SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 2-10699
Post-Effective Amendment No. 78
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-51
Amendment No. 26
SELECTED AMERICAN 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
It is proposed that this filing will become effective:
|_| Immediately upon filing pursuant to paragraph (b)
|X| on May 1, 1997, pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)
|_| on _______________, pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of shares of its $1.25
par value common stock, pursuant to Rule 24f-2, and filed its Rule 24f-2 Notice
for Registrant's most recent fiscal year on or about February 28, 1997.
<PAGE>
FORM N-1A
SELECTED AMERICAN SHARES, INC.
POST-EFFECTIVE AMENDMENT NO. 78 TO REGISTRATION STATEMENT NO. 2-10699 UNDER THE
SECURITIES ACT OF 1933 AND AMENDMENT NO. 26 UNDER THE INVESTMENT COMPANY ACT OF
1940 TO REGISTRATION STATEMENT NO. 811-51.
CROSS REFERENCE
N-1A
Item No. Prospectus Caption or Placement
-------- -------------------------------
1 Front Cover
2 Fund Expenses
3 Financial Highlights; Fund Performance
4 Selected Funds - Summary; Investment
Objectives
5 Manager, Sub-Adviser and Distributor
6 Organization of the Funds; Selected Funds -
Summary; Dividends; Taxes; [Manager and Distributor]
7 Buying Shares; Determining the Price of
Shares - Net Asset Value; Exchanging Shares
[Manager 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
14 Directors and Officers
15 Major Shareholders
16 Manager; 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, 1996 Annual Report are
incorporated by reference.
<PAGE>
PROSPECTUS May 1, 1997
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, 1997, and filed with the
Securities and Exchange Commission. The Statements of Additional Information are
incorporated herein by reference. You may obtain copies of the Statements of
Additional Information without charge by writing or calling us at the above
address or phone number.
An investment in the Selected U.S. Government Income Fund or Selected Daily
Government Fund is neither insured nor guaranteed by the U.S. Government. There
can be no assurance that Selected Daily Government Fund will be able to maintain
a stable net asset value of $1.00 per share. Shares in the Funds are not
deposits or obligations of, or guaranteed or endorsed by, any bank, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
SUMMARY
Stock-Oriented Funds
Selected American Shares, Inc. ("Selected American") and Selected Special
Shares, Inc. ("Selected Special") are diversified, professionally managed
stock-oriented funds. Selected American seeks a combination of capital growth
and income and invests primarily in common stocks and other equity securities.
Selected Special seeks capital growth and invests primarily in common stocks and
securities convertible into common stocks. See "Investment Objectives."
Bond-Oriented Fund
Selected U.S. Government Income Fund ("Selected Government Income") seeks
to obtain current income consistent with preservation of capital by investing
primarily in debt obligations of the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities").
Money Market Fund
Selected Daily Government Fund ("Selected Daily Government") seeks to
provide a high level of current income from short-term money market securities
consistent with prudent investment management, preservation of capital and
maintenance of liquidity. It invests in U.S. Government Securities and
repurchase agreements in respect thereto.
Manager, Sub-Advisers and Distributor
Davis Selected Advisers, L.P. (the "Manager") serves as the investment
manager and distributor for Selected American, Selected Special, Selected
Government Income and Selected Daily Government (individually a "Fund" or
together the "Funds" or the "Selected Funds"). The Manager has hired Bramwell
Capital Management, Inc. (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 $100 or more. Please see
"Buying Shares" for more information on how easy it is to invest. Please see
"Selling Shares" for details on how to redeem shares.
Factors to Consider
An investment in any of our Funds, as with any mutual fund, includes risks
that vary depending upon the Fund's investment objectives and policies. There is
no assurance that the investment objective of any Fund will be achieved. A
Fund's return and net asset value will fluctuate, although Selected Daily
Government seeks to maintain a net asset value of $1.00 per share.
2
<PAGE>
FUND EXPENSES
Shareholder transaction expenses:
Sales Load on Purchases ................................. None
Redemption Fee .......................................... None*
Sales Load on Reinvested Dividends ...................... None
Exchange Fee ............................................ None
Deferred Sales Load ..................................... None
- ----------
* A service fee of $5 is charged for each wire redemption.
Annual fund operating expenses after any expense reimbursements, as a
percentage of average net assets:
<TABLE>
<CAPTION>
Selected Selected Selected Gov't Selected Daily
American Special Income*** Gov't
-------- ------- --------- -----
<S> <C> <C> <C> <C>
Management Fees ............. 0.62% 0.70% 0.50% 0.30%
12b-1 Fees** ................ 0.25% 0.25% 0.25% 0.25%
Other Expenses .............. 0.16% 0.38% 0.69% 0.20%
----- ----- ----- -----
Total Operating Expenses .... 1.03% 1.33% 1.44% 0.75%
</TABLE>
- ----------
** The effect of a 12b-1 plan is that long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted
under applicable rules of the National Association of Securities Dealers,
Inc.
*** After contractual expense reimbursements.
The Manager agreed to absorb certain expenses during 1996 for Selected
Government Income as is reflected above. If the Manager had not done so, "Other
Expenses" for Selected Government Income in the table above would be 0.92%, and
"Total Operating Expenses" would be 1.67%. 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*** Gov't***
One Year .......... $11 $14 $15 $ 8
Three Years ....... $ 33 $ 42 $ 46 $24
Five Years ........ $ 57 $ 73 $ 79 $42
Ten Years ......... $126 $160 $172 $93
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, 1996, which reflect expense reimbursements in respect to
Selected Government Income as described above. There can be no
3
<PAGE>
assurance that reimbursements for Selected Government Income will continue
beyond December 31, 1997. The 5% rate used in the example is only for
illustration and is not intended to be indicative of the future performance of
the Funds, which may be more or less than the assumed rate. Actual expenses may
be greater or lesser than those shown.
FINANCIAL HIGHLIGHTS
The following tables provide you with information about the history of the
Funds' shares, including periods prior to May 1, 1993 when Davis Selected
Advisers, L.P. became the Funds' Manager. The tables 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, 1996 Annual Report to
Shareholders which may be obtained by writing or calling the Fund. The Funds'
1996 financial statements including the financial highlights for each of the
five years in the period ended December 31, 1996, have been audited by the
Funds' independent certified public accountants, whose unqualified opinion
thereon is contained in the Annual Report.
4
<PAGE>
SELECTED AMERICAN
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------------------------
1996 1995 1994 1993(2) 1992 1991 1990 1989
---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ............... $ 17.68 $ 13.09 $ 14.59 $ 17.13 $ 18.43 $ 12.79 $ 13.81 $ 13.67
Income From Investment
Operations Net Investment
Income .......................... 0.18 0.22 0.20 0.24 0.19 0.23 0.26 0.48
Net Gains or Losses on
Securities (both realized
and unrealized) 5.15 4.74 (0.66) 0.70 0.89 5.65 (0.81) 2.21
---------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations ................... 5.33 4.96 (0.46) 0.94 1.08 5.88 (0.55) 2.69
Less Distributions
Dividends (from net
investment income) ............ (0.17) (0.22) (0.20) (0.24) (0.19) (0.23) (0.35) (0.45)
Distributions (from capital
gains) ........................ (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) (0.08) --
---------- -------- -------- -------- -------- -------- -------- --------
Total Distributions ............ (1.48) (0.37) (1.04) (3.48) (2.38) (0.24) (0.47) (2.55)
---------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period ............................ $ 21.53 $ 17.68 $ 13.09 $ 14.59 $ 17.13 $ 18.43 $ 12.79 $ 13.81
========== ======== ======== ======== ======== ======== ======== ========
Total Return ...................... 30.74% 38.09% (3.20)% 5.42% 5.78% 46.37% (3.90%) 20.08%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ................. 1,376,466 925,512 529,404 451,392 580,889 711,905 400,597 360,366
Ratio of Expenses to
Average Net Assets ............ 1.03% 1.09% 1.26% 1.01%(1) 1.17% 1.19% 1.35% 1.08%
Ratio of Net Income to
Average Net Assets ............ 0.87% 1.42% 1.42% 1.37% 0.95% 1.41% 2.04% 3.06%
Portfolio Turnover Rate ........ 29% 27% 23% 79% 50% 21% 48% 45%
Average Commission Rate
Per Share ..................... $ .058 -- -- -- -- -- -- --
</TABLE>
Year ended December 31,
-----------------------
1988 1987
---- ----
Net Asset Value,
Beginning of Period ............... $ 11.43 $ 12.65
Income From Investment
Operations Net Investment
Income .......................... 0.26 0.34
Net Gains or Losses on
Securities (both realized
and unrealized) 2.24 (0.22)
-------- --------
Total From Investment
Operations ................... 2.50 0.12
Less Distributions
Dividends (from net
investment income) ............ (0.26) (0.42)
Distributions (from capital
gains) ........................ -- (0.92)
Distributions in Excess of
Net Investment Income ......... -- --
-------- --------
Total Distributions ............ (0.26) (1.34)
-------- --------
Net Asset Value, End of
Period ............................ $ 13.67 $ 11.43
======== ========
Total Return ...................... 21.95% 0.23%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ................. 284,719 263,141
Ratio of Expenses to
Average Net Assets ............ 1.11% 1.11%
Ratio of Net Income to
Average Net Assets ............ 2.07% 2.38%
Portfolio Turnover Rate ........ 35% 45%
Average Commission Rate
Per Share ..................... -- --
- ----------
(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.
