485APOS 1 file001.htm FORM N-1/A PURSUANT TO RULE 485B

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------------

COVER PAGE OF FORM N-1A
FOR
SELECTED AMERICAN SHARES, INC.
SELECTED SPECIAL SHARES, INC.
SELECTED CAPITAL PRESERVATION TRUST

SELECTED AMERICAN SHARES, INC.
POST-EFFECTIVE AMENDMENT NO. 89 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 2-10699
AND
AMENDMENT NO. 37 UNDER THE INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-51

SELECTED SPECIAL SHARES, INC.
POST-EFFECTIVE AMENDMENT NO. 62 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 2-27514
AND
AMENDMENT NO. 38 UNDER THE INVESTMENT COMPANY ACT OF 194
REGISTRATION NO. 811-01533

SELECTED CAPITAL PRESERVATION TRUST
POST-EFFECTIVE AMENDMENT NO. 31 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 33-15807
AND
AMENDMENT NO. 33 UNDER THE INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-5240

2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
520-434-3771

Agents For Service: Thomas D. Tays, Esq.
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
520-434-3771

-or-

Arthur Don, Esq.
Seyfarth Shaw LLP
55 E. Monroe St., Suite 4200
Chicago, IL 60603-5803
(1-312-602-2048)

It is proposed that this filing will become effective:

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On ___, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] On May 1, 2005, pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On _______________, pursuant to paragraph (a)(2) of Rule 485

Title of Securities being Registered: Common Stock of:
---------------

(1) Selected American Shares Fund
(2) Selected Special Shares Fund
Shares of Beneficial Interest of
--------------------------------
(3) Selected Daily Government Fund

SELECTED FUNDS

Selected American Shares
Selected Special Shares
Selected Daily Government Fund
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PROSPECTUS

Class S shares
Class D shares

May 1, 2005

The Securities and Exchange Commission has neither approved nor disapproved of
these securities, nor has it determined whether this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a crime.

--------------------------------------------------------------------------------
This prospectus contains important information. Please read it carefully before
investing and keep it for future reference.

No financial adviser, dealer, salesperson or any other person has been
authorized to give any information or to make any representations, other than
those contained in this Prospectus, in connection with the offer contained in
this Prospectus and, if given or made, such other information or representations
must not be relied on as having been authorized by the Funds, the Funds'
investment adviser or the Funds' distributor. This Prospectus does not
constitute an offer by the Funds or by the Funds' distributor to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the Funds to make such an
offer in such jurisdiction.
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TABLE OF CONTENTS
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OVERVIEWS OF EACH SELECTED FUND:
4 SELECTED AMERICAN SHARES
11 SELECTED SPECIAL SHARES
18 SELECTED DAILY GOVERNMENT FUND
Investment Objective and Principal Investment Strategies
Determining If This Fund Is Right for You
Principal Risks of Investing in the Fund
Performance Information
Fees and Expenses of the Fund
23 SELECTED FUNDS MANAGEMENT
Davis Advisors
Investment Professionals
The Davis Investment Philosophy
Additional Information about Investments
29 ONCE YOU INVEST IN SELECTED FUNDS
How Your Shares Are Valued
Portfolio Holdings
How We Pay Earnings
Federal Income Taxes
Fees and Expenses of the Funds
35 HOW TO CHOOSE A SHARE CLASS
Class S Shares
Class D Shares
Converting from Class S to Class D shares
37 HOW TO OPEN AN ACCOUNT
Three Ways You Can Open An Account
Anti-Money Laundering Compliance
Retirement Plan Accounts
39 HOW TO BUY, SELL AND EXCHANGE SHARES
Right to Reject or Restrict any Purchase or Exchange Order
Three Ways to Buy, Sell and Exchange Shares
When Your Transactions Are Processed
Buying More Shares
Selling Shares
Exchanging Shares
Market Timing
Telephone Transactions
Internet Transactions
51 OTHER INFORMATION
Dividends and Distributions
Financial Highlights
Householding
Privacy Notice
B/C OBTAINING ADDITIONAL INFORMATION

OVERVIEW OF
SELECTED AMERICAN SHARES
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INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES

Selected American Shares, Inc.'s ("Selected American Shares") investment
objective is to achieve both capital growth and income. In the current market
environment, we expect that income will be low. Under normal circumstances, the
Fund invests at least 80% of its net assets, plus any borrowing for investment
purposes, in securities issued by American companies. Typically, the Fund
invests the majority of its assets in equity securities issued by large
companies with market capitalizations of at least $10 billion that we believe
are of high quality and whose shares are selling at attractive prices. We use
the Davis Investment Philosophy (see "The Davis Investment Philosophy" in this
prospectus) to select companies with the intention of owning their stocks for
the long term.

We consider selling a company if the company no longer exhibits the
characteristics that we believe (i) foster sustainable long-term expansion of
earnings, (ii) manage risk, and (iii) enhance the potential for superior
long-term returns. The Fund has the flexibility to invest a limited portion of
its assets in companies of any size, to invest in companies whose shares may be
subject to controversy, to invest in foreign securities, and to invest in
non-equity securities. See "Additional Information About Investments."

DETERMINING IF THIS FUND IS RIGHT FOR YOU

You should consider investing in this Fund if:

o You are seeking long-term growth of capital.

o You are more comfortable with established, well-known companies.

o You are investing for the long term.

You should not invest in this Fund if:

o You are worried about the possibility of sharp price swings and dramatic
market declines.

o You are interested in earning current income.

o You are investing for the short term.

PROSPECTUS o SELECTED FUNDS o PAGE 5

PRINCIPAL RISKS OF INVESTING IN SELECTED AMERICAN SHARES

If you buy shares of Selected American Shares, you may lose some or all of the
money that you invest. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. This section
describes what we think are the most significant factors that can cause the
Fund's performance to suffer.

o MARKET RISK. The market value of shares of common stock can change rapidly
and unpredictably as a result of political or economic events having little
or nothing to do with the performance of the companies in which we invest.

o COMPANY RISK. The market values of common stock vary with the success or
failure of the company issuing the stock. Many factors can negatively
affect a particular company's stock price, such as poor earnings reports,
loss of major customers, major litigation against the company or changes in
government regulations affecting the company or its industry. The success
of the companies in which the Fund invests largely determines the Fund's
long-term performance.

o FINANCIAL SERVICES RISK. The Fund typically invests a significant portion
of its assets in the financial services sector. Risks of investing in the
financial services sector include: (i) Regulatory actions: financial
services companies may suffer a setback if regulators change the rules
under which they operate; (ii) Changes in interest rates: unstable interest
rates, and/or rising interest rates, can have a disproportionate effect on
the financial services sector; (iii) Un-diversified loan portfolios:
financial services companies whose securities the Fund purchases may
themselves have concentrated portfolios, such as a high level of loans to
real estate developers, which makes them vulnerable to economic conditions
that affect that industry; and (iv) Competition: the financial services
sector has become increasingly competitive.

o FOREIGN COUNTRY RISK. The Fund may invest a significant portion of its
assets in companies operating, incorporated, or principally traded in
foreign countries. Investing in foreign countries involves risks that may
cause the Fund's performance to be more volatile than it would be if we
invested solely in the United States. Foreign economies may not be as
strong or as diversified, foreign political systems may not be as stable,
and foreign financial reporting standards may not be as rigorous as they
are in the United States. In addition, foreign capital markets may not be
as well developed, so securities may be less liquid, transaction costs

PROSPECTUS o SELECTED FUNDS o PAGE 6

may be higher, and investments may be subject to government regulation.
Securities issued by foreign companies are frequently denominated in
foreign currencies. The change in value of a foreign currency against the
U.S. dollar will result in a change in the U.S. dollar value of securities
denominated in that foreign currency. The Fund may, but generally does not
hedge its currency risk. When the value of a foreign currency declines
against the U.S. dollar, the value of the Fund's shares will tend to
decline.

o HEADLINE RISK. We seek to acquire companies with expanding earnings at
value prices. We may make such investments when a company becomes the
center of controversy after receiving adverse media attention. The company
may be involved in litigation, the company's financial reports or corporate
governance may be challenged, the company's annual report may disclose a
weakness in internal controls, investors may question the company's
published financial reports, greater government regulation may be
contemplated, or other adverse events may threaten the company's future.
While we research companies subject to such contingencies, we cannot be
correct every time, and the company's stock may never recover.

o SELECTION RISK. The securities we select for the Fund may underperform the
S&P 500(R) Index or other funds with similar investment objectives and
strategies.

The Fund's shares are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the FDIC or any other agency, and
involve investment risks, including possible loss of the principal amount
invested.

PROSPECTUS o SELECTED FUNDS o PAGE 7

PERFORMANCE INFORMATION

The bar chart and table that follow provide an indication of the risks of
investing in Selected American Shares by showing changes in the Fund's
year-to-year performance and by showing how the Fund's average annual returns
compare to those of the S&P 500(R) Index, a widely recognized unmanaged index of
stock performance. The Fund is not managed to track any particular index and,
consequently, the performance of the Fund may deviate significantly from the
performance of the Index. The Fund's past performance (before and after taxes)
is not necessarily an indication of how the Fund will perform in the future.

SELECTED AMERICAN SHARES
CALENDAR YEAR TOTAL RETURNS FOR CLASS S SHARES

--------------------------------
YEAR RETURN
--------------------------------
1995 38.09%
--------------------------------
1996 30.74%
--------------------------------
1997 37.25%
--------------------------------
1998 16.27%
--------------------------------
1999 20.32%
--------------------------------
2000 9.33%
--------------------------------
2001 (11.17)%
--------------------------------
2002 (17.06)%
--------------------------------
2003 Xx%
--------------------------------
2004 Xx%
--------------------------------

During the period shown above, the highest quarterly return was xx% for the
quarter ended xx, and the worst quarterly return was xx for the quarter ended
xx. Total return for the three months ended March 31, 2005, (not annualized) was
xx%.

PROSPECTUS o SELECTED FUNDS o PAGE 8

SELECTED AMERICAN SHARES AVERAGE ANNUAL TOTAL RETURNS
for the periods ended December 31, 2004

--------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
--------------------------------------------------------------------------------
Selected American Shares xx% xx% xx%
Class S shares
return before taxes
--------------------------------------------------------------------------------
Selected American Shares xx% xx% xx%
Class S shares
return after taxes on
distributions
--------------------------------------------------------------------------------
Selected American Shares xx% xx% xx%
Class S Shares
return after taxes on
distributions and sale of fund
shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
S&P 500(R) Index xx% xx% Xx%
--------------------------------------------------------------------------------

Class D shares were first offered to the public on May 1, 2004, and do not yet
have a one-year performance history. The returns for Class D shares will differ
from the Class S returns because they have lower distribution expenses.

After-tax returns are calculated using the highest historical individual federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on an investor's tax situation and may
differ from those shown. After-tax returns shown are not relevant to investors
who hold their Fund shares through tax-deferred arrangements, such as 401(k)
plans or individual retirement accounts.

If returns are negative, returns after taxes on distributions and sale of fund
shares may be higher than returns before taxes as the resulting capital losses
from the sale of fund shares would be available to offset capital gains from
other investments.

PROSPECTUS o SELECTED FUNDS o PAGE 9

FEES AND EXPENSES OF THE FUND

FEES YOU MAY PAY AS A SELECTED FUNDS SHAREHOLDER
paid directly from your investment

--------------------------------------------------------------------------------
CLASS S CLASS D
SHARES SHARES
--------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None None
as a percentage of offering price
--------------------------------------------------------------------------------
Maximum deferred sales charge (load) imposed on None None
redemptions
as a percentage of the lesser of the net asset
value of the shares redeemed or the total cost
of such shares
--------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None None
dividends
--------------------------------------------------------------------------------
Exchange fee None None
--------------------------------------------------------------------------------

SELECTED AMERICAN SHARES ANNUAL OPERATING EXPENSES
deducted from the fund's assets

--------------------------------------------------------------------------------
CLASS S SHARES CLASS D SHARES
--------------------------------------------------------------------------------
Management Fees 0.xx% 0.xx%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25% 0.00%
--------------------------------------------------------------------------------
Other Expenses 0.xx% 0.xx%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.xx% 0.xx%
--------------------------------------------------------------------------------

Expenses may vary in future years.

The difference in the fee structures between the classes is primarily the result
of their separate arrangements for shareholder and distribution services and is
not the result of any difference in the amounts charged by Davis Advisors for
investment advisory services. Accordingly, the investment advisory expenses do
not vary by class. Different fees and expenses will affect performance. See "How
to Choose a Share Class" to determine which Class of shares best suits you
needs.

PROSPECTUS o SELECTED FUNDS o PAGE 10

EXPENSE EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, your costs, based on these assumptions,
would be:

--------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class S Shares $xx $xx $xx $xx
Class D Shares $xx $xx $xx $xx
--------------------------------------------------------------------------------

PROSPECTUS o SELECTED FUNDS o PAGE 11

OVERVIEW OF
SELECTED SPECIAL SHARES
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES

Selected Special Shares, Inc.'s ("Selected Special Shares") investment objective
is capital growth. Under normal circumstances, the Fund invests the majority of
its assets in equity securities issued by medium and small companies with market
capitalizations of less than $20 billion that we believe are of high quality and
whose shares are selling at attractive prices. We use the Davis Investment
Philosophy (see "The Davis Investment Philosophy" in this prospectus) to select
companies with the intention of owning their stocks for the long term.

DETERMINING IF THIS FUND IS RIGHT FOR YOU

You should consider investing in this Fund if:

o You are seeking long-term growth of capital.

o You want to invest primarily in medium- and small-capitalization companies.

o You are willing to accept higher risk for the opportunity to pursue higher
returns.

o You are investing for the long term.

You should not invest in this Fund if:

o You are worried about the possibility of sharp price swings and dramatic
market declines.

o You prefer to invest in larger, more established companies.

PROSPECTUS o SELECTED FUNDS o PAGE 12

o You are interested in earning current income.

o You are investing for the short-term.

PRINCIPAL RISKS OF INVESTING IN SELECTED SPECIAL SHARES

If you buy shares of Selected Special Shares, you may lose some or all of the
money that you invest. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. This section
describes what we think are the most significant factors that can cause the
Fund's performance to suffer.

o SMALL- AND MEDIUM-CAPITALIZATION RISK. Investing in small- and
medium-capitalization companies may be more risky than investing in
large-capitalization companies. Smaller companies typically have more
limited product lines, markets and financial resources than larger
companies, and their securities may trade less frequently and in more
limited volume than those of larger, more mature companies.

PROSPECTUS o SELECTED FUNDS o PAGE 13

value of securities denominated in that foreign currency. The Fund
generally does not hedge its currency risk. When the value of a foreign
currency declines against the U.S. dollar, the value of the Fund's shares
will tend to decline.

o SELECTION RISK. The securities we select for the Fund may underperform the
Dow Jones Wilshire 5000(R) Index or other funds with similar investment
objectives and strategies.

The Fund's shares are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the FDIC or any other agency and
involve investment risks, including possible loss of the principal amount
invested.

PERFORMANCE INFORMATION

The bar chart and table that follow provide an indication of the risks of
investing in Selected Special Shares by showing changes in the Fund's
year-to-year performance and by showing how the Fund's average annual returns
compare to those of the Dow Jones Wilshire5000(R) Index, a widely recognized
unmanaged index of stock performance. The Fund is not managed to track any
particular index and, consequently, the performance of the Fund may deviate
significantly from the performance of the Index. The Fund's past performance
(before and after taxes) is not necessarily an indication of how the Fund will
perform in the future.

