'ANCONA & PFLAUM]
April 22, 1998
Selected Special Shares, Inc.
124 East Marcy Street
Santa Fe, New Mexico 87501
Ladies and Gentlemen:
We have acted as counsel for Selected Special Shares, Inc. (the
"Fund") in connection with the registration under the Securities Act of 1933
(the "Act") of an indefinite number of shares of beneficial interest of the
series of the Fund designated Selected Special Shares (the "Shares") in
registration statement No. 2-27514 on Form N-1A (the "Registration
Statement").
In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and
other records, certificates and other papers as we deemed it necessary to
examine for the purpose of this opinion, including the Articles of
Incorporation and bylaws of the Fund, actions of the Board of Directors of the
Fund authorizing the issuance of shares of the Fund and the Registration
Statement.
Based on the foregoing examination, we are of the opinion that upon
the issuance and delivery of the Shares of the Fund in accordance with the
Articles of Incorporation and the actions of the Board of Directors
authorizing the issuance of the Shares, and the receipt by the Fund of the
authorized consideration therefor, the Shares so issued will be validly
issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under section 7 of the Act.
Very truly yours,
/s/ D'ANCONA & PFLAUM
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement, (Form
N-1A), and related Statement of Additional Information of Selected Special
Shares, Inc. and to the inclusion of our report dated February 13, 1998 to the
Shareholders and Board of Directors/Trustees of Selected American Shares,
Inc., Selected Special Shares, Inc. and Selected Capital Preservation Trust.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
APRIL 27, 1998
<PAGE>
SELECTED SPECIAL SHARES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
constitutes and appoints James J. McMonagle, Sheldon R. Stein and Arthur Don,
and each of them, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any
post-effective amendments to the registration statement under the Securities
Act of 1933 (Registration No. 2-27514) and/or the Investment Company Act of
1940 (Registration No. 811-1550), whether on Form N-1A or any successor forms
thereof, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and all
appropriate state or federal regulatory authorities. Each of the undersigned
hereby ratifies and confirms all that each of the aforenamed
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney as of the 27th day of April, 1998.
- -----------------------------
Andrew A. Davis, Director
- -----------------------------
Christopher C. Davis, Director
<PAGE>
SELECTED SPECIAL SHARES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
constitutes and appoints James J. McMonagle, Sheldon R. Stein and Arthur Don,
and each of them, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any
post-effective amendments to the registration statement under the Securities
Act of 1933 (Registration No. 2-27514) and/or the Investment Company Act of
1940 (Registration No. 811-1550), whether on Form N-1A or any successor forms
thereof, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and all
appropriate state or federal regulatory authorities. Each of the undersigned
hereby ratifies and confirms all that each of the aforenamed
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney as of the __th day of April, 1998.
- -----------------------------
Shelby M.C. Davis, President
- -----------------------------
Eileen R. Street, Chief Accounting Officer