5
<PAGE>
SELECTED SPECIAL
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994 1993(2),(3) 1992(3) 1991(3) 1990(3) 1989(3) 1988(3) 1987(3)
------- ------- ------- ---------- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ...... $ 10.80 $ 9.02 $ 10.20 $ 10.40 $ 10.16 $ 9.04 $ 9.95 $ 8.52 $ 7.96 $ 8.92
Income From Investment
Operations
Net Investment Income .. -- -- (0.03) -- 0.07 0.12 0.17 0.21 0.10 0.09
Net Gains or Losses on
Securities (both
realized and
unrealized) .......... 1.27 3.04 (0.22) 1.10 0.78 2.11 (0.85) 2.23 1.44 (0.03)
------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Total From
Investment
Operations ........... 1.27 3.04 (0.25) 1.10 0.85 2.23 (0.68) 2.44 1.54 0.06
Less Distributions
Dividends (from net
investment income) .... -- -- -- (0.07) (0.13) (0.20) (0.18) (0.10) (0.32)
Distributions (from
capital gains) ........ (1.18) (1.26) (0.93) (1.30) (0.54) (0.98) (0.03) (0.83) (0.88) (0.70)
------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Total Distributions .... (1.18) (1.26) (0.93) (1.30) (0.61) (1.11) (0.23) (1.01) (0.98) (1.02)
------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Net Asset Value, End of
Period .................... $ 10.89 $ 10.80 $ 9.02 $ 10.20 $ 10.40 $ 10.16 $ 9.04 $ 9.95 $ 8.52 $ 7.96
======= ======= ======= ======= ======= ======= ====== ======= ======= =======
Total Return .............. 11.86% 34.24% (2.56%) 10.81% 8.43% 25.53% (6.87%) 28.91% 19.51% 0.50%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted) .. 62,435 58,975 47,275 53,257 57,605 60,216 50,474 49,887 34,903 36,073
Ratio of Expenses to
Average Net Assets .... 1.33% 1.48% 1.41%(1) 1.24%(1) 1.41%(1) 1.39% 1.41% 1.22% 1.24% 1.10%
Ratio of Net Income to
Average Net Assets .... (0.66)% (0.58)% (0.27)% (0.07)% 0.56% 1.11% 1.81% 2.11% 1.09% 0.85%
Portfolio Turnover Rate . 98% 127% 99% 100% 41% 74% 87% 45% 71% 89%
Average Commission
Rate per share ........ $ .060 -- -- -- -- -- -- -- -- --
</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.
6
<PAGE>
SELECTED GOVERNMENT INCOME
<TABLE>
<CAPTION>
Year ended December 31,
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 ... $ 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 . 0.53 0.54 0.50 0.56 0.61 0.60 0.63 0.64 0.63
Net Gains or Losses on
Securities (both
realized and
unrealized) ......... (0.28) 0.78 (0.75) 0.21 (0.13) 0.58 0.11 0.21 (0.32)
------ ------ ------- ------- ------- ------- ------- ------- -------
Total From
Investment
Operations ........ 0.25 1.32 (0.25) 0.77 0.48 1.18 0.74 0.85 0.31
Less Distributions
Dividends (from net
investment income) .. (0.53) (0.54) (0.50) (0.56) (0.61) (0.60) (0.63) (0.64) (0.63)
Distributions (from
capital gains) ...... (0.02) (0.03) -- (0.32) (0.26) -- -- -- --
Distributions in Excess
of Net Investment
Income .............. -- -- -- -- -- (0.10) (0.09) (0.35) (0.35)
------ ------ ------- ------- ------- ------- ------- ------- -------
Total Distributions ... (0.55) (0.57) (0.50) (0.88) (0.87) (0.70) (0.72) (0.99) (0.98)
------ ------ ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period .................. $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31 $ 9.70 $ 9.22 $ 9.20 $ 9.34
====== ====== ======= ======= ======= ======= ======= ======= =======
Total Return ............ 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) 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 .. 1.44%(1) 1.44%(1) 1.42%(1) 1.34% 1.44% 1.41% 1.44% 1.50%(1) 1.50%(1)
Ratio of Net Income to
Average Net Assets .. 5.96% 6.09% 5.70% 5.85% 6.26% 6.51% 6.95% 6.70% 6.30%
Portfolio Turnover Rate 26% 76% 65% 29% 53% 36% 29% 75% 76%
</TABLE>
November 24, 1987
(Commencement
of operations)
through
December 31,
1987
-----------------
Net Asset Value,
Beginning of Period ... $10.00
Income From Investment
Operations
Net Investment Income . 0.06
Net Gains or Losses on
Securities (both
realized and
unrealized) ......... 0.02
------
Total From
Investment
Operations ........ 0.08
Less Distributions
Dividends (from net
investment income) .. (0.06)
Distributions (from
capital gains) ...... (0.01)
Distributions in Excess
of Net Investment
Income .............. --
------
Total Distributions ... (0.07)
------
Net Asset Value, End of
Period .................. $10.01
======
Total Return ............ 6.57%*
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted) 8,737
Ratio of Expenses to
Average Net Assets .. 1.26%*
Ratio of Net Income to
Average Net Assets .. 4.42%*
Portfolio Turnover Rate --
- ----------
(1) Had the Manager not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1996, 1995, 1994 and 199 would have been
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.
Annualized
7
<PAGE>
SELECTED DAILY GOVERNMENT
<TABLE>
<CAPTION>
May 9, 1988
(Commencement
of operations)
through
Year ended December 31, December 31,
1996 1995 1994 1993(2) 1992 1991 1990 1989 1988
-------- -------- -------- ------- ------- ------- -------- -------- --------------
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period .. $ 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 0.046 0.051 0.034 0.023 0.030 0.054 0.074 0.083 0.051
-------- -------- -------- ------- ------- ------- -------- -------- ---------
Total From
Investment
Operations ...... 0.046 0.051 0.034 0.023 0.030 0.054 0.074 0.083 0.051
Less Distributions
Dividends (from net
investment income) . (0.046) (0.051) (0.034) (0.023) (0.030) (0.054) (0.074) (0.083) (0.051)
-------- -------- -------- ------- ------- ------- -------- -------- ---------
Total Distributions (0.046) (0.051) (0.034) (0.023) (0.030) (0.054) (0.074) (0.083) (0.051)
-------- -------- -------- ------- ------- ------- -------- -------- ---------
Net Asset Value, End of
Period ................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======= ======= ======= ======== ======== =========
Total Return ........... 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) 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 . 0.75% 0.75%(1) 0.75%(1) 0.75%(1) 0.75%(1) 0.68% 0.63% 0.74% 0.70%(1)*
Ratio of Net Income to
Average Net Assets . 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 .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.
* Annualized
8
<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 trust ("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 BBB or lower by Standard & Poor's Corporation
("S&P") or Baa or lower by Moody's Investor Services ("Moody's") or unrated
securities deemed by the Manager to be of an equivalent rating. Securities rated
BBB by S&P or Baa by Moody's have speculative characteristics; changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments. Securities rated BB or lower
by S&P and Ba or lower by Moody's are referred to in the financial community as
"junk bonds" and are considered speculative. The Fund 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). See "Quality Ratings of Bonds" and "High Yield, High
Risk Debt Securities." There is no other limitation on the percentage of assets
that may be invested in any particular type of security. Since Selected American
invests in common stocks and other securities that fluctuate in value, the price
of its shares will fluctuate.
9
<PAGE>
Selected Special - a Growth Fund
Selected Special seeks to provide capital growth. The Fund invests in
companies which the Sub-Adviser believes have capital growth potential because
of factors such as rapid growth of demand within their existing markets,
expansion into new markets, new products 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. See "High
Yield, High Risk Debt Securities."
The price of the Fund's shares fluctuates because the value of the
securities in which the Fund invests also fluctuates. When the Sub-Adviser
believes that economic or investment conditions indicate the need for a
defensive strategy, the Fund may, to protect the interests of its shareholders,
temporarily and without limitation, hold assets other than equity securities,
including cash, U.S. Government Securities and other liquid high-grade debt
securities.
Both 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, 1996, neither Fund had investments in foreign securities.
The Funds will generally invest in securities of foreign companies directly
through trades of individual securities on recognized exchanges and developed
over-the-counter markets and through American Depository Receipts ("ADRs")
covering such securities. In addition, Selected Special may invest in foreign
securities indirectly through registered closed-end investment companies
primarily investing in foreign securities.