SELECTED SPECIAL SHARES
CALENDAR YEAR TOTAL RETURNS FOR CLASS S SHARES

PROSPECTUS o SELECTED FUNDS o PAGE 14

-------------------------------
YEAR RETURN
-------------------------------
1995 34.24%
-------------------------------
1996 11.86%
-------------------------------
1997 26.91%
-------------------------------
1998 24.52%
-------------------------------
1999 16.83%
-------------------------------
2000 (1.10)%
-------------------------------
2001 (14.41)%
-------------------------------
2002 (17.62)%
-------------------------------
2003 Xx%
-------------------------------
2004
-------------------------------

SELECTED SPECIAL SHARES AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 2004

--------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
--------------------------------------------------------------------------------
Selected Special Shares xx% xx% xx%
Class S shares
return before taxes
--------------------------------------------------------------------------------
Selected Special Shares xx% xx% xx%
Class S shares
return after taxes on
distributions
--------------------------------------------------------------------------------
Selected Special Shares xx% xx% xx%
Class S Shares
return after taxes on
distributions and sale of fund
shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Wilshire 5000(R) Index xx% xx% xx%
--------------------------------------------------------------------------------

Class D shares were first offered to the public on May 1, 2004, and do not yet
have a performance history. The returns for Class D shares will differ from the
Class S returns because they have lower distribution expenses.

PROSPECTUS o SELECTED FUNDS o PAGE 15

and may differ from those shown. After-tax returns shown are not relevant to
investors who hold their Fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.

FEES AND EXPENSES OF THE FUND

FEES YOU MAY PAY AS A SELECTED FUNDS SHAREHOLDER
Paid directly from your investment

SELECTED SPECIAL SHARES ANNUAL OPERATING EXPENSES
Deducted from the fund's assets

--------------------------------------------------------------------------------
CLASS S SHARES CLASS D SHARES
--------------------------------------------------------------------------------
Management Fees 0.xx% 0.xx%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25% 0.00%
--------------------------------------------------------------------------------
Other Expenses 0.xx% 0.xx%
--------------------------------------------------------------------------------
Total Annual Operating Expenses xx% 0.xx%
--------------------------------------------------------------------------------

Expenses may vary in future years.

PROSPECTUS o SELECTED FUNDS o PAGE 16

PROSPECTUS o SELECTED FUNDS o PAGE 17

EXPENSE EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

-------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class S Shares $xx $xx $xx $xx
Class D Shares $xx $xx $xx $xx
-------------------------------------------------------------------------------

PROSPECTUS o SELECTED FUNDS o PAGE 18

OVERVIEW OF SELECTED
DAILY GOVERNMENT FUND
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES

Selected Daily Government Fund is a money market fund. Its investment objective
is to provide as high a level of current income as possible from the type of
short-term investments in which it invests, consistent with prudent investment
management, stability of principal and maintenance of liquidity. The Fund
maintains liquidity and preserves capital by carefully monitoring the maturity
of our investments. Our portfolio has a dollar-weighted average maturity of
ninety days or less. Under normal circumstances, the Fund invests exclusively in
U.S. Government Securities and repurchase agreements collateralized by U.S.
Government Securities.

GOVERNMENT SECURITIES

There are two basic types of U.S. Government Securities: (1) direct obligations
of the U.S. Treasury and (2) obligations issued or guaranteed by an agency or
instrumentality of the U.S. government. U.S. Government Securities represent
debt obligations (unlike equity securities, which represent ownership of the
issuer). Obligations that the U.S. Treasury issues or guarantees are generally
considered to offer the highest credit quality available in any security. Many
securities issued by government agencies are not fully guaranteed by the U.S.
government and in unusual circumstances may present credit risk.

A repurchase agreement is a type of short-term investment that uses securities
as collateral. Like a short-term loan, the borrower sells securities to the
lender. The borrower agrees to buy back the securities at a certain time--at a
higher price that incorporates an interest payment.

DETERMINING IF THIS FUND IS RIGHT FOR YOU

You should consider investing in this Fund if:

o You are seeking current income.

o You are most comfortable investing in high-quality U.S. Government
Securities.

o You want a safe haven in times of market turmoil.

o You want easy access to your money.

PROSPECTUS o SELECTED FUNDS o PAGE 19

You should not invest in this Fund if:

o You need a high total return to achieve your investment goals.

o Your primary investment goal is capital growth.

PRINCIPAL RISKS OF INVESTING IN SELECTED DAILY GOVERNMENT FUND

o VARIABLE CURRENT INCOME. The income that Selected Daily Government Fund
pays to investors is not stable. When interest rates increase, the Fund's
income distributions should increase. When interest rates decrease, the
Fund's income distributions should decrease.

o CREDIT RISK. Selected Daily Government Fund seeks to manage credit risk by
investing exclusively, under normal circumstances, in U.S. Government
Securities and repurchase agreements collateralized by U.S. Government
Securities. Many of the agency-issued securities in the Fund's portfolio
(as opposed to the Treasury-issued securities) are not guaranteed by the
U.S. government and in unusual circumstances may present credit risk.
Although an issuer may be chartered or sponsored by Acts of Congress, their
securities are neither issued nor guaranteed by the United States Treasury.
These include direct obligations and mortgage-related securities that have
different levels of credit support from the U.S. government. Some are
supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association ("Ginnie Mae") pass-through
mortgage certificates. Some are supported by the right of the issuer to
borrow from the U.S. Treasury under certain circumstances, such as Federal
National Mortgage Association ("Fannie Mae") bonds. Others are supported
only by the credit of the entity that issued them, such as Federal Home
Loan Mortgage Corporation ("Freddie Mac") obligations. There is always some
risk, even for U.S. Government Securities, that the issuer of a security
held by the Fund will fail to make a payment when it is due.

Although Selected Daily Government Fund seeks to preserve the value of your
investment at $1 per share, investors can lose money. Shares of Selected Daily
Government Fund are not deposits or obligations of any bank, are not guaranteed
by the U.S. government or any bank, are not insured by the FDIC or any other
agency and involve investment risks, including possible loss of the principal
amount invested.

PROSPECTUS o SELECTED FUNDS o PAGE 20

PERFORMANCE INFORMATION

The bar chart and table that follow provide an indication of the risks of
investing in Selected Daily Government Fund by showing changes in the Fund's
year-to-year performance. The Fund's past performance is not necessarily an
indication of how the Fund will perform in the future.

SELECTED DAILY GOVERNMENT FUND
CALENDAR YEAR TOTAL RETURNS FOR CLASS S SHARES

--------------------------
YEAR RETURN
--------------------------
1995 5.23%
1996 4.70%
1997 4.91%
1998 4.85%
1999 4.48%
2000 5.80%
2001 3.73%
2002 1.32%
2003 Xx%
2004 Xx%
--------------------------

The returns for Class D shares offered by this prospectus will differ from the
Class S returns shown in the chart, because they have lower distribution
expenses.

PROSPECTUS o SELECTED FUNDS o PAGE 21

SELECTED DAILY GOVERNMENT FUND AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 2004

----------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------------------------------------------
Class S Shares 0.xx% xx% xx%
----------------------------------------------------------------------------

SELECTED DAILY GOVERNMENT FUND YIELD, CLASS S SHARES
As of December 31, 2004

---------------------------------------------------
7-Day SEC Yield 0.XX%
---------------------------------------------------

You can obtain Selected Daily Government Fund's most recent 7-day SEC Yield by
calling us toll-free at 1-800-243-1575, Monday through Friday, 9 a.m. to 6 p.m.
Eastern Time.

FEES AND EXPENSES OF THE FUND

FEES YOU MAY PAY AS A SELECTED FUNDS SHAREHOLDER
Paid directly from your investment

--------------------------------------------------------------------------------
CLASS S CLASS D
SHARES SHARES
--------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as None None
a percentage of offering price
--------------------------------------------------------------------------------
Maximum deferred sales charge (load) imposed on None None
redemptions
as a percentage of the lesser of the net asset
value of the shares redeemed or the total cost of
such shares
--------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested None None
dividends
--------------------------------------------------------------------------------
Exchange fee None None
--------------------------------------------------------------------------------

PROSPECTUS o SELECTED FUNDS o PAGE 22

SELECTED DAILY GOVERNMENT FUND ANNUAL OPERATING EXPENSES
Deducted from the fund's assets

Expenses may vary in future years.

EXPENSE EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

--------------------------------------------------------------------------------

PROSPECTUS o SELECTED FUNDS o PAGE 23

SELECTED FUNDS
MANAGEMENT
--------------------------------------------------------------------------------

DAVIS ADVISORS

Davis Selected Advisers, L.P., ("Davis Advisors") serves as the investment
adviser for each of the Selected Funds. Davis Advisors' offices are located at
2949 East Elvira Road, Suite 101, Tucson, Arizona 85706. Davis Advisors provides
investment advice for the Selected Funds, manages their business affairs and
provides day-to-day administrative services. Davis Advisors also serves as
investment adviser for other mutual funds and institutional and individual
clients.

For the fiscal year ended December 31, 2004, Davis Advisors' compensation for
its services (based on average net assets) was: Selected American Shares, 0.xx%;
Selected Special Shares, 0.xx%; and Selected Daily Government Fund, 0.30%.

Davis Selected Advisers-NY, Inc., serves as the sub-adviser for each of the
Selected Funds. Davis Selected Advisers-NY, Inc.'s offices are located at 609
Fifth Avenue, New York, New York 10017. Davis Selected Advisers-NY, Inc.,
provides investment management and research services for the Selected Funds and
other institutional clients, and is a wholly owned subsidiary of Davis Advisors.
Davis Selected Advisers-NY, Inc.'s fee is paid by Davis Advisors, not the
Selected Funds.

A discussion regarding the basis for the Board of Directors approving the
investment advisory and sub-advisory agreements is available in the Statement of
Additional Information. The Directors will consider whether to re-approve the
advisory and sub-advisory agreements in 2005, the basis for their decision will
be included in the Fund's June 2005 semi-annual report.

INVESTMENT PROFESSIONALS

SHELBY M.C. DAVIS serves as Adviser and Founder. As Adviser Mr. Davis provides
the firm with analysis regarding companies, the economy, and the markets in
general. He is no longer involved with the day-to-day

PROSPECTUS o SELECTED FUNDS o PAGE 24

management of the Funds. He previously served as a Portfolio Manager of Selected
American Shares from May 1993 until February 1997. He also served as a Portfolio
Manager of another fund managed by Davis Advisors from its inception in 1969
until March 1997.

SELECTED AMERICAN SHARES

o CHRISTOPHER C. DAVIS has served as a Portfolio Manager of Selected American
Shares since December 1994, and also manages other equity funds advised by
Davis Advisors. Mr. Davis served as Assistant Portfolio Manager and
Research Analyst working with Shelby M.C. Davis beginning in September
1989.

o KENNETH CHARLES FEINBERG has served as a Portfolio Manager of Selected
American Shares since May 1998, and also manages other equity funds advised
by Davis Advisors. Mr. Feinberg started with Davis Advisors as a Research
Analyst in December 1994.

SELECTED SPECIAL SHARES

INVESTMENT TEAM. Davis Advisors uses a system of multiple portfolio managers to
manage Selected Special Shares. Under this approach, the portfolio of the Fund
is divided into segments managed by individual portfolio managers. Portfolio
managers decide how their respective segments will be invested, within the
limits provided by the Fund's investment objectives, strategies, restrictions
and senior portfolio managers. The primary individual portfolio managers
responsible for Selected Special Shares are:

o CHRISTOPHER C. DAVIS has served as a Portfolio Manager of Selected Special
Shares since June 2001, and also manages other equity funds advised by
Davis Advisors. Mr. Davis served as Assistant Portfolio Manager and
Research Analyst working with Shelby M.C. Davis from September 1989 through
September 1995.

o KENNETH CHARLES FEINBERG has served as a Portfolio Manager of Selected
Special Shares since June 2001, and also manages other equity funds advised
by Davis Advisors. Mr. Feinberg started with Davis Advisors as a Research
Analyst in December 1994.

o CHIP TUCKER has served as a Portfolio Manager of Selected Special Shares
since May 2004, manages other equity funds advised by Davis Advisors, and
also serves as Research Analyst for Davis Advisors. Mr. Tucker joined Davis
Advisors in April 2002 and previously served as

PROSPECTUS o SELECTED FUNDS o PAGE 25

a portfolio manager for US Trust Company from April 2001 to April 2002, and
as a portfolio manager for Desai Capital Management, Inc., from April 1998
to March 2001.

o KENT WHITAKER has served as a Portfolio Manager of Selected Special Shares
since May 2004, manages other equity funds advised by Davis Advisors, and
also serves as Research Analyst for Davis Advisors. Mr. Whitaker joined
Davis Advisors in August 2000 and previously served Amoco Corp. and BP PLC
in a variety of general management and financial management positions from
1989 until August 2000.

o DANTON GOEI has served as a Portfolio Manager of Selected Special Shares
since May 2004, manages other equity funds advised by Davis Advisors, and
also serves as Research Analyst for Davis Advisors. Mr. Goei joined Davis
Advisors in November 1998.

o TANIA POUSCHINE has served as a Portfolio Manager of Selected Special
Shares since May 2004, manages other equity funds advised by Davis
Advisors, and also serves as Research Analyst for Davis Advisors. Ms.
Pouschine joined Davis Advisors in July 2003. From 1993 to 2003 Ms.
Pouschine worked as an analyst and portfolio manager at Ruane, Cunniff.

o JAE CHUNG has served as a Portfolio Manager of Selected Special Shares
since May 2004, manages other equity funds advised by Davis Advisors, and
also serves as Research Analyst for Davis Advisors. Mr. Chung joined Davis
Advisors in September 2003. From 2000 to September 2003 Mr. Chung served as
a portfolio manager for Marcstone Capital Management. From 1996 to 2000 Mr.
Chung served as a portfolio manager and analyst with Franklin Mutual
Advisers.

o DWIGHT BLAZIN has served as a Portfolio Manager of Selected Special Shares
since May 2004, manages other equity funds advised by Davis Advisors, and
also serves as Research Analyst for Davis Advisors. Mr. Blazin joined Davis
Advisors in 1997.

SELECTED DAILY GOVERNMENT FUND

o CRESTON KING, CFA, has served as a Portfolio Manager of Selected Daily
Government Fund since August 1999. Mr. King also manages government bond
and other government money market funds advised by Davis Advisors. Mr. King
joined Davis Advisors in June 1999, and previously was a trader, analyst
and portfolio manager for U.S. Global Investors, Inc., where he managed
various money market and bond funds.

PROSPECTUS o SELECTED FUNDS o PAGE 26

The Statement of Additional Information provides additional information about
the Portfolio Managers' compensation, other accounts managed by the Portfolio
Managers, and the Portfolio Managers' ownership of securities in the Fund.

THE DAVIS INVESTMENT PHILOSOPHY

Selected American Shares and Selected Special Shares are managed using the Davis
investment philosophy, which stresses a back-to-basics approach. We perform
extensive research to buy companies with expanding earnings at value prices and
hold them for the long term.

Over the years, the Fund's investment adviser, Davis Selected Advisers, L.P.
("Davis Advisors"), has developed a list of characteristics that we believe
allow companies to expand earnings over the long term and manage risk to enhance
their potential for superior long-term returns. While few companies possess all
of these characteristics at any given time, Davis Advisors searches for
companies that demonstrate a majority or an appropriate mix of these
characteristics.

FIRST CLASS MANAGEMENT

o Proven track record

o Significant personal ownership in business

o Intelligent allocation of capital

o Smart application of technology to improve business and lower costs

STRONG FINANCIAL CONDITION AND PROFITABILITY

o Strong balance sheet

o Low cost structure / low debt

o High after-tax returns on capital

o High quality of earnings

STRATEGIC POSITIONING FOR THE LONG TERM

o Non-obsolescent products / services

o Dominant or growing market share in a growing market

o Global presence and brand names

PROSPECTUS o SELECTED FUNDS o PAGE 27

We emphasize individual stock selection and believe that the ability to evaluate
management is critical. We routinely visit managers at their places of business
in order to gain insight into the relative value of different businesses.

ADDITIONAL INFORMATION ABOUT INVESTMENTS

Each Fund's investment objectives are described in its respective Overview. The
Funds' investment objectives are fundamental policies and may not be changed
without a vote of shareholders.