Investments in foreign securities may involve a higher degree of risk than
investments in domestic issuers. Foreign securities are often denominated in
foreign currencies, which means that their value will
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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 inflation rates, balance of payments, capital reinvestment,
gross national product expansion, and other relevant economic issues. When there
are significant foreign investments, the operating expense ratio of a Fund may
be higher than that of investment companies investing exclusively in U.S.
securities, since the management, custodial and certain other expenses are
expected to be higher.
For income purposes (which is only incidental with respect to Selected
Special) the Funds may lend portfolio securities and may write covered call
options on portfolio securities. A Fund will not engage a loan of portfolio
securities if more than 10% of its total assets would be subject to such loans.
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.
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.
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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 into a long term security. Long-term securities
generally fluctuate more widely in response to changes in interest rates than
short or intermediate-term.
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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
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account consisting of cash, U.S. Government Securities or other high grade debt
securities with a value at least equal to the amount of the commitments to
purchase "when-issued" securities. When payment is made for "when-issued"
securities, the Fund will meet its obligations from then available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would normally not expect to do so, sale of the "when-issued"
securities themselves (which may have a market value greater or lesser than the
Fund's obligation). If the Fund chooses to dispose of the right to acquire a
"when-issued" security 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 "Investments" and "Investment Restrictions" in the
Statement of Additional Information.
All Funds
Borrowing. The Funds may borrow money from banks for temporary or emergency
purposes in an amount not exceeding 10% of the value of a Fund's total assets,
and may pledge an amount not exceeding 15% of total assets to secure such
borrowing. No Fund will purchase portfolio securities while any outstanding
borrowing exceeds 5% of such Fund's total assets.
Industry Concentration. No Fund will make any investment (other than U.S.
Government Securities) which would cause 25% or more of its total assets to be
invested in any one industry.
Repurchase Agreements. The Funds may enter into repurchase agreements, but
normally do not enter into repurchase agreements maturing in more than seven
days, and may make repurchase agreement transactions through a joint account
with other funds managed by the Manager. A repurchase agreement involves a sale
of securities to the Funds, with the concurrent agreement of the seller (a
member bank of the Federal Reserve System, or securities dealer, which the
Manager or Sub-Adviser
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determines to be financially sound at the time of the transaction) to repurchase
the securities at the same price plus an amount equal to accrued interest at an
agreed-upon interest rate, within a specified time, usually less than one week,
but, on occasion, at a later time. The repurchase obligation of the seller is,
in effect, secured by the underlying securities. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Funds could experience
both delays in liquidating the underlying securities and losses, including
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. 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 diversifica-
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tion as discussed above, are fundamental policies. The policies with respect to
permissible investments are fundamental policies of Selected Government Income
and Selected Daily Government. All other investment objectives and policies of
the Selected Funds are not fundamental and may be changed without shareholder
approval.
Any percentage restrictions set forth in this Prospectus or in the
Statements of Additional Information, other than the 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 and
distributor for the Selected Funds. The sole general partner of the Manager is
Venture Advisers, Inc. (the "General Partner"). Shelby M.C. Davis is the
controlling shareholder of the General Partner. Subject to the direction and
supervision of the Board of Directors/Trustees, the Manager is responsible for
investment management, administration and distribution activities for the
Selected Funds. As discussed below, the Manager has hired Bramwell Capital
Management, Inc. as the Sub-Adviser for Selected Special. 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 and distributor of Davis New York Venture Fund, Inc., Davis
High Income Fund, Inc., Davis Tax-Free High Income Fund, Inc., Davis Series,
Inc. and Davis International Series, Inc.
The Manager receives advisory fees monthly based upon each Fund's average
daily net assets at the following annual rates: Selected American - 0.65% on the
first $500 million, 0.60% on the next $500 million, and 0.55% on amounts over $1
billion; Selected Special Inc. 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 1997 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.
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The shares of the Selected Funds are distributed by the Manager The Manager
is paid a fee provided by Distribution Plans adopted and approved by the Funds'
Boards and shareholders in accordance with Rule 12b-1 under the Investment
Company Act of 1940. This Rule regulates the manner in which a mutual fund may
assume the costs of distributing and promoting the sale of its shares. The
Manager provides office space and equipment, personnel, literature distribution
and advertising to promote the sale of the Funds' shares. Each Fund pays a
monthly distribution fee at the annual rate of 0.25% of average daily net
assets. In addition, the Plans provide that the Manager, in its sole discretion,
may utilize its own resources for distributing and promoting sales of Fund
shares, including any profits from its management fees.
The Manager has agreements with securities dealers for distributing shares
of the Funds and providing services to shareholders. The Manager may pay such
firms service fees of up to 0.55% of the average net asset value of the shares
of Selected American and Selected Special and up to 0.25% of the average net
asset value of the shares of Selected Government Income 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
Christopher C. Davis is the portfolio manager for Selected American. He was
co-portfolio manager of Selected American, with Shelby M.C. Davis, from
December, 1994 until February 19, 1997. Prior to his responsibilities as
co-portfolio manager, Christopher C. Davis worked closely with Shelby M.C. Davis
as an assistant portfolio manager and research analyst beginning in September,
1989.
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 a
director and 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.
To open an account, just call us at 1-800-243-1575 and we will ask you your
name, address, social security or tax I.D. number, the name of the Fund in which
you want to invest, the amount of your investment and the name and address of
the financial institution that will be wiring your investment to the Selected
Funds and we will immediately give you an account number. (We will then mail you
an application form, which you will need to complete, sign and return to us
immediately.) Then, have your financial institution wire federal funds to the
Selected Funds' Custodian with the following instructions:
Selected Funds
c/o Investors Fiduciary Trust Company
127 W. 10th Street
Kansas City, MO 64105
ABA #101003621
Selected Funds Group Account No. 7523734
The name of the Selected Fund(s) in which you wish to invest
Your shareholder account number
The name in which your account is registered
We accept wires at no charge. However, your bank may charge you for this
service.
Directly By Mail. All it takes to open an account is a check and the
enclosed application. Once you've completed the application, mail it along with
your check to:
Selected Funds
P.O. Box 419782
Kansas City, MO 64141-6782
Please make your check payable to the Selected Funds, and 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.
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Subsequent Investments ($100 minimum)
Directly By Wire. Follow the instructions above for initial investments
directly by wire. There is no need to call us first. Just contact your financial
institution.
Directly By Mail. To add to your account by mail, please send your check or
money order with the detachable stub which you'll find at the bottom of your
most recent account statement, or you may drop us a note that includes the
registered account name, name of the Fund, account number, and amount you wish
to invest. Please remember that purchases should be sent to:
Selected Funds
P.O. Box 419798
Kansas City, MO 64141-6798
Automatic Investing Through Your Bank
Whether you purchase through a Qualified Dealer or directly, you may
arrange for automatic monthly investing by authorizing Investors Fiduciary Trust
Company to initiate a debit to your bank account of a specific amount (minimum
$100) each month to be used to purchase Fund shares. After each automatic
investment, you will receive a transaction confirmation and the debit should be
reflected on your next bank statement. You may terminate the plan at any time,
and we may modify or terminate the plan at any time. If you desire to utilize
this investment option, complete the Automatic Investment Plan portion of the
Application form enclosed with this Prospectus.
Prototype Retirement Plans
The Manager has available various types of prototype retirement plans,
including Individual Retirement Accounts ("IRAs"). See "Retirement Plans" for
more information.
General
Selected American, Selected Special and Selected Government Income do not
issue share certificates unless you specifically request one each time you make
a purchase. We don't issue certificates for Selected Daily Government shares,
for fractional shares, or to shareholders who have elected the Automatic
Withdrawals plan. Also, shares represented by certificates may not be redeemed
by wire or by telephone. See "Selling Shares" for information on how to sell
shares.
Because clearance of foreign checks generally takes longer than checks
drawn on domestic banks, shares will not be purchased until the Funds have
collected funds from checks drawn on foreign banks. 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, except those to an existing
share-owner who is a natural person (as opposed to a corporation or
partnership), credit cards, and cash 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.
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<PAGE>
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.
To keep expenses low, we reserve the right to redeem any single Fund
account that falls below $750. Because we value you as a shareholder, before
your account is redeemed, you will be notified in writing and we will allow you
60 days to make additional share purchases to bring your account value up to the
minimum level.
You may not sell shares by wire or through the Automatic Withdrawals plan
or write checks against a Selected Daily Government account until the shares
have been on the 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.
There is a $1,000 redemption minimum for Selected Daily Government and a $10,000
redemption minimum for the other Funds if you wire funds. You will be charged a
service fee of $5 for each wire redemption. There is a $25,000 maximum for all
the Funds if you utilize ACH.
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) guaranteed. See "By Mail" for
signature guarantee instructions. Additional documents may be required when
shares are held by a corporation, partnership, executor, administrator, trustee
or guardian.
Requests for wire redemptions are normally paid by the next business day.
However, in the event that the Manager determines that such redemptions would
adversely affect the Funds by requiring untimely disposition of portfolio
securities, such payment may be delayed for up to seven calendar days.
Automatic Withdrawals Plan
This Plan may be appropriate if you have special income needs or recurring
major expenses and your account balance is $5,000 or more. Under the Automatic
Withdrawals Plan, you may choose to have your shares redeemed from your account
monthly, quarterly or semi-annually and a check will be sent to you
20
<PAGE>
or to anyone you choose. Just let us know what the amount of the check should
be, although there is a $100 minimum for the Plan. Withdrawals can also be
processed electronically as described in the preceding section. Any income and
capital gains dividends will be automatically reinvested in your account on the
dividend reinvestment date. Shares are redeemed and checks are issued at the end
of the month of the time period selected. Therefore, you should receive your
check during the first week of the next month.
As these withdrawals involve redemption of shares, they may result in a
gain or loss for income tax purposes (although generally no gain or loss results
from redemption of shares of Selected Daily Government). Purchases of Selected
American, Selected Special or Selected Government Income shares at the same time
you are selling shares may not be advantageous because of tax consequences. In
addition, depending upon the size of the requested payment and fluctuations in
the share price, you may exhaust your account.
By Telephone
You can sell shares by calling 1-800-243-1575 (see "How to Reach Us") and
receive a check by mail, but please keep in mind:
The check can be issued only in amounts up to a maximum $25,000;
The check can be issued only to the registered owner (who must be an
individual);
The check can be sent only to the address of record; and
Your current address of record must have been on file for 60 days.
Please Note:
Unless you have provided in your application that the telephone privilege
is not to be available, the telephone privilege is automatically available for
selling or exchanging shares. By exercising the telephone privilege to sell or
exchange shares, you agree that the Fund will not be liable for following
telephone instructions reasonably believed to be genuine. Reasonable procedures
will be employed to confirm that such instructions are genuine and if not
employed, the Fund may be liable for unauthorized instructions. Such procedures
will include a request for personal identification (account or social security
number) and tape recording of the instructions. You should be aware that during
unusual market conditions we may experience difficulty accepting telephone
requests, in which case you should mail your redemption request. See "By Mail"
below.
By Mail
Simply send your written request to redeem your shares as follows:
Selected Funds
P.O. Box 419782
Kansas City, MO 64141-6782
This written request must: (1) be signed by all account owners exactly as
the account is registered (both parties must sign in the case of joint
accounts); (2) state the dollar amount or number of shares to be redeemed; and
(3) specify the Fund and account number from which shares are to be redeemed.
Please
21
<PAGE>
remember that you cannot place any conditions on your request. If any share
certificates were issued, they must also be returned duly endorsed or
accompanied by a separate stock assignment. For your protection, you should send
your share certificates by registered mail.
If the redemption proceeds are $25,000 or less and are to be paid to an
individual shareholder of record at the address of record, a signature guarantee
is not required (unless there has been an address change within 60 days). All
other redemption requests must have signatures guaranteed. Signatures may be
guaranteed by a commercial bank, trust company, savings and loan association,
federal savings bank, a member firm of a national stock exchange, credit union
or other eligible financial institution. An acknowledgment by a notary public is
not acceptable. Certain shareholders, such as corporations, trusts and estates,
may be required to submit additional documents.
Normally, payment by check is made within seven days after the redemption
request is received with all required documents in proper form. However, if you
bought your shares by check, a Fund will delay sending redemption proceeds until
it has determined that your check has cleared, which is generally within 15
days.
By Check - Selected Daily Government Only
If you are a shareholder in Selected Daily Government, you can also redeem
shares by check. If you choose this free check writing privilege in your account
application (or request it later), you will be provided with a supply of checks.
These checks will be imprinted with your name, the Fund name and your account
number, and can be made payable to any person with a $250 minimum and $5 million
maximum amount. You may not sell shares by writing checks against your Selected
Daily Government account until the shares have been on the Fund's books for at
least 15 days.
When a check is presented for payment, a sufficient number of shares in
your account will be redeemed to cover the amount of the redemption check. You
will continue to earn dividends on these shares until the check clears. All
checks must be signed exactly as the account is registered so that, unless only
one signer is authorized on the account application, these redemption checks
must be signed by all account owners. You should not write a check to close your
account because the amount in your account varies daily (due to the daily
declaration of dividends). If you wish to close your account, you should do so
by the other redemption procedures described above.
IRA or other retirement plan accounts and certain accounts established
through brokers may not use the check redemption feature.
Your account will be charged a $10 service fee if you:
Write a check for less than the $250 minimum;
Overdraw your available account balance;
Draw against shares owned for less than 15 days (does
not apply to shares purchased by wire);
or Order a "stop payment."
The Fund will not honor checks when the right to redeem shares has been
suspended or postponed, or whenever the account has been otherwise restricted.
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<PAGE>
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"). Exchanges made over the phone may be made by any person, not just the
shareholder of record. Please remember that during unusual market conditions, we
may experience difficulty accepting telephone requests, in which case you should
mail your request. In addition, exchanges may also be made through securities
dealers who may charge you a fee for effecting an exchange. See "Please Note"
following "Selling Shares-By Telephone," as the conditions set forth in the note
also apply to exchanges.
An exchange of shares is considered a sale for federal income tax purposes.
A shareholder may realize a gain or loss depending upon whether the value of the
shares being exchanged is more or less than the adjusted cost basis. This is
usually the case except when exchanging shares of Selected Daily Government for
shares of another Selected Fund.
Since excessive trading may hurt Fund performance, disrupt portfolio
management and increase transaction costs, the Funds have 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.
23
<PAGE>
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.
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."
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<PAGE>
"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(R), a financial reporting service that publishes each week
average rates of bank and thrift institution money market deposit accounts,
Super N.O.W. accounts and certificates of deposit.
DETERMINING THE PRICE OF SHARES - NET ASSET VALUE
The price you pay when you buy shares in a Fund and the price you receive
if you redeem is the next net asset value computed after we receive your order
to buy or redeem in proper form. The net asset value per share of a Fund is
computed by dividing the total value of the assets of a Fund, minus its
liabilities, by the total number of its shares outstanding.
The net asset value per share is determined on each day the New York Stock
Exchange is open, at the earlier of the close of the Exchange or 4:00 p.m. New
York time. The price per share for purchases or redemptions made directly
through Investors Fiduciary Trust Company is the net asset value next computed
after Investors Fiduciary Trust Company receives the purchase order or
redemption request. If the purchase order or redemption request is placed with a
Qualified Dealer, then the applicable price is computed as of 4:00 p.m. New York
time, provided that the Qualified Dealer receives the order before 4:00 p.m. New
York time and the Distributor receives the order before 5:30 p.m. New York time.
Otherwise the applicable price is the next determined net asset value. It is the
responsibility of Qualified Dealers to promptly forward purchase and redemption
orders to the Distributor. Note that in the case of redemptions and repurchases
of shares owned by corporations, trusts or estates, the Transfer Agent may
require additional documents to effect the redemption and the applicable price
will be that next determined following the receipt of the required
documentation.
Method of Valuation
Selected American, Selected Special and Selected Government Income each
value their security holdings on the basis of market value which, with respect
to fixed-income securities, may be based on prices provided by a pricing
service. If no market value is readily available, such securities will be valued
at a fair value determined by the Boards of Directors/Trustees.
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.
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<PAGE>
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 of $10 or more be paid by
check. You may make such an election on your account application or make such a
request later. You can make such a request by writing to the Funds. Your request
will be effective for the current dividend or distribution if it is received
before the record date. Requests received after that time will be effective
beginning with the next dividend or distribution.
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.
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.
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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 31% 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 including 401(k),
profit sharing, money purchase, IRAs, Simplified Employee Pension ("SEP") plans
and model 403(b) and 457 plans for charitable, educational and governmental
entities. These plans utilize the shares of the Funds as their investment
vehicle. Investors Fiduciary Trust Company ("IFTC") acts as custodian or trustee
for the plans and charges the participant an annual maintenance fee of $12 per
account (which will be redeemed automatically at year end from your account,
unless you elect to pay the fee directly to IFTC each year).
The Funds' custodian, IFTC, acts as the trustee or custodian under the IRA,
SEP and 403(b) plans and may act as trustee or custodian under the other plans.
For information, please call 1-800-243-1575, or write us at Selected Funds, P0.
Box 419782, Kansas City, MO 64141-6782.
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.