Each Fund's principal investment strategies and main risks are also described in
its Overview. The Funds are not limited to investing in the securities and using
the principal investment strategies described in the Overviews. Each Fund may
also purchase other kinds of securities; engage in active trading (which would
increase portfolio turnover and commission expenses and may increase taxable
distributions); or employ other investment strategies that are not principal
investment strategies, if, in Davis Advisors' professional judgment, the
securities or investment strategies are appropriate. Factors that Davis Advisors
considers in pursuing these other strategies include whether (i) purchasing such
securities would be consistent with shareholders' reasonable expectations; (ii)
they may assist a Fund in pursuing its investment objective; (iii) they are
consistent with the Fund's investment strategy; (iv) they will cause the Fund to
violate any of its investment restrictions; or (v) they will materially change
the Fund's risk profile as described in the Fund's prospectuses and Statement of
Additional Information, as amended from time to time. The Statement of
Additional Information discusses these securities and investment strategies.

SHORT-TERM INVESTMENTS. Each Fund uses short-term investments, such as treasury
bills and repurchase agreements, to maintain flexibility while evaluating
long-term opportunities. A Fund may also use short-term investments for
temporary defensive purposes. At such times a Fund will be not pursuing its
normal investment policies. In the event that our portfolio managers anticipate
a decline in the market values of the companies in which a Fund invests (due to
economic, political or other factors), we may reduce a Fund's risk by investing
in short-term securities until market conditions improve. Unlike equity
securities, these investments will not appreciate in value when the market
advances and will not contribute to long-term growth of capital.

PROSPECTUS o SELECTED FUNDS o PAGE 28

For more details concerning current investments and market outlook, please see
the most recent shareholder report.

EXECUTION OF PORTFOLIO TRANSACTIONS

The Adviser places orders with broker-dealers for Selected Funds portfolio
transactions. The Adviser seeks to place portfolio transactions with brokers or
dealers who will execute transactions as efficiently as possible and at the most
favorable net price. In placing executions and paying brokerage commissions or
dealer markups, the Adviser considers price, commission, timing, competent block
trading coverage, capital strength and stability, research resources, and other
factors. Subject to best price and execution, the Adviser may place orders for
Selected Funds' portfolio transactions with broker-dealers who have sold shares
of Selected Funds. In placing orders for Selected Funds' portfolio transactions,
the Adviser does not commit to any specific amount of business with any
particular broker-dealer. Further, when the Adviser places orders for Selected
Funds' portfolio transactions, it does not give any consideration to whether a
broker-dealer has sold shares of Selected Funds.

PROSPECTUS o SELECTED FUNDS o PAGE 29

ONCE YOU
INVEST IN SELECTED FUNDS
--------------------------------------------------------------------------------

This section describes how your investment is valued, how you earn money on your
investment and how the government may tax these earnings.

HOW YOUR SHARES ARE VALUED

Once you open your Selected Funds account, you may buy or sell shares on any
business day. The price of your shares in a Selected Fund is based upon the
total value of the Fund's investments. Your account balance may change daily
because the share price may change daily.

The value of one share of a Selected Fund, also known as the net asset value, or
NAV, is calculated at 4 p.m. on each day the New York Stock Exchange is open or
as of the time the Exchange closes, if earlier.

The business sections of many, but not all, major newspapers publish Selected
Funds' net asset values. If you have access to the Internet, you can also check
the net asset value on our website (www.selectedfunds.com).

VALUATION OF PORTFOLIO SECURITIES

Your shares will be purchased at the net asset value, or sold at the net asset
value next determined after Selected Funds' transfer agent receives and accepts
your request.

Securities are valued primarily on the basis of market quotations. However,
Selected Funds have adopted procedures for making "fair value" determinations if
market quotations are not readily available. The Funds use fair value prices any
time the Adviser concludes that reliable market quotations for its portfolio
securities are not readily available from an approved third party pricing
service or from independent brokers. Examples of when fair value pricing may be
used include illiquid or thinly traded securities, and securities whose values
have been affected by a significant event occurring after the close of their
primary markets. Selected Funds use an independent vendor to assist in fair
value pricing of foreign securities when deemed appropriate. The use of fair
value pricing

PROSPECTUS o SELECTED FUNDS o PAGE 30

by the Funds may cause the net asset value of their shares to differ
significantly from the net asset value that would be calculated using last
reported prices.

Some of the Funds' securities may be traded in markets that close at a different
time than when the Funds' shares are priced. Events affecting portfolio values
that occur after the time that such markets close and the time Funds' shares are
priced may result in the use of fair value pricing, as described above.
Likewise, because foreign securities trade in markets and exchanges that operate
on U.S. holidays and weekends, the value of some of the Funds' foreign
investments might change significantly on those days when investors cannot buy
or redeem shares. Selected Funds have adopted procedures designed to identify
and react to significant events in foreign markets that would have a material
effect on a Fund's net asset value. Notwithstanding, the net asset value of a
Fund's shares may change on days when shareholders will not be able to purchase
or redeem Fund shares.

Securities denominated in foreign currencies and traded in foreign markets will
have their value converted into U.S. dollar equivalents at the prevailing
exchange rate as computed by State Street Bank and Trust. Fluctuation in the
value of foreign currencies in relation to the U.S. dollar may affect the net
asset value of a Fund's shares even if there has not been any change in the
foreign currency price of that Fund's investments.

Selected Daily Government Fund typically values all of its investments at
amortized cost. Normally, the share price of Selected Daily Government Fund does
not fluctuate. However, if there are unusually rapid changes in interest rates
that the Fund's Board of Directors believes will cause a material deviation
between the amortized cost of the Fund's debt securities and the market value of
those securities, the Board will consider taking temporary action to maintain a
fixed price or to prevent material dilution or other unfavorable consequences to
Fund shareholders. This temporary action could include withholding dividends,
paying dividends out of surplus, realizing gains or losses, or using market
valuation to calculate net asset value rather than amortized cost.

PORTFOLIO HOLDINGS. A description of the Funds' policies and procedures with
respect to the disclosure of the Funds' portfolio holdings is available in the
Statement of Additional Information.

Each Fund's portfolio holdings are published and mailed to shareholders twice a
year in the annual and semi-annual reports which are mailed

PROSPECTUS o SELECTED FUNDS o PAGE 31

approximately 60 days after the end of the Funds' second and fourth fiscal
quarters. In addition, the Funds file their portfolio holdings with the SEC four
times a year, 60 days after the end of each of the Funds' fiscal quarters. These
filings may be viewed on the SEC's website. Each Fund publishes its top 10
holdings in a fact sheet four times a year. Each Fund's fact sheets are
available on the Selected Funds website (www.selectedfunds.com) approximately 60
days after the end of the Funds' fiscal quarter, and remain available on the
website until updated.

HOW WE PAY EARNINGS

There are two ways you can receive payments from the Selected Fund you invest
in:

o DIVIDENDS. Dividends are distributions to shareholders of net investment
income and short-term capital gains on investments.

o CAPITAL GAINS. Capital gains are profits received by a Fund from the sale
of securities held for the long term, which are then distributed to
shareholders.

If you would like information about when a particular Selected Fund pays
dividends and distributes capital gains, please call 1-800-243-1575. Unless you
choose otherwise, the Selected Funds will automatically reinvest your dividends
and capital gains in additional Fund shares.

You can request to have your dividends and capital gains paid to you by check,
deposited directly into your bank account, paid to a third party or sent to an
address other than your address of record.

We also offer a DIVIDEND DIVERSIFICATION PROGRAM, which allows you to have your
dividends and capital gains reinvested in shares of another Selected Fund.

You will receive a statement each year detailing the amount of all dividends and
capital gains paid to you during the previous year. To ensure that these
distributions are reported properly to the U.S. Treasury, you must certify on
your Selected Funds Application Form or on IRS Form W-9 that your Taxpayer
Identification Number is correct and you are not subject to backup withholding.
If you are subject to backup withholding, or you did not certify your taxpayer
identification number, the IRS requires the Selected Funds to withhold a
percentage of any dividends paid and redemption or exchange proceeds received.

PROSPECTUS o SELECTED FUNDS o PAGE 32

HOW TO PUT YOUR DIVIDENDS AND CAPITAL GAINS TO WORK

You can have all of your dividends and capital gains automatically invested in
the same Fund or the same share Class of any other Selected Fund. To be eligible
for this DIVIDEND DIVERSIFICATION PROGRAM, all accounts involved must be
registered under the same name and same Class of shares and have a minimum
initial value of $1,000 for Class S shares or $10,000 for Class D shares. Shares
are purchased at the chosen Fund's net asset value on the dividend payment date.
You can make changes to your selection or withdraw from the program with ten
days notice. To participate in this program, fill out the cross-reinvest
information in the appropriate section of the Application Form. If you wish to
establish this program after your account has been opened, call for more
information.

FEDERAL INCOME TAXES

TAXES ON DISTRIBUTIONS

Distributions you receive from a Fund may be subject to income tax and may also
be subject to state or local taxes unless you are exempt from taxation.

For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. A Fund's distributions of net
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from a Fund will normally be taxable to you
when made, regardless of whether you reinvest distributions or receive them in
cash.

Selected Funds will send you a statement each year showing the tax status of all
your distributions.

TAXES ON TRANSACTIONS

Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment is the
difference between the cost of your shares and the price you receive when you
sell them.

PROSPECTUS o SELECTED FUNDS o PAGE 33

More information concerning federal taxes is available in the Statement of
Additional Information. We recommend that you consult with a tax advisor about
dividends and capital gains that may be received from the Selected Funds.

FEES AND EXPENSES OF THE FUNDS

Each Fund must pay operating fees and expenses.

MANAGEMENT FEE

The management fee covers the normal expenses of managing the Fund, including
compensation, research costs, corporate overhead expenses and related expenses.
The difference in the fee structures between the Classes is primarily the result
of their separate arrangements for shareholder and distribution services and is
not the result of any difference in the amounts charged by Davis Advisors for
core investment advisory services. Accordingly, the core investment advisory
expenses do not vary by Class. Different fees and expenses will affect
performance.

12B-1 FEES

Selected Funds offer two Classes of shares. Class S shares have adopted Plans of
Distribution, or "12b-1 Plans," which provide revenue to help sell and
distribute the shares. This revenue may be used to pay for the services of
financial planners, mutual fund supermarkets, and other distribution activities.
Class S shares pay up to 0.25% of their average annual net assets for these
services and activities. Class D shares do not pay 12b-1 fees, and thus have a
lower expense ratio, which should result in higher investment returns over time.

OTHER EXPENSES

Other expenses include miscellaneous fees from affiliated and outside service
providers. These fees may include legal, audit, custodial, the printing and
mailing of reports and statements, automatic reinvestment of distributions and
other conveniences and payments to third parties that provide recordkeeping
services or administrative services for investors in the Fund.

PROSPECTUS o SELECTED FUNDS o PAGE 34

TOTAL FUND OPERATING EXPENSES

The total cost of running a mutual fund is reflected in its expense ratio. A
shareholder does not pay operating costs directly; instead, operating costs are
taken out before the Fund's NAV is calculated and are expressed as a percentage
of the Fund's average daily net assets. The effect of these fees is reflected in
the performance results for that Class of shares. Investors should examine them
closely in the prospectus, especially when comparing one fund with another fund
in the same investment category.

OTHER COMPENSATION PAID TO DEALERS AND OTHER FINANCIAL INTERMEDIARIES

The Distributor for the Selected Funds, Davis Distributors, LLC (the
"Distributor"), makes substantial payments to qualifying dealers and other
financial intermediaries who sell Selected Funds' shares. Qualifying dealers may
receive: (i) distribution and service fees from the Funds' 12b-1 distribution
plans; (ii) shareholder servicing fees from the Funds for servicing investors
who hold Selected Funds shares through dealer-controlled omnibus accounts; and
(iii) other compensation, described below, paid by the Distributor from its own
resources, which may include management fees paid to the Advisor by the Selected
Funds and other clients.

Other compensation paid by the Distributor from its own resources may include
(i) marketing support payments including business planning assistance, educating
personnel about the Selected Funds, and shareholder financial planning needs,
placement on the dealer's list of offered funds, and access to sales meetings,
sales representatives and management representatives of the dealer; and (ii)
financial assistance paid to dealers that enable the Distributor to participate
in and/or present at conferences or seminars, sales or training programs for
invited registered representatives and other employees, client and investor
events and other dealer-sponsored events. A number of factors are considered in
determining payments, including the dealer's sales and assets, and the quality
of the dealer's relationship with the Distributor.

The Distributor routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Selected Funds and
are afforded the opportunity to speak with portfolio managers. Invitation to
these meetings is not conditioned on selling a specific number of shares. Those
who have shown an interest in Selected Funds, however, are more likely to be
considered. To the extent permitted by their firm's policies and procedures,
registered representatives' expenses in attending these meetings may be covered
by the Distributor.

The Distributor may offer other compensation to the extent not prohibited by
state or federal laws, the Securities and Exchange Commission, or any

PROSPECTUS o SELECTED FUNDS o PAGE 35

self-regulatory agency, such as the NASD. The Statement of Additional
Information provides more information concerning these payments. Investors
should consult their financial intermediary regarding the details of the
payments they may receive in connection with the sale of Selected Fund shares.

The Adviser and the Distributor, in their sole discretion, from time to time,
may use their own resources (at no direct cost to the Funds) to make payments to
brokers, dealers or other financial institutions for distribution and
administrative services they perform. The Adviser may use its profits from the
advisory fee it receives from the Fund. In their sole discretion, the
Distributor and the Adviser may increase or decrease the amount of payments they
make from their own resources to plan recipients.

PROSPECTUS o SELECTED FUNDS o PAGE 36

HOW TO
CHOOSE A SHARE CLASS
--------------------------------------------------------------------------------

Before you can buy shares in any Selected Fund, you need to decide which Class
of shares best suits your needs. Selected Funds offers two Classes of shares: S
and D. Each Class is essentially identical in legal rights and invests in the
same portfolio of securities. The difference in the fee structures between the
Classes is primarily the result of their separate arrangements for shareholder
and distribution services and is not the result of any difference in the amounts
charged by Davis Advisors for investment advisory services. Accordingly, the
investment advisory expenses do not vary by Class.

CLASS S SHARES

Class S shares may be most appropriate if you intend to retain the services of a
financial adviser, mutual fund supermarket, or other financial intermediary.
Class S shares have adopted Plans of Distribution, or "12b-1 Plans," which
provide revenue that may be used to pay for the services of financial planners,
mutual fund supermarkets, and other distribution activities. Class S shares pay
up to 0.25% of their average annual net assets for these services and
activities. You must invest a minimum of $1,000 in a single Fund to open an
account in Class S shares. You must invest at least $1,000 in each Fund to open
Class S shares accounts in more than one Selected Fund.

CLASS D SHARES

Class D shares may be most appropriate if you intend to make your own investment
decisions and will invest directly with Selected Funds. Class D shares do not
pay 12b-1 fees, and thus have a lower expense ratio, which should result in
higher investment returns over time. You must invest a minimum of $10,000 in a
single Fund to open an account in Class D shares. You must invest at least
$10,000 in each Fund to open Class D shares accounts in more than one Selected
Fund. Class D shares may not be available for purchase through some financial
intermediaries.

PROSPECTUS o SELECTED FUNDS o PAGE 37

CONVERTING FROM CLASS S TO CLASS D SHARES

If your Class S shares account is held directly with the Selected Funds'
distributor or with a financial intermediary that does not require 12b-1 fees to
pay for its services, and if the current market value of your account in a
single Fund is at least $10,000, you may elect to convert that account from
Class S to Class D shares. A conversion from Class S to Class D shares of the
same Fund is not a taxable transaction. You may convert from Class S to Class D
shares by calling Shareholder Services at 1-800-243-1575 during our business
hours (9 a.m. to 6 p.m. Eastern Time) or you may use our automated telephone
system at any time, day or night.