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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
William G. Cole Richard C. O'Brien
Shelby M.C. Davis Larry Robinson
Robert J. Greenebaum Marsha Williams
Jerome E. Hass
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 8:00 a.m. to 4:00 p.m. Mountain time. The Funds are closed on days on which
the New York Stock Exchange is closed. Whenever you want to contact us by mail,
please write to us at:
Selected Funds
P.O. Box 419782
Kansas City, MO 64141-6782
QUALITY RATINGS OF BONDS
Portfolio Quality Ratings
The table on the following page reflects Selected American's portfolio
quality ratings for the year ended December 31, 1996 calculated on the basis of
the average weighted ratings of all bonds held during
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the year The table reflects the percentage of total assets represented by
fixed-income securities rated by Moody's or S&P by unrated fixed-income
securities and by other assets. The percentages shown reflect the higher of the
Moody's or S&P rating. U.S. Government Securities, whether or not rated, are
reflected as Aaa and AAA (highest quality). Other assets may include money
market instruments, repurchase agreements, equity securities, net payables and
receivables and cash. The allocations in the table are not necessarily
representative of portfolio composition at other times. Portfolio quality
ratings will change over time.
The description of each bond quality category set forth below is intended
to be a general guide and not a definitive statement as to how Moody's and S&P
define such rating category. A more complete description of the rating
categories is set forth following the table. The ratings of Moody's and S&P
represent their opinions as to the quality of the securities that they undertake
to rate. It should be emphasized, however, that ratings are relative and
subjective and are not absolute standards of quality. There is no assurance that
a rating assigned initially will not change. Selected American may retain a
security whose rating has changed or has become unrated.
Portfolio Composition of Selected American by Quality Rating
as a Percentage of Total Assets at December 31, 1996
<TABLE>
<CAPTION>
Fund's Assessment of General Definition
Moody'/S&P Rating Category Percentage Unrated Securities of Bond Quality
- -------------------------- ---------- ------------------ ---------------
<S> <C> <C> <C>
Aaa/AAA Highest quality
Aa/AA - High quality
A/A 0.24 - Upper medium grade
Baa/BBB 0.44 - Medium grade
Ba/BB - - Some speculative elements
B/B - - Speculative
Caa/CCC - - More speculative
Ca,C/CC,C,D - - Very speculative, may
be in default
Not Rated - - Not rated by Moody's
or S&P
Common and Preferred Stock 98.4 -
Short-term Investments 0.92 -
------
100.00% 0.00%
</TABLE>
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk. Interest payments are protected by
a large or an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the
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<PAGE>
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat greater than Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e. they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics, as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any longer period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
to a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Standard & Poor's Corporation Corporate Bond Ratings
AAA - Debt rated AAA has the highest rating assigned by Standard and
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
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BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - CC - C - is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. C
indicates the highest degree of speculation. While such debt will likely have
some quality and protective characteristics, these are out-weighed by large
uncertainties or major exposures to adverse conditions.
D - This rating indicates that the issue is either in default as to payment
of interest and/or repayment of principal or is expected to be in default upon
maturity.
HIGH YIELD, HIGH RISK DEBT SECURITIES
Selected American and Selected Special may invest in debt securities,
including securities convertible into common stocks. Investments may be made in
convertible securities to provide an opportunity for appreciation as the value
of the common stock appreciates. However, convertible securities are often
viewed by the issuer as future common stock subordinated to other debt and carry
a lower rating than the issuer's non-convertible debt obligations.
The debt securities (including convertible securities) in which the Funds
may invest include securities rated BB or lower by S&P or Ba or lower by Moody's
or, if unrated, deemed by management to be comparable to such ratings.
Securities rated BB or Ba or lower are referred to in the financial community as
"junk bonds." While likely to have some quality and protective characteristics,
such securities, whether or not convertible into common stock, usually involve
increased risk as to payment of principal and interest. Such securities are
subject to greater price volatility than higher rated securities, tend to
decline in price more steeply than higher rated securities in periods of
economic difficulty or accelerating interest rates and are subject to greater
risk of non-payment in adverse economic times. There may be a thin trading
market for such securities. This may have an adverse impact on market price and
the ability of the Funds to dispose of particular issues and may cause the Funds
to incur special securities registration responsibilities, liabilities and costs
and liquidity and valuation difficulties. Unexpected net redemptions may force
the Funds to sell high yield, high risk debt securities without regard to
investment merit, thereby possibly reducing return rates. Such securities may be
subject to redemptions or call provisions which, if exercised when investment
rates are declining, could result in the replacement of such securities with
lower yielding securities, resulting in a decreased return. To the extent that
the Funds invest in bonds that are original issue discount, zero coupon,
pay-in-kind or deferred interest bonds, the Funds may have taxable interest
income in excess of the cash actually received on these issues. In order to
avoid taxation to the Funds, the Funds may have to sell portfolio securities to
meet taxable distribution requirements.
See the Statements of Additional Information for more detailed information
on high yield, high risk debt securities.
31
<PAGE>
Selected Daily INFORMATION CONCERNING THE DRAFTS USED FOR
Government Check CHECK WRITING PRIVILEGE:
Writing Privilege:
|_| If you wish to use 1. Your Selected Daily Government Fund drafts are paid
this privilege please from an account at Investors Fiduciary Trust Company
check the box to the ("IFTC").
left and complete the
signature card below. 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 Kansas
Uniform Commercial Code. All notices with regard to
those rights and duties must be given to IFTC.
3. Stop payment instructions must be given to Davis
Selected Advisers, L.P. by calling their service
telephone number for the Selected Funds: (800)
243-1575 or by writing to IFTC. IFTC's address is
Investors Fiduciary Trust Company, c/o The Selected
Funds, P.O. Box 419782, Kansas City, MO 64141-6782.
4. These rules may be amended from time to time.
THE SELECTED DAILY GOVERNMENT FUND SIGNATURE CARD (Type
or Print)
Account number_________________________________________
Shareholder Name_______________________________________
Co-Shareholder Name____________________________________
BY SIGNING THIS SIGNATURE CARD THE UNDERSIGNED AGREE(S)
TO BE SUBJECT TO THE INSTRUCTIONS AND RULES, AS NOW IN
EFFECT AND AS AMENDED FROM TIME TO TIME, OF THE
SELECTED DAILY GOVERNMENT FUND, THAT PERTAIN TO THE USE
OF REDEMPTION CHECKS. (SOME OF THE CURRENT RULES APPEAR
ABOVE.) EACH SIGNATORY GUARANTEES THE OTHER'S
SIGNATURE.
(Signature)____________________________________________
(Signature of Co-Shareholder)__________________________
|_| Check here if both signatures are required on
checks.
|_| Check here if only one signature is required on
checks.
If neither box is checked, all checks will require both
signatures.
32
TABLE OF CONTENTS
PAGE
----
Summary .................................................................. 2
Fund Expenses ............................................................ 3
Financial Highlights ..................................................... 4
Investment Objectives .................................................... 9
Manager, Sub-Advisers and Distributor .................................... 16
Portfolio Managers ....................................................... 17
Buying Shares ............................................................ 18
Selling Shares ........................................................... 20
Exchanging Shares ........................................................ 23
Fund Performance ......................................................... 24
Determining the Price of Shares -
Net Asset Value ....................................................... 25
Dividends ................................................................ 26
Taxes .................................................................... 26
Retirement Plans ......................................................... 27
Organization of the Funds ................................................ 27
Directors and Trustees ................................................... 28
How to Reach Us .......................................................... 28
Quality Ratings of Bonds ................................................. 28
High Yield, High Risk Debt Securities .................................... 31
================================================================================
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION May 1, 1997
Selected American Shares, Inc.
124 East Marcy Street
Santa Fe, New Mexico 87501
Call Toll-Free 1-800-243-1575
This Statement of Additional Information is not a Prospectus and should be read
in conjunction with the Prospectus dated May 1, 1997. The Prospectus may be
obtained from the Fund.
<PAGE>
The December 31, 1996 Annual Report accompanies this Statement of Additional
Information. The Financial Statements appearing in this report are incorporated
herein by reference.
TABLE OF CONTENTS
TOPIC PAGE
Investment Restrictions .................................................... 3
Lending Portfolio Securities and Writing
Covered Call Options .................................................. 4
High Yield, High Risk Debt Securities ...................................... 5
Net Asset Value ............................................................ 6
Directors and Officers ..................................................... 7
Directors' Compensation Schedule ........................................... 8
Manager .................................................................... 9
Custodian and Transfer Agent ............................................... 10
Independent Auditors ....................................................... 10
Distribution Plan .......................................................... 10
Portfolio Transactions ..................................................... 10
Taxes ...................................................................... 11
Major Shareholders ......................................................... 11
Shareholder Meetings ....................................................... 11
Performance Data ........................................................... 12
2
<PAGE>
INVESTMENT RESTRICTIONS
Selected American 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. 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 20% of the value of the Fund's net assets.
3. 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.
4. 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.
5. Invest in other investment companies (as defined in the Investment Company
Act of 1940), except as part of a merger, consolidation, reorganization or
acquisition of assets.
6. Underwrite securities of other issuers (although the Fund may technically
be considered an underwriter if it sells restricted securities).
7. 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.
8. Make loans, except it may acquire debt securities from the issuer or others
which are publicly distributed or are of a type normally acquired by
institutional investors and except that it may make loans of portfolio
securities if any such loans are secured continuously by collateral at
least equal to the market value of the securities loaned in the form of
cash and/or securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and provided that no such loan will be made
if upon the making of that loan more than 10% of the value of the Fund's
total assets would be the subject of such loans.
9. Concentrate more than 25% of its assets in securities of any one industry.
10. Purchase or sell real estate or interests in real estate, commodities or
commodity contracts or interests in oil, gas or other mineral exploration
or development programs. It may, however, purchase marketable securities of
companies which may make such investments.
3
<PAGE>
11. Allow any person associated with the Fund or its investment manager who is
an officer or director of another issuer to participate in any decision to
purchase or sell any securities of such other issuer.
All percentage restrictions except those with respect to illiquid
securities, apply as of the time of investment without regard to later increases
or decreases in the values of securities or total or net assets.
LENDING PORTFOLIO SECURITIES AND WRITING COVERED CALL OPTIONS
Lending Portfolio Securities
The Fund's investment restrictions provide that the Fund may loan portfolio
securities so long as no more than 10% of the value of the Fund's total assets
would be subject to such loans. However, the Fund does not intend to engage in
any such transaction if it would cause more than 5% of its net assets to be
subject to such loans. Income may be earned on collateral received to secure the
loans. Cash collateral would be invested in money market instruments. U.S.
Government Securities collateral would yield interest or earn discount. Part of
this income might be shared with the borrower. Alternatively, the Fund could
allow the borrower to receive the income from the collateral and charge the
borrower a fee. In either event, the Fund would receive the amount of dividends
or interest paid on the loaned securities.
Usually these loans would be made to brokers, dealers or financial
institutions. Loans would be fully secured by collateral deposited with the
Fund's custodian in the form of cash and/or U.S. Government Securities. This
collateral must be increased within one business day in the event that its value
shall become less than the market value of the loaned securities.
The borrower, upon notice, must redeliver the loaned securities within 5
business days. In the event that voting rights with respect to the loaned
securities pass to the borrower and a material proposal affecting the securities
arises, the loan may be called or the Fund will otherwise secure or be granted a
valid proxy in time for it to vote on the proposal.
In making such loans, the Fund may utilize the services of a loan broker
and pay a fee therefor. The Fund may incur additional custodian fees for
services in connection with lending of securities.
Writing Covered Call Options
The Fund may write covered call options on a portion of its portfolio
securities and purchase call options in closing transactions. The Fund's
investment restrictions provide that such an option may not be written if
thereafter the market value of all securities subject to options would exceed
20% 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 such options. The Fund would only write options on securities in its
portfolio and would not write options on loaned securities. The Fund will limit
its income derived from the writing of options that expire in less than 3 months
so as to meet the requirements for qualification as a regulated investment
company under the Internal Revenue Code.
A covered call option gives the purchaser of the option the right to buy
the underlying security at the price specified in the option (the "exercise
price") at any time until the option expires, generally within 3 to 9 months, in
return for the payment to the writer upon the issuance of the option of an
amount called the "premium." A commission may be charged in connection with the
writing of the option. The premium received for writing a call option is
determined by the option markets. The premium paid plus the exercise price will
always be greater than the market price of the underlying securities at the time
the option is written. By writing a covered call option, the Fund forgoes, in
exchange for the premium, the opportunity to profit from any increase in the
market value of the underlying security above the exercise price.
4
<PAGE>
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 30% 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. The Fund intends not to
purchase securities rated BB or Ba or lower if after such purchase more than 30%
of the Fund's net assets determined at the time of investment, would be invested
in such securities (including downgraded securities). 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
Manager considers the ratings assigned by S & P and Moody's as one of several
factors in its independent credit analysis of issuers. Ratings assigned by
credit agencies do not evaluate market risks.
The market values of such securities tend to reflect individual corporate
developments to a greater extent than do higher rated securities, which react
partly to fluctuations in the general level of interest rates. Such lower rated
securities also tend to be more sensitive to economic and industry conditions
than higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis regarding individual lower rated
bonds and the high yield, high risk market may depress the prices for such
securities. If the negative factors such as the aforementioned adversely impact
the market value of high yield, high risk securities, the portfolio's net asset
value will be adversely affected.
The high yield, high risk bond market comprised a small piece of the
general bond market until the middle 1980's when issuance increased
dramatically. Since that time the high yield, high risk bond market has
experienced only one recessionary environment but never has been exposed to a
significant increase in interest rates. During the economic downturn that was
experienced, prices of high yield, high risk bonds declined and defaults rose.
Future economic downturns and/or significant increases in interest rates are
likely to have a negative effect on the high yield, high risk bond market and
consequently on the value of these bonds, as well as increase the incidence of
defaults on such bonds.
High yield, high risk bonds may be issued in a variety of circumstances.
Some of the more common circumstances are issuance by corporations in the growth
stage of their development, in connection with a corporate reorganization or as
part of a corporate takeover. Companies that issue such high yielding, high risk
bonds often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the bonds of such issuers generally is greater than is the case with higher
rated bonds. For example, during an economic downturn or recession, highly
leveraged issuers of high yield, high risk bonds may experience financial
stress. During such periods, such issuers may not have sufficient revenues to
meet their principal and interest payment obligations. The issuer's ability to
service its debt obligations may also be adversely affected by specific
corporate developments, or the issuer's inability to meet specific projected
business forecasts, or the unavailability of additional financing. The risk of
loss due to default by the issuer is significantly greater for the holders of
high yielding bonds because such bonds are generally
5
<PAGE>
unsecured and are often subordinated to other creditors of the issuer. The costs
associated with recovering principal and interest once a security has defaulted
may impact the return to holders of the security.
The Fund may have difficulty disposing of certain high yield, high risk
bonds because there may be a thin trading market for such bonds. Because not all
dealers maintain markets in all high yield high, risk bonds, the Fund
anticipates that such bonds could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market may have an
adverse impact on market price and the ability to dispose of particular issues
and may also make it more difficult for the Fund to obtain accurate market
quotations or valuations for purposes of valuing the Fund's assets. Market
quotations generally are available on many high yield issues only from a limited
number of dealers and may not necessarily represent firm bid prices of such
dealers or prices for actual sales. In addition, adverse publicity and investor
perceptions may decrease the values and liquidity of high yield, high risk bonds
regardless of a fundamental analysis of the investment merits of such bonds. To
the extent that the Fund purchases illiquid or restricted bonds, it may incur
special securities registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties relating to such bonds.
Bonds may be subject to redemptions or call provisions. If an issuer
exercises these provisions when investment rates are declining, the Fund may
replace such bonds with lower yielding bonds resulting in a decreased return.
Zero coupon, pay-in-kind and deferred interest bonds involve additional special
considerations. Zero coupon bonds are debt obligations that do not entitle the
holder to any periodic payments of interest prior to maturity or a specified
cash payment date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from their face
amount or par value. The market prices of zero coupon securities are generally
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a greater
degree than do securities paying interest currently having similar maturities
and credit quality. Pay-in-kind bonds pay interest in the form of other
securities rather than cash. Deferred interest bonds defer the payment of
interest to a later date. Zero coupon, pay-in-kind or deferred interest bonds
carry additional risk in that, unlike bonds which pay interest in cash
throughout the period to maturity, the Fund will realize no cash until the cash
payment date unless a portion of such securities are sold. The Fund has no
assurance of the value or the liquidity of securities received from pay-in-kind
bonds. If the issuer defaults, the Fund may obtain no return at all on its
investment. To the extent that the Fund invests in bonds that are original issue
discount, zero coupon, pay-in-kind or deferred interest bonds, the Fund may have
taxable interest income in excess of the cash actually received on these issues.
In order to avoid taxation to the Fund, the Fund may have to sell portfolio
securities to meet its taxable distribution requirements under potentially
adverse circumstances.
NET ASSET VALUE
The Fund does not price its shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange (the "Exchange") is closed.
Such days include the following holidays: New Year's Day, 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
6
<PAGE>
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 Special 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 1985 to April 1989 and
January 1993 to August 1994. His address is One Stamford Forum, Stamford, CT
06904.
Floyd A. Brown (11/5/30) - Director. Staff announcer and program host for WGN
Radio and Television, Chicago, Illinois. Sole proprietor of The Floyd Brown Co.,
Elgin, Illinois (advertising, media production and mass media marketing). His
address is 51 Douglas Avenue, Elgin, Illinois 60120.
William G. Cole (3/7/17) - Director. Retired educator; writer. His address is
544 W. Brompton, Chicago, Illinois 60657.
*/**Shelby M.C. Davis (3/20/37) - Director and President. Director, Chairman and
Chief Executive Officer of Venture Advisers, Inc. President of each of the Davis
Funds; Employee of Capital Ideas, Inc. (financial consulting firm); Consultant
to Fiduciary Trust Company International. Director of Shelby Cullom Davis
Financial Consultants, Inc. His address is P.O. Box 205, Hobe Sound, Florida
33455.