If the market value of your Class D shares account declines to less than $5,000
due to a redemption or exchange, we may convert your Class D shares into Class S
shares at relative net asset value. See "Involuntary Redemption or Conversion."

PROSPECTUS o SELECTED FUNDS o PAGE 38

HOW TO
OPEN AN ACCOUNT
--------------------------------------------------------------------------------

You can open an account if you initially invest at least $1,000 for Class S
shares or $10,000 for Class D shares in each Fund.

THREE WAYS YOU CAN OPEN AN ACCOUNT

o BY MAIL. Fill out the Application Form and mail it to our service provider,
State Street Bank and Trust. You must sign the Application Form. Include a
check made payable to SELECTED FUNDS or, in the case of a retirement
account, the custodian or trustee. All purchases by check should be in U.S.
dollars. SELECTED FUNDS WILL NOT ACCEPT THIRD-PARTY CHECKS, STARTER CHECKS,
TRAVELER'S CHECKS OR MONEY ORDERS.

o BY DEALER. You may have your dealer order and pay for the shares. In this
case, you must pay your dealer directly. Your dealer will then order the
shares from our Distributor. Please note that your dealer may charge a
service fee or commission for these transactions.

o BY WIRE. You may wire federal funds directly to our service provider, State
Street Bank and Trust. Before you wire an initial investment, you must call
the Distributor and obtain an account number and Application Form. A
customer service representative will assist you with your initial
investment by wire. After the initial wire purchase is made, you will need
to return the Application Form to State Street Bank and Trust. To ensure
that the purchase is credited properly, follow these wire instructions:

State Street Bank and Trust Company
P.O. Box 8243
Boston, MA 02210
Attn: Mutual Fund Services
[NAME OF SELECTED FUND AND CLASS OF SHARES THAT YOU ARE BUYING]
Shareholder Name
Shareholder Account Number
Federal Routing Number 011000028
DDA Number 9905-325-8

PROSPECTUS o SELECTED FUNDS o PAGE 39

ANTI-MONEY LAUNDERING COMPLIANCE

Selected Funds and the Distributor are required to comply with various
anti-money laundering laws and regulations. Consequently, the Funds or the
Distributor may request additional information from you to verify your identity
and source of funds. If you do not provide the information the Selected Funds
may not be able to open your account. If at any time the Funds believe an
investor may be involved in suspicious activity, or if certain account
information matches information on government lists of suspicious persons, they
may choose not to establish a new account or may be required to "freeze" a
shareholder's account. They may also be required to provide a government agency
or another financial institution with information about transactions that have
occurred in a shareholder's account or to transfer monies received to establish
a new account, transfer an existing account or transfer the proceeds of an
existing account to a governmental agency. In some circumstances, the law may
not permit the Funds or the Distributor to inform the shareholder that it has
taken the actions described above.

RETIREMENT PLAN ACCOUNTS

You can invest in Selected Funds using any of these types of retirement plan
accounts:

o IRAs

o Roth IRAs

o Coverdell Education Savings Accounts

o Simple IRAs

o Simplified Employee Pension (SEP) IRAs

o 403(b) Plans

State Street Bank and Trust acts as custodian (service provider) for the
retirement plans and charges the participant a $15 maintenance fee each year
regardless of the number of plans established per Social Security Number. This
fee will be waived for accounts sharing the same Social Security Number if the
accounts total at least $50,000 at Selected Funds. This maintenance fee is
automatically deducted from each account unless you elect to pay the fee
directly. There is also a $15 fee for closing retirement plan accounts. To open
a retirement plan account, you must fill out a special application form. You can
request this form by calling the Distributor.

PROSPECTUS o SELECTED FUNDS o PAGE 40

HOW TO
BUY, SELL AND EXCHANGE SHARES
--------------------------------------------------------------------------------

Once you have established an account with Selected Funds, you can add to or
withdraw from your investment. This prospectus describes the types of
transactions you can perform as a Selected Funds shareholder, including how to
initiate these transactions and the charges that you may incur (if any) when
buying, selling or exchanging shares. A transaction will not be executed until
all required documents have been received in in a form meeting all legal
requirements. Legal requirements vary depending upon the type of transaction and
the type of account. Call Shareholder Services for instructions. These
procedures and charges may change over time and the prospectus in effect at the
time a transaction is initiated will determine the procedures and charges which
will apply to the transaction.

RIGHT TO REJECT OR RESTRICT ANY PURCHASE OR EXCHANGE ORDER

Purchases and exchanges should be made for investment purposes only. Selected
Funds and the Distributor reserve the right to reject or restrict any purchase
or exchange order for any reason. Selected Funds are not designed to serve as a
vehicle for frequent trading in response to short-term fluctuations in the
securities markets. Accordingly, purchases or exchanges that are part of
activity that Selected Funds or the Distributor have determined may involve
actual or potential harm to a Fund may be rejected.

THREE WAYS TO BUY, SELL AND EXCHANGE SHARES

o BY TELEPHONE. Call 1-800-243-1575. You can speak directly with a Selected
Funds representative during our business hours (9 a.m. to 6 p.m. Eastern
Time) or use our automated telephone system at any time, day or night.

o BY MAIL. Send the request to our service provider, State Street Bank and
Trust Company.

Regular mail:
State Street Bank and Trust Company
c/o Selected Funds
P.O. Box 8243, Boston, MA 02266-8243

PROSPECTUS o SELECTED FUNDS o PAGE 41

Express shipping:
State Street Bank and Trust Company
c/o Selected Funds
66 Brooks Drive, Braintree, MA 02184

o BY DEALER. Contact a dealer who then will make the transaction through our
Distributor. Please note that your dealer may charge a service fee or
commission for these transactions.

The Selected Funds do not issue certificates for any class of shares. Instead,
shares purchased are automatically credited to an account maintained for you on
the books of the Selected Funds by State Street Bank and Trust. Transactions in
the account, such as additional investments, will be reflected on regular
confirmation statements from the Transfer Agent. Dividend and capital gain
reinvestments, purchases through automatic investment plans and certain
retirement plans, and automatic exchanges and withdrawals will be confirmed at
least quarterly. Selected Daily Government Fund sends out statements once a
month, not every time you purchase or sell shares.

WHEN YOUR TRANSACTIONS ARE PROCESSED

The per-share price for purchases or sales made through our Distributor, will be
processed on the same day if the order is received before 4 p.m. Eastern Time.
If State Street Bank and Trust requires additional documents to complete the
purchase or sale, the transaction price will be determined at the close of
business after all required documents are received.

For your transaction to be counted on the day you place your order with your
broker-dealer or other financial institution, they must:

o Receive your order before 4 p.m. Eastern Time.

o Promptly transmit the order to State Street Bank and Trust.

BUYING MORE SHARES

You may buy more shares at any time, by mail or through a dealer. The minimum
purchase amount is $25 for Class S shares and $250 for Class D shares.

When you purchase shares by mail, send a check made payable to SELECTED FUNDS
for the amount of purchase to our service provider, State

PROSPECTUS o SELECTED FUNDS o PAGE 42

Street Bank and Trust. If you have the purchase form from your most recent
statement, include it with the check. If you do not have a purchase form,
include a letter with your check stating the name of the Fund, the class of
shares you wish to buy, and your account number.

When you buy shares through a dealer, you may be charged a service fee or
commission for these transactions.

MAKING AUTOMATIC INVESTMENTS

An easy way to increase your investment in any Selected Fund is to sign up for
the AUTOMATIC INVESTMENT PLAN. Under this plan, you arrange for a set amount of
money to be taken from your bank account and invested in Fund shares. The
minimum amount you can invest under the plan each month is $25 for Class S
shares or $100 for Class D shares. The account minimum ($1,000 for Class S
shares or $10,000 for Class D shares) must be met prior to establishing an
automatic investment plan. The account minimum will be waived if you meet the
minimum requirement within one year and purchases are made automatically every
month through your employer as part of a qualified plan.

Purchases can be processed electronically on any day of the month between the
5th and 28th if the institution that services your bank account is a member of
the Automated Clearing House system. The debit should show up on your next bank
statement.

To sign up for the Automatic Investment Plan, fill out the appropriate section
of the Application Form. If you wish to establish this plan after your account
has been opened, you must submit a letter of instruction signed by the account
owner(s). You can stop automatic investments at any time by calling the
Distributor.

You can also use our Dividend Diversification Program to buy more shares in any
Selected Fund. See "Once You Invest in Selected Funds."

Note: The Automated Clearing House system is used by most banks for electronic
transfers of money into and out of your bank account and is regulated by the
Federal Reserve.

SELLING SHARES

You may sell back all or part of your shares in any Selected Fund in which you
invest (known as a redemption) on any business day at net asset

PROSPECTUS o SELECTED FUNDS o PAGE 43

value. You can sell the shares by telephone, by internet, by mail or through a
dealer.

When you sell shares by mail, indicate the number of shares or the dollar amount
you wish to redeem and send the request to our service provider, State Street
Bank and Trust. If more than one person owns the shares you wish to sell, all
owners must sign the redemption request. You may be required to have the owners'
signatures medallion-guaranteed (see "Medallion Signature Guarantee" below).

When you sell shares through a dealer, you may be charged a service fee or
commission for these transactions.

Redemption proceeds are usually paid to you by check within seven days after
State Street Bank and Trust receives your proper sale request. You may redeem
shares on any business day. Redemption proceeds may be withheld until a
sufficient period of time has passed for State Street Bank and Trust to be
reasonably sure that all checks or drafts (including certified or cashier's
checks) for shares purchased have cleared, normally not exceeding fifteen
calendar days.

CHECK WRITING PRIVILEGE FOR SELECTED DAILY GOVERNMENT FUND

You can establish check writing privileges on your Selected Daily Government
Fund (in either Class S or Class D shares) if you are not investing through a
retirement plan or an IRA. Selected Daily Government Fund investors with check
writing privileges can write checks:

o For $250 or more for Class S shares, $1,000 or more for Class D shares.
Checks written for less than $250 for Class S shares or $1,000 for Class D
shares will be honored and a $20 service fee will be debited from the
account;

o So long as the account balance is at least $1,000 for Class S shares, or
$10,000 for Class D shares, after the check has been paid. If a check is
presented for payment which would bring the account balance to less than
$1,000 for Class S shares, or $10,000 for Class D shares, a $20 service fee
will be debited from the account and check writing privileges may be
suspended; and

o Subject to the rules prescribed by State Street Bank and Trust. The Funds
and State Street Bank and Trust reserve the right to modify these rules at
any time.

PROSPECTUS o SELECTED FUNDS o PAGE 44

Writing a check is a way of selling shares and directing the proceeds to a third
party. When a Selected Daily Government Fund check is presented to State Street
Bank and Trust for payment, the bank will redeem a sufficient number of shares
in your account to cover the amount of the check. If you have had recent
activity in your Selected Daily Government Fund account, funds may not be
available to cover your checks. For example: (1) If you have redeemed or
exchanged funds out of your Selected Daily Government Fund account, there may
not be sufficient funds remaining to cover your check; (2) If you have recently
purchased shares in your Selected Daily Government Fund account, the funds may
still be within the fifteen-day uncollected status; or (3) If funds were
exchanged into your Selected Daily Government Fund account from another Selected
Fund, those funds may still be within the fifteen-day uncollected status.

To qualify for CHECK WRITING PRIVILEGES, fill out the appropriate section in
your Application Form.

If you write a check on your Selected Daily Government Fund account and you do
not have sufficient shares in your account to cover the check, or if your check
is presented for payment before your purchase check has cleared, the check will
be returned and your account will be assessed an insufficient funds fee of
$20.00. You can find more information about check writing privileges in the
Statement of Additional Information. Selected Funds and State Street Bank and
Trust reserve the right to modify or terminate the check writing service at any
time.

WHAT YOU NEED TO KNOW BEFORE YOU SELL YOUR SHARES

o You will always receive cash for sales that total less than $250,000 or one
percent of a Fund's net asset value during any ninety-day period. Any sales
above the cash limit may be paid in securities and would mean you would
have to pay brokerage fees if you sold the securities.

o You will need a medallion signature guarantee on a stock power or
redemption request for sales paid by check totaling more than $100,000.
However, if your address of record has changed in the last thirty days, or
if you wish to send redemption proceeds to a third party, you will need a
medallion signature guarantee for all sales.

o In the past, the Selected Funds issued certificates for Class S shares. If
a certificate was issued for the shares you wish to sell, the certificate
must be sent by certified mail to State Street Bank and Trust and
accompanied by a letter of instruction signed by the owner(s).

PROSPECTUS o SELECTED FUNDS o PAGE 45

o A sale may produce a gain or loss. Gains may be subject to tax.

o The Securities and Exchange Commission may suspend redemption of shares
under certain emergency circumstances if the New York Stock Exchange is
closed for reasons other than customary closings and holidays.

MEDALLION SIGNATURE GUARANTEE

To protect you and the Selected Funds against fraud, certain redemption requests
must be made in writing with your signature guaranteed. A medallion signature
guarantee is a written endorsement from an eligible guarantor institution that
the signature(s) on the written request is (are) valid. Certain commercial
banks, trust companies, savings associations, credit unions and members of a
United States stock exchange participate in the medallion signature guarantee
program. No other form of signature verification will be accepted.

STOCK POWER

This is a letter of instruction signed by the owner of the shares that gives
State Street Bank and Trust permission to transfer ownership of the shares to
another person or group. Any transfer of ownership requires that all
shareholders have their signatures medallion-guaranteed.

INVOLUNTARY REDEMPTION OR CONVERSION

If your Class S shares account balance declines to less than $500 in any Fund as
a result of a redemption or exchange, or if your account has not met the $1,000
minimum investment requirement, we may sell your remaining Class S shares in the
Fund at net asset value. If your Class D shares account balance declines to less
than $5,000 in any Fund as a result of a redemption or exchange, or if your
account has not met the $10,000 minimum investment requirement, we may convert
your remaining Class D shares into Class S shares at relative net asset value.

We first will notify you by mail, giving you at least sixty days' notice that an
INVOLUNTARY REDEMPTION or CONVERSION may take place. If you increase your
account balance to above $500 for Class S shares or $5,000 for Class D shares
during the notice period the Involuntary Redemption or Conversion will be
cancelled.

PROSPECTUS o SELECTED FUNDS o PAGE 46

MAKING AUTOMATIC WITHDRAWALS

If your Class S shares account balance is more than $10,000, or your Class D
shares account balance is more than $50,000, you can sell a set dollar or
percentage amount each month or quarter (for retirement accounts or IRAs,
withdrawals may be established on an annual basis). Because withdrawals are
sales, they may produce a gain or loss. If you purchase additional shares at the
same time that you make a withdrawal, you may have to pay taxes. When you
participate in this plan, known as the AUTOMATIC WITHDRAWAL PLAN, shares are
sold so that you will receive payment by one of three methods:

o You may receive funds at the address of record provided that this address
has been unchanged for a period of not less than thirty days. These funds
will be sent by check between the 5th and 28th days of the month.

o You may also choose to receive funds by Automated Clearing House (ACH) to
the banking institution of your choice. You may elect an ACH draft date
between the 5th and the 28th days of the month. You must complete the
appropriate section of the Application Form. If you wish to execute an
Automatic Withdrawal Plan by ACH after your account has been established,
you must submit a letter of instruction with a medallion signature
guarantee.

o You may have funds sent by check to a third party at an address other than
the address of record. You must complete the appropriate section of the
Application Form. If you wish to designate a third-party payee after your
account has been established, you must submit a letter of instruction with
a medallion signature guarantee.

You may stop automatic withdrawals at any time without charge or penalty by
calling the Distributor or by notifying the service agent in writing.

WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT

PROSPECTUS o SELECTED FUNDS o PAGE 47

You may be eligible to have your redemption proceeds electronically transferred
to a commercial bank account by federal funds wire. There is a $5 charge by
State Street Bank and Trust for wire service (State Street Bank and Trust
charges $50 for wiring money internationally), and receiving banks may also
charge for this service. Redemption by federal funds wire is usually credited to
your bank account on the next business day after the sale. Alternatively,
redemption through Automated Clearing House will usually arrive at your bank two
banking days after the sale. To have redemption proceeds sent by federal funds
wire to your bank, you must first fill out the Banking Instructions section on
the account application form and attach a voided check or deposit slip. If the
account has already been established, an Account Service Form or letter of
instruction must be submitted with a medallion guarantee and a copy of a voided
check or deposit slip.

EXCHANGING SHARES

The same Class of shares of different Selected Funds may be exchanged at
relative net asset value. You can sell shares of any Selected Fund to buy shares
in the same Class of any other Selected Fund. This is known as an exchange. You
can only exchange shares from your account within the same Class and under the
same registration. You can exchange shares by telephone, by internet, by mail or
through a dealer. For Class S shares the initial exchange must be for at least
$1,000 for a non-retirement account (unless you are participating in the
Automatic Exchange Program). For Class D shares the initial exchange must be for
at least $10,000. Exchanges are normally performed on the same day of the
request if received in proper form (all necessary documents, signatures, etc.)
by 4 p.m. Eastern Time.

When you exchange shares by mail, you must send our service provider, State
Street Bank and Trust, a written request for the exchange. In the past, the
Selected Funds issued certificates. If you wish to exchange shares for which you
hold share certificates, these certificates must be sent by certified mail to
State Street Bank and Trust, accompanied by a letter of instruction signed by
the owner(s). If your shares are being sold for cash, this is known as a
redemption. Please see the section, "What You Need to Know Before You Sell Your
Shares," for restrictions that might apply to this type of transaction.

When you exchange shares through a dealer, you may be charged a service fee or
commission for each transaction.

PROSPECTUS o SELECTED FUNDS o PAGE 48

For federal income tax purposes, exchanges between Selected Funds are treated as
a sale and a purchase. Therefore, there will usually be a recognizable capital
gain or loss due to an exchange.

MARKET TIMING

Selected Funds discourage short-term or excessive trading, often referred to as
"market timing," and intend to seek to restrict or reject such trading or take
other action if in the judgment of the Adviser such trading may be detrimental
to the interests of a Fund and its long-term shareholders. Market timing
strategies may dilute the value of fund shares held by long-term shareholders,
interfere with the efficient management of the Fund's portfolio, and increase
brokerage and administrative costs.

The Board of Directors has adopted policies and procedures with respect to the
frequent purchases and redemption of fund shares. Currently, four round-trip
exchanges between Selected Funds are allowed during a calendar year. You may
make an unlimited number of exchanges out of Selected Daily Government Fund.
Automatic exchanges are excluded from this provision. The Distributor must
approve in writing any exchanges above the limit.

Selected Funds use several methods to reduce the risk of market timing. These
methods include: (i) limiting annual exchange activity per fund account; and
(ii) committing staff to selectively review on a continuing basis recent trading
activity in order to identify trading activity that may be contrary to the
Funds' market timing policy.

If Selected Funds determine that your purchase or exchange patterns reflect a
market timing strategy, Selected Funds reserve the right to take any action
permitted under applicable rules and standards, including but not limited to:
(i) refusing to accept your orders to purchase Fund shares, and/or (ii)
restricting the availability of exchanges through telephone requests, facsimile
transmissions, automated telephone services, internet services or any electronic
transfer services.

While Selected Funds encourages financial intermediaries to apply the Funds'
marketing timing policy to their customers who invest indirectly in the Funds,
Selected Funds are limited in their ability to monitor the trading activity or
enforce the Funds' market timing policy with respect to

PROSPECTUS o SELECTED FUNDS o PAGE 49

customers of financial intermediaries. Shareholders seeking to engage in
excessive trading practices may employ a variety of strategies to avoid
detection. The ability of Selected Funds to detect and curtail excessive trading
practices may also be limited by operational systems ad technological
limitations. In addition, Selected Funds receive purchase exchange and
redemption orders from many financial intermediaries which maintain omnibus
accounts with the Funds. Omnibus account arrangements permit financial
intermediaries to aggregate their clients' transaction and ownership positions.
In these circumstances, the identity of the particular shareholder(s) is not
known to Selected Funds.

MAKING AUTOMATIC EXCHANGES

You can elect to make automatic monthly exchanges if all accounts involved are
registered under the same name and have a minimum initial value of $1,000 for
Class S shares or $10,000 for Class D shares. You must exchange at least $25 for
Class S shares and $250 for Class D shares to participate in this program, known
as the AUTOMATIC EXCHANGE PROGRAM. To sign up for this program, fill out the
appropriate section of the Application Form. If your account has already been
established, you may contact our customer service department to set up this
program.

TELEPHONE TRANSACTIONS

A benefit of investing through Selected Funds is that you can use our automated
telephone system to buy, sell or exchange shares. If you do not wish to have
this option activated for your account, complete the appropriate section of the
Application Form.

When you call the Distributor, you can perform a transaction with Selected Funds
in one of two ways:

o Speak directly with a representative during business hours (9 a.m. to 6
p.m. Eastern Time).

o If you have a TouchTone(TM) telephone, you can use the Selected Funds'
automated telephone system, known as SELECTED DIRECT ACCESS, 24 hours a
day, seven days a week.

If you wish to sell shares by telephone and receive a check in the mail:

o The maximum amount that can be issued is $100,000.

o The check can be issued only to the registered account owner.

PROSPECTUS o SELECTED FUNDS o PAGE 50

o The check must be sent to the address on file with the Distributor.

o Your current address must be on file for at least thirty days.

When you buy, sell or exchange shares over the telephone, you agree that the
Selected Funds are not liable for following telephone instructions believed to
be genuine (that is, directed by the account holder or registered representative
on file). We use certain procedures to confirm that your instructions are
genuine, including a request for personal identification and a tape recording of
the conversation. If these procedures are not used, the Fund may be liable for
any loss from unauthorized instructions.

Be aware that during unusual market conditions, Selected Funds may not be able
to accept all requests by telephone.

INTERNET TRANSACTIONS

You can use our website--WWW.SELECTEDFUNDS.COM--to review your account balance
and recent transactions. Your account may qualify for the privilege to purchase,
sell or exchange shares online. You may also request confirmation statements and
tax summary information to be mailed to the address on file. Please review our
website for more complete information. If you do not wish to have this option
activated for your account, please contact our customer service department.

To access your accounts, you will need the name of the Fund(s) in which you are
invested, your account number and your Social Security Number. Selected Funds
provides written confirmation of your initial access and any time you buy, sell
or exchange shares. You must also establish a unique and confidential Personal
Identification Number (PIN). This PIN is required each time you access your
Selected account online.

When you buy, sell or exchange shares over the Internet, you agree that the
Selected Funds are not liable for following instructions believed to be genuine
(that is, directed by the account holder or registered representative on file).
We use certain procedures to confirm that your instructions are genuine. If
these procedures are not used, the Funds may be liable for any loss from
unauthorized instructions.

PROSPECTUS o SELECTED FUNDS o PAGE 51

YOU CAN USE SELECTED DIRECT ACCESS TO:

o Get the price, total return and fund description for any Selected Fund.

o Check your account balance and other account information.

o Buy, sell and exchange shares.*

o Get the mailing address and wire instructions for any Selected Fund.

* Retirement Accounts may be subject to restrictions.

PROSPECTUS o SELECTED FUNDS o PAGE 52

OTHER
INFORMATION
--------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

o Selected American Shares and Selected Special Shares ordinarily distribute
their dividends and capital gains, if any, in December.

o Selected Daily Government Fund ordinarily distributes dividends monthly.
Selected Daily Government Fund does not ordinarily distribute capital
gains.

o When a dividend or capital gain is distributed, the net asset value per
share is reduced by the amount of the payment. Selected Daily Government
Fund's net asset value is not affected by dividend payments.

You may elect to reinvest dividend and/or capital gain distributions to purchase
additional shares of any Selected Fund, or you may elect to receive them in
cash. Many shareholders do not elect to take capital gain distributions in cash
because these distributions reduce principal value.

FINANCIAL HIGHLIGHTS

These tables are designed to show you the financial performance of each of the
Funds in this prospectus for the past five years, assuming that all dividends
and capital gains have been reinvested. Some of the information reflects
financial results for a single Fund share. The total returns represent the rate
at which an investor would have earned (or lost) money on an investment in the
Fund.

This information has been audited by KPMG LLP. KPMG LLP's report, along with
each Fund's financial statements, is included in the annual report, which is
available upon request.

Xxinsert financial highlights tables

PROSPECTUS o SELECTED FUNDS o PAGE 53

PROSPECTUS o SELECTED FUNDS o PAGE 54

HOUSEHOLDING

To avoid sending duplicate copies of materials to households, the Fund will mail
only one copy of each prospectus, annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. The consolidation
of these mailings, called householding, benefits the Fund through reduced
mailing expense. If you do not want the mailing of these documents to be
combined with those to other members of your household, please contact the
Selected Funds in writing at 2949 E. Elvira Road, Suite 101, Tucson, Arizona
85706. Individual copies of prospectuses and reports will be sent to you within
thirty days after the Fund receives your request to stop householding.

PRIVACY NOTICE

While you may be dealing with a broker-dealer or other financial adviser, we may
collect information about you from your account application and other forms that
you may deliver to us. We use this information to process your requests and
transactions; for example, to provide you with additional information about our
funds, to open an account for you or to process a transaction. In order to
service your account and effect your transactions, we may provide your personal
information to firms that assist us in servicing your account, such as our
transfer agent. We may also provide your name and address to one of our agents
for the purpose of mailing to you your account statement and other information
about our products and services. We require these outside firms and agents to
protect the confidentiality of your information and to use the information only
for the purpose for which the disclosure is made. We do not provide customer
names and addresses to outside firms, organizations or individuals except in
furtherance of our business relationship with you or as otherwise allowed by
law.

We restrict access to nonpublic personal information about you to those
employees who need to know that information to provide products or services to
you. We maintain physical, electronic and procedural safeguards that comply with
federal standards to guard your personal information.

PROSPECTUS o SELECTED FUNDS o PAGE 55

OBTAINING
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

Additional information about Selected Funds' investments is available in the
Selected Funds' ANNUAL AND SEMI-ANNUAL REPORTS to shareholders. In the Funds'
Annual Report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. The STATEMENT OF ADDITIONAL INFORMATION provides more
detailed information about Selected Funds and their management and operations.
The Statement of Additional Information and the Funds' Annual and Semi-Annual
Reports are available, without charge, upon request.

The Selected Funds' Statement of Additional Information and Annual Report have
been filed with the Securities and Exchange Commission, are incorporated by
reference, and are legally a part of this prospectus.

HOW TO GET MORE INFORMATION (Including Annual Report, Semi-Annual Report and
Statement of Additional Information)

BY TELEPHONE. Call Selected Funds toll-free at 1-800-243-1575, Monday through
Friday, 9 a.m. to 6 p.m. Eastern Time. You may also call this number for account
inquiries.

BY MAIL. Write to State Street Bank and Trust Company, c/o Selected Funds, P.O.
Box 8243, Boston, MA 02266-8243.

ON THE INTERNET. www.selectedfunds.com.

FROM THE SEC. Additional copies of the registration statement can be obtained,
for a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, DC 20549-0102, or by sending an electronic request to
<publicinfo@sec.gov>. Reports and other information about the Funds are
also available by visiting the SEC website (www.sec.gov). For more information
on the operations of the Public Reference Room, call 1-202-942-8090.

The Funds' Investment Company Act File Numbers are:
[SELECTED FUNDS LOGO] Selected American Shares, 811-51
Selected Special Shares, 811-1550
Selected Daily Government Fund, 811-5240

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2005

SELECTED AMERICAN SHARES, INC.
SELECTED SPECIAL SHARES, INC.
SELECTED DAILY GOVERNMENT FUND

2949 EAST ELVIRA ROAD, SUITE 101
TUCSON, ARIZONA 85706
1-800-243-1575

SELECTED DAILY GOVERNMENT FUND IS A SERIES OF SELECTED CAPITAL PRESERVATION
TRUST.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 2005. THIS STATEMENT OF
ADDITIONAL INFORMATION INCORPORATES THE PROSPECTUS BY REFERENCE. THE PROSPECTUS
MAY BE OBTAINED FROM THE SELECTED FUNDS.

THE FUNDS' MOST RECENT ANNUAL REPORT AND SEMI-ANNUAL REPORT TO SHAREHOLDERS ARE
SEPARATE DOCUMENTS THAT ARE AVAILABLE ON REQUEST AND WITHOUT CHARGE BY CALLING
SHAREHOLDER SERVICES. THE ANNUAL REPORT, ACCOMPANYING NOTES AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM APPEARING IN THE ANNUAL REPORT ARE
INCORPORATED BY REFERENCE IN THIS STATEMENT OF ADDITIONAL INFORMATION.

Selected Funds Statement of Additional Information 1

TABLE OF CONTENTS

PAGE

SECTION I: INVESTMENT STRATEGIES, RISKS AND RESTRICTIONS............................3

Additional Information About the Funds' Investment Strategies and Risks........3
Portfolio Transactions........................................................23
Investment Restrictions.......................................................26

SECTION II: KEY PERSONS............................................................29

Organization of the Funds.....................................................29
Directors and Officers........................................................30
Directors.....................................................................31
Independent Directors' Compensation...........................................35
Officers......................................................................35
Standing Committees of the Board of Directors.................................36
Directors' Fund Holdings......................................................37
Independent Directors' Affiliations and Transactions..........................37
Certain Shareholders of the Fund..............................................38
Investment Advisory Services..................................................39
Portfolio Managers............................................................39
Disclosure of Portfolio Holdings..............................................41
Distribution of Fund Shares...................................................42
Other Important Service Providers.............................................45

SECTION III: CLASSES OF SHARES, PURCHASES, EXCHANGES AND REDEMPTIONS...............45

Selecting the Appropriate Class of Shares.....................................45
How to Purchase Shares........................................................46
Special Services..............................................................46
Exchange of Shares............................................................47
Redemption of Shares..........................................................47

SECTION IV: GENERAL INFORMATION....................................................48

Determining the Price of Shares...............................................48
Dividends and Distributions...................................................49
Federal Income Taxes..........................................................49
Performance Data..............................................................50

APPENDIX A: QUALITY RATINGS OF DEBT SECURITIES.....................................54

APPENDIX B: SUMMARY OF PROXY VOTING PROCEDURES AND POLICIES .......................58

Selected Funds Statement of Additional Information 2

SECTION I: INVESTMENT STRATEGIES, RISKS AND RESTRICTIONS
--------------------------------------------------------
This Statement of Additional Information should be read in conjunction with the
prospectuses. This Statement of Additional Information supplements the
information available in the prospectus.

ADDITIONAL INFORMATION ABOUT THE FUNDS'
INVESTMENT STRATEGIES AND RISKS

THE ADVISER. Selected American Shares, Selected Special Shares, and Selected
Daily Government Fund (each a "Fund") are managed by Davis Selected Advisers,
L.P. ("Adviser").

PRINCIPAL INVESTMENT STRATEGIES AND ADDITIONAL INVESTMENT STRATEGIES. The
investment objectives, principal investment strategies and the main risks of
each Fund are described in the Funds' prospectus. The Funds are not limited to
just investing in the securities and using the principal investment strategies
described in the prospectus. The Funds may invest in other securities and use
additional investment strategies if, in the Adviser's professional judgment, the
securities or investment strategies are appropriate. Factors which the Adviser
considers include whether: (i) purchasing such securities would be consistent
with shareholders' reasonable expectations; (ii) they may assist the Fund in
pursuing its investment objective; (iii) they are consistent with the Fund's
investment strategy; (iv) they will cause the Fund to violate any of its
investment restrictions; or (v) they will materially change the Fund's risk
profile as described in the Fund's prospectus and Statement of Additional
Information, as amended from time to time. This section of the Statement of
Additional Information contains supplemental information about the Funds'
principal investment strategies and also describes additional investment
strategies that the Adviser and/or Davis Selected Advisers - NY, Inc.
("Sub-Adviser") may use to try to achieve the Funds' objectives. The composition
of the Funds' portfolios and the strategies that the Adviser may use to try to
achieve the Funds' investment objectives may vary depending on market conditions
and available investment opportunities. The Funds are not required to use any of
the investment strategies described below in pursuing their investment
objectives. The Funds may use some of the investment strategies rarely or not at
all. Whether the Funds use a given investment strategy at a given time depends
on the professional judgment of the Adviser.