**Robert J. Greenebaum (7/30/17) - Director and Chairman of the Board. Retired.
Engaged in investment consulting and private investment activities. Director,
Blue Chip Value Fund, Inc. and United Asset Management Corporation (a holding
company in the investment management field). His address is 111 West Washington
Street, Chicago, Illinois 60602.
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) - 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.
7
<PAGE>
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.
**Samuel P. Ynzunza (8/13/62) - Vice President and Secretary. Senior Vice
President, Venture Advisers, Inc. Vice President and Secretary of each of the
Davis Funds except Davis International. Former Corporate Counsel, INVESCO Funds
Group, Inc. and Franklin Resources. His address is 124 E. Marcy Street, Santa
Fe, New Mexico 87501.
**Eileen R. Street (3/11/62) - Assistant Treasurer and Assistant Secretary.
Senior Vice President, Venture Advisers, Inc. Assistant Treasurer and Assistant
Secretary of each of the Davis Funds. Her address is 124 East Marcy Street,
Santa Fe, New Mexico 87501.
**Arthur Don (9/24/53) - Assistant Secretary. Assistant Secretary of each of the
Davis Funds. Partner, D'Ancona & Pflaum, Fund Legal Counsel. His address is 30
North LaSalle Street, Suite 2900, Chicago, Illinois 60602.
**Sheldon R. Stein (11/29/28) - Assistant Secretary. Assistant Secretary of each
of the Davis Funds. Partner, D'Ancona & Pflaum, Fund Legal Counsel. His address
is 30 North LaSalle Street, Suite 2900, Chicago, Illinois 60602.
As of March 31, 1997, the directors and officers of the Fund as a group
owned 0.097% 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, 1996 the compensation paid to
directors who are not considered to be interested persons of the Fund was as
follows:
Aggregate Fund Total Complex
Name Compensation Compensation*
---- ------------ -------------
William P. Barr 25,078 30,000
Floyd A Brown 26,750 32,000
William G. Cole 28,840 34,500
Robert J. Greenebaum 44,723 53,500
Jerome E. Hass*** -0- -0-
Walter E. Hoadley** 26,750 32,000
Katerine L. MacWilliams*** -0- -0-
James J. McMonagle 23,406 28,000
Richard C. O'Brien*** -0- -0-
Larry Robinson 23,406 28,000
Marsha Williams 23,406 28,000
8
<PAGE>
* Complex compensation is the aggregate compensation paid, for services as a
Director, by all mutual funds with the same investment adviser.
** Mr. Hoadley retired from the Board of Directors effective December 31,
1996.
*** Ms. MacWilliams and Messrs. Hass and O'Brien were elected to the Board of
Directors on March 25, 1997.
MANAGER
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 investment advice and management. It furnishes
statistical, executive and clerical personnel, bookkeeping, office space, and
equipment necessary to carry out its investment advisory functions and such
corporate managerial duties as are requested by the Board of 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.
Under the Investment Management Agreement between the Fund and the Manager,
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties, the Manager will not be liable for any act or omission
in the cause of, or connected with, rendering service under the Agreement or for
any losses that may be sustained in the purchase, holding or sale of any
security.
The Fund pays the Manager monthly an investment advisory fee computed at
the following annual rates: 0.65% of the first $500 million of average daily net
assets, 0.60% of the next $500 million of average daily net assets and 0.55% of
average daily net assets over $1 billion.
During the years ended December 31, 1996, 1995 and 1994 the Fund paid
management fees of $6,770,841, $4,719,283 and $3,092,488, respectively.
The Manager has adopted a Code of Ethics which regulates the personal
securities transactions of the Manager's investment personnel and other
employees and affiliates with access to information regarding securities
transactions of the Fund. The Code of Ethics requires investment personnel to
disclose personal securities holdings upon commencement of employment and all
subsequent trading activity to the Manager's Compliance Officer. Investment
personnel are prohibited from engaging in any securities transactions, including
the purchase of securities in a private offering, without the prior consent of
the Compliance Officer. Additionally, such personnel are prohibited from
purchasing securities in an initial public offering and are prohibited from
trading in any securities (i) for which the Fund has a pending buy or sell
order, (ii) which the Fund is considering buying or selling, or (iii) which the
Fund purchased or sold within seven calendar days.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas
City, Missouri 64105, serves as the Fund's custodian and the United Missouri
Bank of Kansas City, N.A., Tenth and Grand Streets, Kansas City, Missouri 64106,
serves as the Fund's sub-custodian. The custodian and sub-custodian have custody
of all securities and cash of the Fund. The custodian and sub-custodian attend
to the collection of principal and income and the payment for, and the
collection of proceeds of, securities bought and sold by the Fund. IFTC is also
the Fund's transfer agent and dividend-paying agent.
9
<PAGE>
INDEPENDENT AUDITORS
The Fund's auditors are Tait, Weller & Baker, Two Penn Center, Suite 700,
Philadelphia, Pennsylvania 19102-1707. The services of Tait, Weller & Baker
include an audit of 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
The Manager has served as the Distributor of the Fund's shares since May 1,
1993. The Fund has adopted a Distribution Plan (the "Plan") under Rule l2b-l of
the 1940 Act. Rule 12b-1 permits an investment company to finance, directly or
indirectly, any activity which is primarily intended to result in the sale of
its shares only if it does so in accordance with the provisions of the Rule.
Under the Plan, the Fund pays the Distributor an annual compensatory fee of
0.25% of average daily net assets for distributing the Fund's shares. The
Distributor pays all the costs of distribution except for the cost of
prospectuses and reports sent to current shareholders. The Board of Directors
has determined that there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders.
The Board of Directors has been informed by the Manager that the expenses
of distribution currently exceed, and for the foreseeable future are expected to
exceed, the amounts paid by the Fund under the Plan. Such excess is and will be
paid out of the Manager's own resources and not by the Fund.
During the years ended December 31, 1996 and 1995, the Fund's distribution
fees were $2,738,904 and $1,862,201, respectively. The Distributor reported that
the following amounts were spent on the indicated items: $1,289,299 and
$322,232, respectively on advertising; $75,608 and $274,678, respectively on
printing and mailing prospectuses and sales literature to other than current
shareholders; $674,611 and $416,924, respectively on fees to brokers; $4,232 and
$4,232, respectively on registration and filing fees.
PORTFOLIO TRANSACTIONS
The Manager makes investment decisions and decisions as the execution of
portfolio transactions for the Fund, subject to the general supervision of the
Board of Directors. The Fund's policy is to seek to place portfolio transactions
with those brokers or dealers who will execute transactions as efficiently as
possible and at favorable prices. Many of these transactions involve the payment
of brokerage commissions by the Fund. In some cases, transactions are with firms
that act as principal for their own account. In effecting transactions in
over-the-counter securities, the Fund deals with market makers unless it appears
that better prices and execution are available elsewhere.
Subject to the policy of seeking favorable price and execution for the
transaction size and risk involved, in selecting brokers or dealers or
negotiating the commissions to be paid, the Manager 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 staff of the Manager. 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 Manager deems the purchase or sale of a security to
be in the best interests of the Fund as well as other fiduciary accounts, the
Manager may aggregate the securities to be sold or purchased for
10
<PAGE>
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 Manager 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 Manager 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 Manager in
performing its services for the Fund. The Manager 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, 1996 and 1995, the Fund paid brokerage
commissions of $800,020 and $883,133 respectively. Of this amount, 97% and 95%,
respectively was paid to brokers providing research services to the Fund. During
1993, the Fund paid brokerage commissions of $1,088,756; 82% of which was paid
to brokers providing research services to the Fund. No commissions were paid to
the Distributor or its affiliates during such periods.
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 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 April 22, 1997, Shelby Cullom Davis & Co., 609 5th Avenue, 11th
Floor, New York, NY 10017-1021, owned of record 26,327,012.679 shares of the
Fund's common stock, constituting 38.22% of the outstanding shares of such
stock. Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, CA
94104, owned of record 13,602,534.325 shares of the Fund's common stock,
constituting 19.74% 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 shareholders 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 shareholders 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:
11
<PAGE>
One year ended December 31, 1996 ........... 30.74%
Five years ended December 31, 1996 ......... 14.26%
Ten years ended December 31, 1996 .......... 14.92%
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(1 + 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.
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, 1996, was 30.74%, 94.91% and 302.29%, 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 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 Fund may also use evaluations of the Fund published by nationally
recognized ranking services and financial publications, including, but not
limited to, 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.
12
<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 1996 Annual
Report:
Tait, Weller & Baker Auditor's Report.
Portfolio of Investments at December 31, 1996.
Statement of Assets and Liabilities at December 31,
1996.
Statement of Operations for the year ended December 31,
1996.
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995.
Notes to Financial Statements.
Included in Part B:
Report of Tait, Weller & Baker.
(b) Exhibits:
(1) Articles of Incorporation, incorporated by reference
to Exhibit (1) to Post-Effective Amendment No. 68 to
Registrant's Registration Statement on Form N-1A,
File No. 2-10699.
(2) Amended and Restated Bylaws as of January 27, 1994,
incorporated by reference to Exhibit (2) to
Post-Effective Amendment No. 74 to Registrant's
Registration Statement on Form N-1A, File No.
2-10699.
<PAGE>
(5)(a) Management Agreement dated May 1, 1993, incorporated
by reference to Exhibit (5) to Post-Effective
Amendment No. 71 to Registrant's Registration
Statement on Form N-1A, File No. 2-10699.
(5)(b) Sub-Advisory Agreement dated December 1, 1996.
(6)/(15) Distribution Services Agreement and Plan of
Distribution dated May 1, 1993, incorporated by
reference to Exhibit (6)/(15) to Post-Effective
Amendment No. 71 to Registrant's Registration
Statement on Form N-1A, File No. 2-10699.
(8) (a) Custody Agreement dated November 25, 1991,
incorporated by reference to Exhibit (8) (a) to
Post-Effective Amendment No. 69 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.
(8) (b) Agency Agreement dated November 25, 1991,
incorporated by reference to Exhibit (8) (b) to
Post-Effective Amendment No. 69 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.
(11) Consent of Tait, Weller & Baker.
(14) (a) Individual Retirement Account Plan Documents,
incorporated by reference to Exhibit (14) (a) to
Post-Effective Amendment No. 70 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.
(14) (b) Money Purchase Pension and Profit Sharing Plan Basic
Document, incorporated by reference to Exhibit (14)
(b) to Post-Effective Amendment No. 71 to
Registrant's Registration Statement on Form N-1A,
File No. 2-10699.
(14) (c) Money Purchase Pension Adoption Agreement,
incorporated by reference to Exhibit (14) (c) to
Post-Effective Amendment No. 71 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.
(14) (d) Profit-Sharing Adoption Agreement, incorporated by
reference to Exhibit (14) (d) to Post-Effective
Amendment No. 71 to Registrant's Registration
Statement on Form N-1A, File No. 2-10699.
<PAGE>
(14) (e) Profit-Sharing 401(k) Plan, incorporated by reference
to Exhibit (14) (e) to Post-Effective Amendment No.
71 to Registrant's Registration Statement on Form
N-1A, File No. 2-10699.
(14) (f) 403 (b) Plan Documents, incorporated by reference to
Exhibit (14) (f) to Post-Effective Amendment No. 68
to Registrant's Registration Statement on Form N-1A,
File No. 2-10699.
(14) (g) Prototype Simplified Employee Pension Plan Documents,
incorporated by reference to Exhibit (14) (f) to
Post-Effective Amendment No. 68 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.
(14) (h) Deferred Compensation Section 457 Savings Plan,
incorporated by reference to Exhibit (14) (f) to
Post-Effective Amendment No. 68 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.
(14) (i) Defined Contribution Trust, incorporated by reference
to Exhibit (14) (i) to Post-Effective Amendment No.
71 to Registrant's Registration Statement on Form
N-1A, File No. 2-10699.
(16) Sample Computation of Performance Data, incorporated
by reference to Exhibit (14) (f) to Post-Effective
Amendment No. 68 to Registrant's Registration
Statement on Form N-1A, File No. 2-10699.
(17) (a) Powers of Attorney, incorporated by reference to
Exhibit (17) to Post-Effective Amendment No. 76 and
Exhibit 17(b) to Post-Effective Amendment No. 77 to
Registrant's Registration Statement on Form N-1A,
File No. 2-10699.
(17) (b) Power of attorney for Jerome E. Hass, Katherine L.
MacWilliams, Richard C. O'Brien and Kenneth Eich.
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
<PAGE>
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of March 31, 1997
-------------- ------------------------
Common Stock 26,449
Item 27. Indemnification
Information concerning indemnification is incorporated by reference
herein from Item 4, Part II of Registrant's Post-Effective Amendment No. 55, and
from Item 27 of Post-Effective Amendment No. 64 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
Davis Selected Advisers, L.P., the Registrant's investment adviser,
renders investment advisory services to individual, institutional and pension
and profit-sharing plan accounts, as well as to Selected Special Shares, Inc.,
Selected Capital Preservation Trust, Davis New York Venture Fund, Davis High
Income Fund, Davis Tax-Free High Income Fund, Davis Series, Inc. and Davis
International Series, Inc.
Shelby M.C. Davis is a Director, Chairman, Chief Executive Officer
and principal owner of Venture Advisers, Inc. (the "General Partner") and is a
Director of Shelby Cullom Davis Financial Consultants, 70 Pine Street, New York,
New York 10270.
Item 29. Principal Underwriter
(a) Davis Selected Advisers, L.P., located at 124 East Marcy Street,
Santa Fe, New Mexico 87501, serves as the principal underwriter of the
Registrant and also serves as principal underwriter for Selected Special Shares,
Inc., Selected Capital Preservation Trust, Davis New York Venture Fund, Davis
High Income Fund, Davis Tax-Free High Income Fund, Davis Series, Inc. and Davis
International Series, Inc.
(b) Manager of the General Partner of the Principal Underwriter.
Positions and Offices Positions and
Name and Principal with General Partner of Offices with
Business Address Principal Underwriter Registrant
- ---------------- --------------------- ----------
Shelby M.C. Davis Director, Chairman and Director and
P.O. Box 205 Chief Executive Officer President
Hobe Sound, FL 33455
<PAGE>
Kenneth C. Eich Senior Vice President, Vice President
124 East Marcy Street Chief Operating Officer
Santa Fe, NM 87501
Eileen R. Street Senior Vice President Treasurer and
124 East Marcy Street Assistant Secretary
Santa Fe, NM 87501
Samuel P. Ynzunza Senior Vice President, Vice President and
124 East Marcy Street General Counsel Secretary
Santa Fe, NM 87501
Carolyn H. Spolidoro Vice President None
124 East Marcy Street
Santa Fe, NM 87501
Andrew A. Davis President None
124 East Marcy Street
Santa Fe, NM 87501
(c) Not applicable.
Item 30. Location of Accounts and Records
All records and documents required to be maintained under Section 31
(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are in the possession of Davis Selected Advisers, L.P., 124 East Marcy Street,
Santa Fe, New Mexico 87501, the investment adviser of the Registrant, except
that shareholder account records are in the possession of Investors Fiduciary
Trust Company, 127 West 10th Street, Kansas City, Missouri 64105, custodian and
transfer agent, and current minute books are in the possession of D'Ancona &
Pflaum, 30 North LaSalle Street, Chicago, Illinois 60602. Davis Selected
Advisers, L.P. maintains copies of the minutes.
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 AMERICAN SHARES, INC.
SIGNATURES
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 28th day of
April, 1997
SELECTED AMERICAN 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 28, 1997
--------------------------- Chief Executive
Shelby M.C. Davis Officer and Director
Kenneth C. Eich* Vice President, April 28, 1997
--------------- principal accounting
officer
*By: /s/ Sheldon R. Stein
--------------------------------------
Sheldon R. Stein,
Attorney-in-Fact
*Sheldon R. Stein signs this document on behalf of the foregoing officers
pursuant to the powers of attorney filed as Exhibit 17 to Post-Effective
Amendment No. 76 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
28, 1997 by the following persons in the capacities indicated.
Signature Title
--------- -----
William P. Barr* Director
----------------------------------
William P. Barr
Floyd A. Brown* Director
----------------------------------
Floyd A. Brown
William G. Cole* Director
----------------------------------
William G. Cole
Shelby M.C. Davis* Director
----------------------------------
Shelby M.C. Davis
Robert J. Greenebaum* Director
----------------------------------
Robert J. Greenebaum
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
*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 Amdendment No. 76 and Exhibit 17(b) to Post-Effective
Amendment No. 77 to Registrant's Registration Statement on Form N-1A and
Exhibit 17(b) to this Registration Statement.
SELECTED AMERICAN SHARES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes
and appoints Robert J. Greenebaum, 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.
2-10699) and/or the Investment Company Act of 1940 (Registration No. 811-51),
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 10th day of April, 1997.
- -----------------------------
Richard C. O'Brien
- -----------------------------
Jerome E. Hass
- -----------------------------
Katherine L. MacWilliams
<PAGE>
SELECTED AMERICAN SHARES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert J. Greenebaum, Samuel P. Ynzunza, Sheldon R. Stein and Arthur
Don, and each of them, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any post-effective
amendments to the registration statement under the Securities Act of 1933
(Registration No. 2-10699) and/or the Investment Company Act of 1940
(Registration No. 811-51), 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. 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 WHEROF, the undersigned has executed this Power of Attorney as
of the 25th day of April, 1997.
- -------------------------------
Kenneth C. Eich, Vice President
CONSENT OF INEPENDENT 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 American
Shares, Inc. and to the inclusion of our report dated January 31, 1997 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
-----------------------------------
TAIT WELLER & BAKER
Philadelphia, Pennsylvania
April 28, 1997