There is no assurance that the Funds will achieve their investment objectives.
An investment in the Funds may not be appropriate for all investors, and
short-term investing is discouraged.

In the discussions that follow, "Fund" applies equally to Selected American
Shares, Selected Special Shares, and Selected Daily Government Fund unless the
context indicates otherwise.

EQUITY SECURITIES. Equity securities represent an ownership position in a
company. These securities may include, without limitation, common stocks,
preferred stocks and securities with equity conversion or purchase rights. The
prices of equity securities fluctuate based on changes in the financial
condition of their issuers and on market and economic conditions. Events that
have a negative impact on a business probably will be reflected in a decline in
their equity securities. Furthermore, when the stock market declines, most
equity securities, even those issued by strong companies, likely will decline in
value.

RIGHTS AND WARRANTS. Rights and warrants are forms of equity securities.
Warrants basically are options to purchase equity securities at specific prices
valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to
warrants, but normally have a shorter maturity and are distributed directly by
the issuer to its shareholders. Rights and warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.

INITIAL PUBLIC OFFERINGS ("IPOS"). IPOs are a form of equity security. IPOs can
have a dramatic impact on Fund performance and assumptions about future
performance based on that impact may not be warranted. Investing in IPOs
involves risks. Many, but not all, of the companies issuing IPOs are small,
unseasoned companies. These are companies that have been in operation for a
short period of time. Small company securities, including IPOs, are subject to
greater volatility in their prices than are securities issued by more
established companies. If the Fund does not intend to make a long-term
investment in the IPO (it is

Selected Funds Statement of Additional Information 3

sometimes possible to immediately sell an IPO at a profit) the Adviser may not
perform the same detailed research on the company that it does for core
holdings.

SMALL- AND MID-CAPITALIZATION COMPANIES. Companies with less than $10 billion in
market capitalization are considered by the Adviser to be mid- or
small-capitalization companies. Investing in mid- and small-capitalization
companies may be more risky than investing in large-capitalization companies.
Smaller companies typically have more limited product lines, markets and
financial resources than larger companies, and their securities may trade less
frequently and in more limited volume than those of larger, more mature
companies. Securities of these companies may be subject to volatility in their
prices. They may have a limited trading market, which may adversely affect the
Fund's ability to dispose of them and can reduce the price the Fund might be
able to obtain for them. Other investors that own a security issued by a mid- or
small-capitalization company for whom there is limited liquidity might trade the
security when the Fund is attempting to dispose of its holdings in that
security. In that case the Fund might receive a lower price for its holdings
than otherwise might be obtained. Small-capitalization companies also may be
unseasoned. These include companies that have been in operation for less than
three years, including the operations of any predecessors.

FINANCIAL SERVICES SECTOR. The Adviser has developed a special expertise in
financial services companies and the Fund may, from time to time, invest a
significant portion of its assets in the financial services sector if the
Adviser believes that such investments are consistent with the Fund's investment
strategy, may contribute to the Fund achieving its investment objectives and
will not cause the Fund to violate any of its investment restrictions.

A company is "principally engaged" in financial services if it owns financial
services related assets constituting at least 50% of the total value of its
assets, or if at least 50% of its revenues are derived from its provision of
financial services. The financial services sector consists of several different
industries that behave differently in different economic and market
environments; for example, banking, insurance and securities brokerage houses.
Companies in the financial services sector include commercial banks, industrial
banks, savings institutions, finance companies, diversified financial services
companies, investment banking firms, securities brokerage houses, investment
advisory companies, leasing companies, insurance companies and companies
providing similar services.

Due to the wide variety of companies in the financial services sector, they may
react in different ways to changes in economic and market conditions.

Banking. Commercial banks (including "money center" regional and community
banks), savings and loan associations and holding companies of the foregoing are
especially subject to adverse effects of volatile interest rates, concentrations
of loans in particular industries (such as real estate or energy) and
significant competition. The profitability of these businesses is to a
significant degree dependent on the availability and cost of capital funds.
Economic conditions in the real estate market may have a particularly strong
effect on certain banks and savings associations. Commercial banks and savings
associations are subject to extensive federal and, in many instances, state
regulation. Neither such extensive regulation nor the federal insurance of
deposits ensures the solvency or profitability of companies in this industry,
and there is no assurance against losses in securities issued by such companies.

Insurance. Insurance companies are particularly subject to government regulation
and rate setting, potential anti-trust and tax law changes, and industry-wide
pricing and competition cycles. Property and casualty insurance companies also
may be affected by weather, terrorism and other catastrophes. Life and health
insurance companies may be affected by mortality and morbidity rates, including
the effects of epidemics. Individual insurance companies may be exposed to
reserve inadequacies, problems in investment portfolios (for example, due to
real estate or "junk" bond holdings) and failures of reinsurance carriers.

Other Financial Services Companies. Many of the investment considerations
discussed in connection with banks and insurance companies also apply to
financial services companies. These companies are all subject to extensive
regulation, rapid business changes, and volatile performance dependent on the
availability and cost of capital and prevailing interest rates and significant
competition. General economic conditions significantly affect these companies.
Credit and other losses resulting from the financial difficulty of

Selected Funds Statement of Additional Information 4

borrowers or other third parties have a potentially adverse effect on companies
in this industry. Investment banking, securities brokerage and investment
advisory companies are particularly subject to government regulation and the
risks inherent in securities trading and underwriting activities.

Other Considerations. Regulations of the Securities and Exchange Commission
("SEC") impose limits on: (1) investments in the securities of companies that
derive more than 15% of their gross revenues from the securities or investment
management business. Although there are exceptions, a Fund is prohibited from
investing more than 5% of its total assets in a single company that derives more
than 15% of its gross revenues from the securities or investment management
business, and (2) investments in insurance companies. A Fund generally is
prohibited from owning more than 10% of the outstanding voting securities of an
insurance company.

REAL ESTATE SECURITIES, INCLUDING REITS. Real estate securities are a form of
equity security. Real estate securities are issued by companies that have at
least 50% of the value of their assets, gross income or net profits attributable
to ownership, financing, construction, management or sale of real estate, or to
products or services that are related to real estate or the real estate
industry. The Fund does not invest directly in real estate. Real estate
companies include real estate investment trusts ("REITs") or other securitized
real estate investments, brokers, developers, lenders and companies with
substantial real estate holdings such as paper, lumber, hotel and entertainment
companies. REITs pool investors' funds for investment primarily in
income-producing real estate or real estate-related loans or interests. A REIT
is not taxed on income distributed to shareholders if it complies with various
requirements relating to its organization, ownership, assets and income, and
with the requirement that it distribute to its shareholders at least 95% of its
taxable income (other than net capital gains) each taxable year. REITs generally
can be classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs
invest the majority of their assets directly in real property and derive their
income primarily from rents. Equity REITs also can realize capital gains by
selling property that has appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both Equity REITs and Mortgage REITs. To the extent that the management fees
paid to a REIT are for the same or similar services as the management fees paid
to the Fund, there will be a layering of fees, which would increase expenses and
decrease returns.

Real estate securities, including REITs, are subject to risks associated with
the direct ownership of real estate. The Fund also could be subject to such
risks by reason of direct ownership as a result of a default on a debt security
it may own. These risks include declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, changes in
zoning laws, uninsured casualties or condemnation losses, fluctuations in rental
income, changes in neighborhood values, the appeal of properties to tenants and
increases in interest rates.

Equity REITs may be affected by changes in the value of the underlying property
owned by the trusts, while mortgage REITs may be affected by the quality of
credit extended. Equity and mortgage REITs are dependent on management skill,
may not be diversified and are subject to project financing risks. Such trusts
also are subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation and the possibility of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code, and failing to maintain
exemption from registration under the Investment Company Act of 1940 ("1940
Act"). Changes in interest rates also may affect the value of the debt
securities in the Fund's portfolio. By investing in REITs indirectly through the
Fund, a shareholder will bear not only his or her proportionate share of the
expense of the Fund but also, indirectly, similar expenses of the REITs,
including compensation of management. Some real estate securities may be rated
less than investment grade by rating services. Such securities may be subject to
the risks of high-yield, high-risk securities discussed below.

CONVERTIBLE SECURITIES. Convertible Securities are a form of equity security.
Generally, convertible securities are bonds, debentures, notes, preferred
stocks, warrants or other securities that convert or are exchangeable into
shares of the underlying common stock at a stated exchange ratio. Usually, the
conversion or exchange is solely at the option of the holder. However, some
convertible securities may be convertible or exchangeable at the option of the
issuer or are automatically converted or exchanged at a certain time, or on the
occurrence of certain events, or have a combination of these characteristics.
Usually a convertible security provides a long-

Selected Funds Statement of Additional Information 5

term call on the issuer's common stock and therefore tends to appreciate in
value as the underlying common stock appreciates in value. A convertible
security also may be subject to redemption by the issuer after a certain date
and under certain circumstances (including a specified price) established on
issue. If a convertible security held by the Fund is called for redemption, the
Fund could be required to tender it for redemption, convert it into the
underlying common stock or sell it.

Convertible bonds, debentures and notes are varieties of debt securities, and as
such are subject to many of the same risks, including interest rate sensitivity,
changes in debt rating and credit risk. In addition, 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. Thus,
convertible securities are subject to many of the same risks as high-yield,
high-risk securities. A more complete discussion of these risks is provided
below in the sections titled "Bonds and Other Debt Securities" and "High-Yield,
High-Risk Debt Securities."

Due to its conversion feature, the price of a convertible security normally will
vary in some proportion to changes in the price of the underlying common stock.
A convertible security will also normally provide a higher yield than the
underlying common stock (but generally lower than comparable non-convertible
securities). Due to their higher yield, convertible securities generally sell
above their "conversion value," which is the current market value of the stock
to be received on conversion. The difference between this conversion value and
the price of convertible securities will vary over time depending on the value
of the underlying common stocks and interest rates. When the underlying common
stocks decline in value, convertible securities will tend not to decline to the
same extent because the yield acts as a price support. When the underlying
common stocks rise in value, the value of convertible securities also may be
expected to increase, but generally will not increase to the same extent as the
underlying common stocks.

Fixed-income securities generally are considered to be interest rate-sensitive.
The market value of convertible securities will change in response to changes in
interest rates. During periods of falling interest rates, the value of
convertible bonds generally rises. Conversely, during periods of rising interest
rates, the value of such securities generally declines. Changes by recognized
rating services in their ratings of debt securities and changes in the ability
of an issuer to make payments of interest and principal also will affect the
value of these investments.

FOREIGN SECURITIES. Equity securities are issued by both domestic and foreign
companies. Sometimes a company may be classified as either "domestic" or
"foreign" depending upon which factors are considered most important for a given
company. Factors which the Adviser considers include: (1) was the company
organized under the laws of the United States or a foreign country; (2) are the
company's securities principally traded in securities markets outside of the
United States; (3) where does the company earn the majority of its revenues or
profits; and (4) where does the company have the majority of its assets.

Foreign securities include, but are not limited to, equity securities, real
estate securities, convertible securities and bonds. Investments in foreign
securities may be made through the purchase of individual securities on
recognized exchanges and developed over-the-counter markets, through American
Depository Receipts ("ADRs") or Global Depository Receipts ("GDRs") covering
such securities, and through U.S.-registered investment companies investing
primarily in foreign securities. To the extent that the management fees paid to
an investment company are for the same or similar services as the management
fees paid to the Fund, there would be a layering of fees that would increase
expenses and decrease returns. When the Fund invests in foreign securities,
their operating expenses are likely to be higher than that of an investment
company investing exclusively in U.S. securities, since the custodial and
certain other expenses are expected to be higher.

Investments in foreign securities may involve a higher degree of risk than
investments in domestic issuers. Foreign securities are often denominated in
foreign currencies, which means that their value will be affected by changes in
exchange rates, as well as other factors that affect securities prices. There
generally is less information publicly available about foreign securities and
securities markets, and there may be less government regulation and supervision
of foreign issuers and securities markets. Foreign securities and markets also
may be affected by political and economic instabilities and may be more volatile
and less liquid than domestic securities and markets. Investment risks may
include expropriation or nationalization

Selected Funds Statement of Additional Information 6

of assets, confiscatory taxation, exchange controls and limitations on the use
or transfer of assets and significant withholding taxes. Foreign economies may
differ from the United States favorably or unfavorably with respect to inflation
rates, balance of payments, capital reinvestment, gross national product
expansion and other relevant indicators. The Fund may attempt to reduce exposure
to market and currency fluctuations by trading in currency futures contracts or
options on futures contracts for hedging purposes only.

SPECIAL RISKS OF EMERGING MARKETS. Emerging and developing markets abroad may
offer special opportunities for growth investing but have greater risks than
more developed foreign markets, such as those in Europe, Canada, Australia, New
Zealand and Japan. Securities in emerging market countries may be more difficult
to sell at an acceptable price and their prices may be more volatile than
securities of companies in more developed markets. There may be even less
liquidity in their securities markets, and settlements of trades may be subject
to greater delays so that the Fund may not receive the proceeds of a sale of a
security on a timely basis. They are subject to greater risks of limitations on
the repatriation of income and profits because of currency restrictions imposed
by local governments. Those countries also may be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. Emerging countries may have less
developed trading markets and exchanges. They may have less developed legal and
accounting systems.

BONDS AND OTHER DEBT SECURITIES. Bonds and other debt securities may be
purchased by the Fund if the Adviser believes that they are consistent with the
Fund's investment strategies may contribute to the Fund's investment objective
and will not cause the Fund to violate any of its investment restrictions. The
U.S. government, corporations and other issuers sell bonds and other debt
securities to borrow money. Issuers pay investors interest and generally must
repay the amount borrowed at maturity. Some debt securities, such as zero-coupon
bonds, do not pay current interest, but are purchased at a discount from their
face values. The prices of debt securities fluctuate, depending on such factors
as interest rates, credit quality and maturity.

Bonds and other debt securities generally are subject to credit risk and
interest rate risk. While debt securities issued by the U.S. Treasury generally
are considered free of credit risk, debt issued by agencies and corporations all
entail some level of credit risk. Investment grade debt securities have less
credit risk than do high-yield, high-risk debt securities. Credit risk is
described more fully in the section titled "High-Yield, High-Risk Debt
Securities."

Bonds and other debt securities generally are interest rate-sensitive. During
periods of falling interest rates, the value of debt securities held by the Fund
generally rises. Conversely, during periods of rising interest rates, the value
of such securities generally declines. Changes by recognized rating services in
their ratings of debt securities and changes in the ability of an issuer to make
payments of interest and principal also will affect the value of these
investments.

SELECTED DAILY GOVERNMENT FUND AVERAGE MATURITY. Selected Daily Government Fund
limits the average maturity of its investment portfolio to 90 days or less. The
Adviser may adjust the average maturity of Selected Daily Government Fund's
portfolio from time to time, depending on the Adviser's 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 (as short
as one day), and at other times may be relatively long (up to 90 days). Selected
Daily Government Fund strives to maintain a constant net asset value per share
of $1. There is no guarantee that the Fund will be successful.

GOVERNMENT SECURITIES. U.S. Government Securities are debt securities that are
obligations of or guaranteed by the U.S. government, its agencies or
instrumentalities. There are two basic types of U.S. Government Securities: (1)
direct obligations of the U.S. Treasury, and (2) obligations issued or
guaranteed by an agency or instrumentality of the U.S. government. Agencies and
instrumentalities include the Federal Farm Credit System ("FFCS"), Student Loan
Marketing Association ("SLMA"), Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Home Loan Banks ("FHLB"), Federal National Mortgage
Association ("FNMA") and Government National Mortgage Association ("GNMA"). Some
obligations

Selected Funds Statement of Additional Information 7

issued or guaranteed by agencies or instrumentalities, such as those issued by
GNMA, are fully guaranteed by the U.S. government. Others, such as FNMA bonds,
rely on the assets and credit of the instrumentality with limited rights to
borrow from the U.S. Treasury. Still other securities, such as obligations of
the FHLB, are supported by more extensive rights to borrow from the U.S.
Treasury.

U.S. Government Securities include mortgage-related securities issued by an
agency or instrumentality of the U.S. government. GNMA Certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations are either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. A "pool" or group
of such mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once approved by GNMA, the timely payment
of interest and principal on each mortgage is guaranteed by GNMA and backed by
the full faith and credit of the U.S. government. GNMA Certificates differ from
bonds in that principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. GNMA Certificates are
called "pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the Certificate.

Pools of mortgages also are issued or guaranteed by other agencies of the U.S.
government. The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
or lengthened by unscheduled or early payment, or by slower than expected
prepayment of principal and interest on the underlying mortgages. The occurrence
of mortgage prepayments is affected by the level of interest rates, general
economic conditions, the location and age of the mortgage and other social and
demographic conditions. As prepayment rates of individual pools vary widely, it
is not possible to accurately predict the average life of a particular pool.

A collateralized mortgage obligation ("CMO") is a debt security issued by a
corporation, trust or custodian, or by a U.S. government agency or
instrumentality that is collateralized by a portfolio or pool of mortgages,
mortgage-backed securities, U.S. Government Securities or corporate debt
obligations. The issuer's obligation to make interest and principal payments is
secured by the underlying pool or portfolio of securities. CMOs are most often
issued in two or more classes (each of which is a separate security) with
varying maturities and stated rates of interest. Interest and principal payments
from the underlying collateral (generally a pool of mortgages) are not
necessarily passed directly through to the holders of the CMOs; these payments
typically are used to pay interest on all CMO classes and to retire successive
class maturities in a sequence. Thus, the issuance of CMO classes with varying
maturities and interest rates may result in greater predictability of maturity
with one class and less predictability of maturity with another class than a
direct investment in a mortgage-backed pass-through security (such as a GNMA
Certificate). Classes with shorter maturities typically have lower volatility
and yield while those with longer maturities typically have higher volatility
and yield. Thus, investments in CMOs provide greater or lesser control over the
investment characteristics than mortgage pass-through securities and offer more
defensive or aggressive investment alternatives.

Investments in mortgage-related U.S. Government Securities, such as GNMA
Certificates and CMOs, also involve other risks. The yield on a pass-through
security typically is quoted based on the maturity of the underlying instruments
and the associated average life assumption. Actual prepayment experience may
cause the yield to differ from the assumed average life yield. Accelerated
prepayments adversely impact yields for pass-throughs purchased at a premium;
the opposite is true for pass-throughs purchased at a discount. During periods
of declining interest rates, prepayment of mortgages underlying pass-through
certificates can be expected to accelerate. When the mortgage obligations are
prepaid, the Fund reinvests the prepaid amounts in securities, the yields of
which reflect interest rates prevailing at that time. Therefore, the Fund's
ability to maintain a portfolio of high-yielding, mortgage-backed securities
will be adversely affected to the extent that prepayments of mortgages must be
reinvested in securities that have lower yields than the prepaid mortgages.
Moreover, prepayments of mortgages that underlie securities purchased at a
premium could result in capital losses. Investment in such securities also could
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 that was considered
a short or intermediate-term security at the time of purchase into a long-term
security. Long-term securities

Selected Funds Statement of Additional Information 8

generally fluctuate more widely in response to changes in interest rates than
short or intermediate-term securities.

The guarantees of the U.S. government, its agencies and instrumentalities are
guarantees of the timely payment of principal and interest on the obligations
purchased. The value of the shares issued by the Fund is not guaranteed and will
fluctuate with the value of the Fund's portfolio. Generally when the level of
interest rates rise, the value of the Fund's investment in government securities
is likely to decline and, when the level of interest rates decline, the value of
the Fund's investment in government securities is likely to rise.

The Fund may engage in portfolio trading primarily to take advantage of yield
disparities. Such trading strategies may result in minor temporary increases or
decreases in the Fund's current income and in its holding of debt securities
that sell at substantial premiums or discounts from face value. If expectations
of changes in interest rates or the price of the securities prove to be
incorrect, the Fund's potential income and capital gain will be reduced or its
potential loss will be increased.

HIGH-YIELD, HIGH-RISK DEBT SECURITIES. The real estate securities, convertible
securities, bonds and other debt securities in which the Fund may invest may
include high-yield, high-risk debt securities rated BB or lower by Standard &
Poor's Corporation ("S&P") or Ba or lower by Moody's Investors Service
("Moody's") or unrated securities. Securities rated BB or lower by S&P and Ba or
lower by Moody's are referred to in the financial community as "junk bonds" and
may include D-rated securities of issuers in default. See Appendix A for a more
detailed description of the rating system. Ratings assigned by credit agencies
do not evaluate market risks. The Adviser considers the ratings assigned by S&P
or Moody's as one of several factors in its independent credit analysis of
issuers. A brief description of the quality ratings of these two services is
contained in the section titled "Quality Ratings of Debt Securities."

While likely to have some quality and protective characteristics, high-yield,
high-risk debt securities, whether convertible into common stock, usually
involve increased risk as to payment of principal and interest. Issuers of such
securities may be highly leveraged and may not have available to them
traditional methods of financing. Therefore, the risks associated with acquiring
the securities of such issuers generally are greater than is the case with
higher-rated securities. For example, during an economic downturn or a sustained
period of rising interest rates, issuers of high-yield securities may be more
likely to experience financial stress, especially if such issuers are highly
leveraged. During such periods, such issuers may not have sufficient revenues to
meet their principal and interest payment obligations. The issuer's ability to
service its debt obligations also may be adversely affected by specific issuer
developments, or the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due to
default by the issuer is significantly greater for the holders of high-yield
securities because such securities may be unsecured and may be subordinated to
other creditors of the issuer.

High-yield, high-risk debt securities are subject to greater price volatility
than higher-rated securities, tend to decline in price more steeply than
higher-rated securities in periods of economic difficulty or accelerating
interest rates and are subject to greater risk of non-payment in adverse
economic times. There may be a thin trading market for such securities. This may
have an adverse impact on market price and the ability of the Fund to dispose of
particular issues and may cause the Fund to incur special securities'
registration responsibilities, liabilities and costs, and liquidity and
valuation difficulties. Unexpected net redemptions may force the Fund to sell
high-yield, high-risk debt securities without regard to investment merit,
thereby possibly reducing return rates. Such securities may be subject to
redemptions or call provisions, which, if exercised when investment rates are
declining, could result in the replacement of such securities with
lower-yielding securities, resulting in a decreased return. To the 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 greater than the cash actually received on these issues. In order to
avoid taxation to the Fund, the Fund may have to sell portfolio securities to
meet taxable distribution requirements.

The market values of such securities tend to reflect individual corporate
developments to a greater extent than do higher-rated securities, which react
primarily to fluctuations in the general level of interest rates. Such
lower-rated securities also tend to be more sensitive to economic and industry
conditions than are

Selected Funds Statement of Additional Information 9

higher-rated securities. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis regarding individual lower-rated bonds, and
the high-yield, high-risk market may depress the prices for such securities. If
the negative factors such as the aforementioned adversely impact the market
value of high-yield, high-risk securities, net asset value will be adversely
affected.

The 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 also may make it more difficult 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 redemption or call provisions. If an issuer exercises
these provisions when investment rates are declining, the Fund will be likely to
replace such bonds with lower-yielding bonds, resulting in a decreased return.
Zero-coupon, pay-in-kind and deferred interest bonds involve additional special
considerations. Zero-coupon bonds are debt obligations that do not entitle the
holder to any periodic payments of interest prior to maturity or a specified
cash payment date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from their face
amount or par value. The market prices of zero-coupon securities generally are
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 that 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. There is 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 greater than the cash actually received on these issues. In
order to distribute such income to avoid taxation, the Fund may have to sell
portfolio securities to meet its taxable distribution requirements under
circumstances that could be adverse.

Federal tax legislation limits the tax advantages of issuing certain high-yield,
high-risk bonds. This could have a materially adverse effect on the market for
high-yield, high-risk bonds.

A description of each bond quality category is set forth in Appendix A. The
ratings of Moody's and S&P represent their opinions as to the quality of the
securities that they undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute standards of quality.
There is no assurance that a rating assigned initially will not change. The Fund
may retain a security whose rating has changed or has become unrated.

CASH MANAGEMENT. For defensive purposes or to accommodate inflows of cash
awaiting more permanent investment, the Fund may temporarily and without
limitation hold high-grade short-term money market instruments, cash and cash
equivalents, including repurchase agreements. The Fund also may invest in other
investment companies (or companies exempted under Section 3(c)(7) of the 1940
Act) that themselves primarily invest in temporary defensive investments,
including commercial paper. To the extent that the management fees paid to the
other investment companies are for the same or similar services as the
management fees paid to the Fund, there will be a layering of fees that would
increase expenses and decrease returns. Investments in other investment
companies are limited by the 1940 Act.

Selected Funds Statement of Additional Information 10

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Repurchase
agreements involve an agreement to purchase a security and to sell that security
back to the original owner at an agreed-on price. The resale price reflects the
purchase price plus an agreed-on incremental amount, which is unrelated to the
coupon rate or maturity of the purchased security. 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 Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the collateral during
the period while the Fund seeks to enforce its rights thereto, (b) possible loss
of all or a part of the income during this period, and (c) expenses of enforcing
its rights.

The Fund will enter into repurchase agreements only when the seller agrees that
the value of the underlying securities, including accrued interest (if any),
will at all times be equal to or exceed the value of the repurchase agreement.
The Fund may enter into tri-party repurchase agreements in which a third-party
custodian bank ensures the timely and accurate exchange of cash and collateral.
The majority of these transactions run from day to day, and delivery pursuant to
the resale typically occurs within one to seven days of the purchase. The Fund
normally will not enter into repurchase agreements maturing in more than seven
days.

BORROWING. The Fund may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. The Fund also may borrow up to an additional 5% of its total assets from
banks or others. The Fund may purchase additional securities so long as
borrowings do not exceed 5% of its total assets. The Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities. In the event that market fluctuations cause borrowing
to exceed the limits stated above, the Adviser would act to remedy the situation
as promptly as possible (normally within three business days), although it is
not required to dispose of portfolio holdings immediately if the Fund would
suffer losses as a result. Borrowing money to meet redemptions or other purposes
would have the effect of temporarily leveraging the Fund's assets and
potentially exposing the Fund to leveraged losses.

LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
certain types of eligible borrowers approved by the Board of Directors. The Fund
may engage in securities lending to earn additional income or to raise cash for
liquidity purposes. The Fund must receive collateral for a loan. Under current
applicable regulatory requirements (which are subject to change), on each
business day the loan collateral must be at least equal to the value of the
loaned securities. The collateral must consist of cash, bank letters of credit,
securities of the U.S. government or its agencies or instrumentalities, or other
cash equivalents in which the Fund is permitted to invest.

Lending activities are strictly limited as described in the section titled
"Investment Restrictions." Lending money or securities involves the risk that
the Fund may suffer a loss if a borrower does not repay a loan when due. To
manage this risk the Fund deals only with counterparties it believes to be
creditworthy and requires that the counterparty deposit collateral with the
Fund.

When it loans securities, the Fund still owns the securities, receives amounts
equal to the dividends or interest on loaned securities and is subject to gains
or losses on those securities. The Fund also receives one or more of: (a)
negotiated loan fees, (b) interest on securities used as collateral, and/or (c)
interest on any short-term debt instruments purchased with such loan collateral.
Either type of interest may be shared with the borrower. The Fund also may pay
reasonable finder's, custodian and administrative fees in connection with these
loans. The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned securities on
five days' notice or in time to vote on any important matter.

HEADLINE RISK. We seek to acquire companies with expanding earnings at value
prices. We may make such investments when a company becomes the center of
controversy after receiving adverse media attention. The company may be involved
in litigation, the company's financial reports or corporate governance may be
challenged, the company's annual report may disclose a weakness in internal
controls, investors may question the company's published financial reports,
greater government regulation may be contemplated, or

Selected Funds Statement of Additional Information 11

other adverse events may threaten the company's future. While we research
companies subject to such contingencies, we cannot be correct every time, and
the company's stock may never recover.

SHORT SALES. When the Fund believes that a security is overvalued, it may sell
the security short and borrow the same security from a broker or other
institution to complete the sale. If the price of the security decreases in
value, the Fund may make a profit and, conversely, if the security increases in
value, the Fund will incur a loss because it will have to replace the borrowed
security by purchasing it at a higher price. There can be no assurance that the
Fund will be able to close out the short position at any particular time or at
an acceptable price. Although the Fund's gain is limited to the amount at which
it sold a security short, its potential loss is not limited. A lender may
request that the borrowed securities be returned on short notice; if that occurs
at a time when other short sellers of the subject security are receiving similar
requests, a "short squeeze" can occur. This means that the Fund might be
compelled, at the most disadvantageous time, to replace borrowed securities
previously sold short with purchases on the open market at prices significantly
greater than those at which the securities were sold short. Short selling also
may produce higher than normal portfolio turnover and result in increased
transaction costs to the Fund. If the Fund sells a security short it will either
own an off-setting "long position" (an economically equivalent security which is
owned) or establish a "Segregated Account" as described in this Statement of
Additional Information.

The Fund also may make short sales "against-the-box," in which it sells short
securities it owns. The Fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining and closing short sales
against-the-box, which result in a "constructive sale," requiring the Fund to
recognize any taxable gain from the transaction.

The Fund has adopted a non-fundamental investment limitation that prevents it
from selling any security short if it would cause more than 5% of its total
assets, taken at market value, to be sold short. This limitation does not apply
to selling short against the box.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted securities
that are subject to contractual restrictions on resale. The Fund's policy is to
not purchase or hold illiquid securities (which may include restricted
securities) if more than 15% of the Fund's net assets would then be illiquid.

The restricted securities that the Fund may purchase include securities that
have not been registered under the 1933 Act but are eligible for purchase and
sale pursuant to Rule 144A ("Rule 144A Securities"). This Rule permits certain
qualified institutional buyers, such as the Fund; to trade in privately placed
securities even though such securities are not registered under the 1933 Act.
The Adviser, under criteria established by the Fund's Board of Directors, will
consider whether Rule 144A Securities being purchased or held by the Fund are
illiquid and thus subject to the Fund's policy limiting investments in illiquid
securities. In making this determination, the Adviser 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
marketplace 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 also will be monitored by the Adviser and, if as a result
of changed conditions it is determined that a Rule 144A Security is no longer
liquid, the Fund's holding of illiquid securities will be reviewed to determine
what, if any, action is required in light of the policy limiting investments in
such 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.

WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. The Fund can invest in securities
on a "when-issued" basis and can purchase or sell securities on a
"delayed-delivery" basis. When-issued and delayed-delivery are terms that refer
to securities whose terms and indenture are available and for which a market
exists but that are not available for immediate delivery.

When such transactions are negotiated, the price (which generally is expressed
in yield terms) is fixed at the time the commitment is made. Delivery and
payment for the securities take place at a later date (generally within 45 days
of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the

Selected Funds Statement of Additional Information 12

purchase price. For example, changes in interest rates in a direction other than
that expected by the Adviser before settlement will affect the value of such
securities and may cause a loss to the Fund. During the period between purchase
and settlement, no payment is made by the Fund to the issuer and no interest
accrues to the Fund from the investment.

The Fund may engage in when-issued transactions to secure what the Adviser
considers to be an advantageous price and yield at the time of entering into the
obligation. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Adviser considers to be advantageous. When the
Fund engages in when-issued and delayed-delivery transactions, it does so for
the purpose of acquiring or selling securities consistent with its investment
objective and strategies or for delivery pursuant to options contracts it has
entered into, and not for the purpose of investment leverage. Although the Fund
will enter into delayed-delivery or when-issued purchase transactions to acquire
securities, it can dispose of a commitment before settlement. If the Fund
chooses to dispose of the right to acquire a when-issued security before its
acquisition or to dispose of its right to delivery or receive against a forward
commitment, it may incur a gain or loss.

At the time the Fund makes the commitment to purchase or sell a security on a
when-issued or delayed-delivery basis, it records the transaction on its books
and reflects the value of the security purchased in determining the Fund's net
asset value. In a sale transaction, it records the proceeds to be received. The
Fund will identify on its books liquid securities of any type at least equal in
value to the value of the Fund's purchase commitments until the Fund pays for
the investment.

When issued and delayed-delivery transactions can be used by the Fund as a
defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices,
the Fund might sell securities in its portfolio on a forward commitment basis to
attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
delayed-delivery basis to obtain the benefit of currently higher cash yields.

A segregated account is not required when the Fund holds securities, options or
futures positions whose values are expected to offset its obligations that would
otherwise require a segregated account.

SEGREGATED ACCOUNTS. A number of the Fund's investment strategies require it to
establish segregated accounts. When the Fund enters into an investment strategy
that would result in a "senior security" as that term is defined in the 1940
Act, the Fund will either: (i) own an offsetting position in securities, options
or futures positions; or (ii) set aside liquid securities in a segregated
account with its custodian bank (or designated in the Fund's books and records)
in the amount prescribed. The Fund will maintain the value of such segregated
account equal to the prescribed amount by adding or removing additional liquid
securities to account for fluctuations in the value of securities held in such
account. Securities held in a segregated account cannot be sold while the senior
security is outstanding, unless they are replaced with similar securities.

DERIVATIVES. The Fund can invest in a variety of derivative investments to
pursue its investment objective or for hedging purposes. Some derivative
investments the Fund can use are the hedging instruments described below.

Hedging. The Fund can use hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain unrealized
gains in the value of portfolio securities that have appreciated or to
facilitate selling securities for investment reasons. To do so, the Fund could:

o sell futures contracts;

o buy puts on such futures or on securities; or

o write covered calls on securities or futures.

Selected Funds Statement of Additional Information 13

The Fund can use hedging to establish a position in the securities market as a
temporary substitute for purchasing particular securities. In that case, the
Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could:

o buy futures;

o buy calls on such futures or on securities; or

o sell puts on such futures or on securities..

The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Adviser's discretion, as described below. The
Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
can employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.

Futures. The Fund can buy and sell futures contracts that relate to: (1)
broad-based stock indices ("stock index futures"), (2) debt securities (these
are referred to as "interest rate futures"), (3) other broad-based securities
indices (these are referred to as "financial futures"), (4) foreign currencies
(these are referred to as "forward contracts"), or (5) commodities (these are
referred to as "commodity futures").

A broad-based stock index is used as the basis for trading stock index futures.
They may in some cases be based on stocks of issuers in a particular industry or
group of industries. A stock index assigns relative values to the common stocks
included in the index and its value fluctuates in response to the changes in
value of the underlying stocks. A stock index cannot be purchased or sold
directly. Financial futures are similar contracts based on the future value of
the basket of securities that comprise the index. These contracts obligate the
seller to deliver, and the purchaser to take, cash to settle the futures
transaction. There is no delivery made of the underlying securities to settle
the futures obligation. Either party also may settle the transaction by entering
into an offsetting contract.

An interest rate future obligates the seller to deliver (and the purchaser to
take) cash or a specified type of debt security to settle the futures
transaction. Either party also could enter into an offsetting contract to close
out the position.

No money is paid or received by the Fund on the purchase or sale of a future. On
entering into a futures transaction, the Fund will be required to deposit an
initial margin payment with the futures commission merchant (the "futures
broker"). Initial margin payments will be deposited with the Fund's custodian
bank in an account registered in the futures broker's name. However, the futures
broker can gain access to that account only under specified conditions. As the
future is marked to market (that is, its value on the Fund's books is changed)
to reflect changes in its market value, subsequent margin payments, called
variation margin, will be paid to or by the futures broker daily.

At any time before expiration of the future, the Fund can elect to close out its
position by taking an opposite position, at which time a final determination of
variation margin is made and any additional cash must be paid by or released to
the Fund. Any loss or gain on the future is then realized by the Fund for tax
purposes. All futures transactions, except forward contracts, are effected
through a clearinghouse associated with the exchange on which the contracts are
traded.

Put and Call Options. The Fund can buy and sell (and sell short) certain kinds
of put options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options and options
on the other types of futures described above.

Writing Covered Call Options. The Fund can write (that is, sell) covered calls.
If the Fund sells a call option, it must be covered. That means the Fund must
own the security subject to the call while the call is

Selected Funds Statement of Additional Information 14

outstanding or, for certain types of calls, the call can be covered by
identifying liquid assets on the Fund's books to enable the Fund to satisfy its
obligations if the call is exercised.

When the Fund writes a call on a security, it receives cash (a premium). The
Fund agrees to sell the underlying security to a purchaser of a corresponding
call on the same security during the call period at a fixed exercise price
regardless of market price changes during the call period. The call period is
usually not more than nine months. The exercise price may differ from the market
price of the underlying security. The Fund has the risk of loss that the price
of the underlying security may decline during the call period. That risk may be
offset to some extent by the premium the Fund receives. If the value of the
investment does not rise above the call price, it is likely that the call will
lapse without being exercised. In that case, the Fund would keep the cash
premium and the investment.

When the Fund writes a call on an index, it receives cash (a premium). If the
buyer of the call exercises it, the Fund will pay an amount of cash equal to the
difference between the closing price of the call and the exercise price,
multiplied by a specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.

The Fund's custodian bank, or a securities depository acting for the custodian
bank, will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.

When the Fund writes an over-the-counter ("OTC") option, it will treat as
illiquid (for purposes of its restriction on holding illiquid securities) the
marked-to-market value of any OTC option it holds, unless the option is subject
to a buy-back agreement by the executing broker. To terminate its obligation on
a call it has written, the Fund can purchase a corresponding call in a "closing
purchase transaction." The Fund will then realize a profit or loss, depending on
whether the net of the amount of the option transaction costs and the premium
received on the call the Fund wrote is more or less than the price of the call
the Fund purchases to close out the transaction. The Fund may realize a profit
if the call expires unexercised, because the Fund will retain the underlying
security and the premium it received when it wrote the call. Any such profits
are considered short-term capital gains for federal income tax purposes, as are
the premiums on lapsed calls. When distributed by the Fund, they are taxable as
ordinary income. If the Fund cannot effect a closing purchase transaction due to
the lack of a market, it will have to hold the callable securities until the
call expires or is exercised.

The Fund also can write calls on a futures contract without owning the futures
contract or securities deliverable under the contract. To do so, at the time the
call is written, the Fund must cover the call by identifying an equivalent
dollar amount of liquid assets on the Fund's books. The Fund will identify
additional liquid assets on its books if the value of the segregated assets
drops below 100% of the current value of the future. Because of this segregation
requirement, in no circumstances would the Fund's receipt of an exercise notice
as to that future require the Fund to deliver a futures contract. It would
simply put the Fund in a short futures position, which is permitted by the
Fund's hedging policies.

Writing Put Options. The Fund can sell put options. A put option on securities
gives the purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.

If the Fund writes a put, the put must be covered by liquid assets identified on
the Fund's books. The premium the Fund receives from writing a put represents a
profit, as long as the price of the underlying investment remains equal to or
above the exercise price of the put. However, the Fund also assumes the
obligation during the option period to buy the underlying investment from the
buyer of the put at the exercise price, even if the value of the investment
falls below the exercise price. If a put the Fund has written expires
unexercised, the Fund realizes a gain in the amount of the premium less the
transaction costs incurred. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying

Selected Funds Statement of Additional Information 15

investment at the exercise price. That price usually will exceed the market
value of the investment at that time. In that case, the Fund may incur a loss if
it sells the underlying investment. That loss will be equal to the sum of the
sale price of the underlying investment and the premium received minus the sum
of the exercise price and any transaction costs the Fund incurred.

When writing a put option on a security, to secure its obligation to pay for the
underlying security the Fund will deposit in escrow liquid assets with a value
equal to or greater than the exercise price of the underlying securities. The
Fund therefore foregoes the opportunity of investing the segregated assets or
writing calls against those assets.

As long as the Fund's obligation as the put writer continues, it may be assigned
an exercise notice by the broker-dealer through which the put was sold. That
notice will require the Fund to take delivery of the underlying security and pay
the exercise price. The Fund has no control over when it may be required to
purchase the underlying security, since it may be assigned an exercise notice at
any time prior to the termination of its obligation as the writer of the put.
That obligation terminates on expiration of the put. It also may terminate if,
before it receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.

The Fund can decide to effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent the underlying
security from being put. Effecting a closing purchase transaction also will
permit the Fund to write another put option on the security or to sell the
security and use the proceeds from the sale for other investments. The Fund will
realize a profit or loss from a closing purchase transaction depending on
whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits from writing puts are considered
short-term capital gains for federal tax purposes and, when distributed by the
Fund, are taxable as ordinary income.

Purchasing Calls and Puts. The Fund can purchase calls to protect against the
possibility that the Fund's portfolio will not participate in an anticipated
rise in the securities market. When the Fund buys a call (other than in a
closing purchase transaction), it pays a premium. The Fund then has the right to
buy the underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. The Fund benefits
only if it sells the call at a profit or if, during the call period, the market
price of the underlying investment is above the sum of the call price plus the
transaction costs and the premium paid for the call and the Fund exercises the
call. If the Fund does not exercise the call or sell it (whether or not at a
profit), the call will become worthless at its expiration date. In that case the
Fund will have paid the premium but lost the right to purchase the underlying
investment.

The Fund can buy puts whether it holds the underlying investment in its
portfolio. When the Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a seller of
a put on a corresponding investment during the put period at a fixed exercise
price. Buying a put on securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a decline in the value
of the underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and, as a result, the put is not exercised or resold, the put will become
worthless at its expiration date. In that case the Fund will have paid the
premium but lost the right to sell the underlying investment. However, the Fund
can sell the put prior to its expiration. That sale may or may not be at a
profit.

When the Fund purchases a call or put on an index or future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying investment
to the Fund. Gain or loss depends on changes in the index in question (and thus
on price movements in the securities market generally) rather than on price
movements in individual securities or futures contracts.

Forward Contracts. Forward contracts are foreign currency exchange contracts.
They are used to buy or sell foreign currency for future delivery at a fixed
price. The Fund uses them to "lock in" the U.S. dollar price of a security
denominated in a foreign currency that the Fund has bought or sold, or to
protect against

Selected Funds Statement of Additional Information 16

possible losses from changes in the relative values of the U.S. dollar and a
foreign currency. The Fund limits its exposure in foreign currency exchange
contracts in a particular foreign currency to the amount of its assets
denominated in that currency or a closely correlated currency. The Fund also can
use "cross-hedging" where the Fund hedges against changes in currencies other
than the currency in which a security it holds is denominated.

Under a forward contract, one party agrees to purchase, and another party agrees
to sell, a specific currency at a future date. That date may be any fixed number
of days from the date of the contract agreed on by the parties. The transaction
price is set at the time the contract is entered into. These contracts are
traded in the inter-bank market conducted directly among currency traders
(usually large commercial banks) and their customers.

The Fund can use forward contracts to protect against uncertainty in the level
of future exchange rates. The use of forward contracts does not eliminate the
risk of fluctuations in the prices of the underlying securities the Fund owns or
intends to acquire, but it does fix a rate of exchange in advance. Although
forward contracts may reduce the risk of loss from a decline in the value of the
hedged currency, at the same time they limit any potential gain if the value of
the hedged currency increases.

When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, or when it anticipates receiving dividend
payments in a foreign currency, the Fund might desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund might enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in the currency exchange rates during
the period between the date on which the security is purchased or sold or on
which the payment is declared and the date on which the payments are made or
received.

The Fund also could use forward contracts to lock in the U.S. dollar value of
portfolio positions. This is called a "position hedge." When the Fund believes
that foreign currency might suffer a substantial decline against the U.S.
dollar, it could enter into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar may suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its forward contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which portfolio securities of the Fund are denominated.
That is referred to as a "cross hedge."

The Fund will cover its short positions in these cases by identifying to its
custodian bank assets having a value equal to the aggregate amount of the Fund's
commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if the consummation of
the contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or another currency that is the subject of the
hedge. However, to avoid excess transactions and transaction costs, the Fund can
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess. As
one alternative, the Fund can purchase a call option permitting the Fund to
purchase the amount of foreign currency being hedged by a forward sale contract
at a price no higher than the forward contract price. As another alternative,
the Fund can purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high as or
higher than the forward contact price.

The precise matching of the amounts under forward contracts and the value of the
securities involved generally will not be possible because the future value of
securities denominated in foreign currencies will change as a consequence of
market movements between the date the forward contract is entered into and

Selected Funds Statement of Additional Information 17

the date it is sold. In some cases the Adviser might decide to sell the security
and deliver foreign currency to settle the original purchase obligation. If the
market value of the security is less than the amount of foreign currency that
the Fund is obligated to deliver, the Fund might have to purchase additional
foreign currency on the "spot" (that is, cash) market to settle the security
trade. If the market value of the security instead exceeds the amount of foreign
currency the Fund is obligated to deliver to settle the trade, the Fund might
have to sell on the spot market some of the foreign currency received on the
sale of the security. There will be additional transaction costs on the spot
market in those cases.

The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that anticipated currency
movements would not be accurately predicted, causing the Fund to sustain losses
on these contracts and to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.

At or before the maturity of a forward contract requiring the Fund to sell a
currency, the Fund might sell a portfolio security and use the sale proceeds to
make delivery of the currency. In the alternative, the Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund might close out a forward contract requiring it to
purchase a specified currency by entering into a second contract entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund would realize a gain or loss as a result of entering into
such an offsetting forward contract under either circumstance. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first and
offsetting contracts.

The cost to the Fund of engaging in forward contracts varies with factors such
as the currencies involved, the length of the contract period and the market
conditions then prevailing. Because forward contracts usually are entered into
on a principal basis, no brokerage fees or commissions are involved. Because
these contracts are not traded on an exchange, the Fund must evaluate the credit
and performance risk of the counterparty under each forward contract.

Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund can convert foreign currency from time to time and will
incur costs in doing so. Foreign exchange dealers do not charge a fee for
conversion, but they do seek to realize a profit based on the difference between
the prices at which they buy and sell various currencies. Thus, a dealer might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.

Index-Linked Notes. Principal and/or interest payments on these notes depend on
the performance of an underlying index. Currency-indexed securities are another
derivative the Fund can use. Typically these are short-term or intermediate-term
debt securities. Their value at maturity or the rates at which they pay income
are determined by the change in value of the U.S. dollar against one or more
foreign currencies or an index. In some cases, these securities may pay an
amount at maturity based on a multiple of the amount of the relative currency
movements. This type of index security offers the potential for increased income
or principal payments but at a greater risk of loss than a typical debt security
of the same maturity and credit quality.

Debt Exchangeable for Common Stock of an Issuer or "Equity-Linked Debt
Securities" of an Issuer. At maturity, the debt security is exchanged for common
stock of the issuer or it is payable in an amount based on the price of the
issuer's common stock at the time of maturity. Both alternatives present a risk
that the amount payable at maturity will be less than the principal amount of
the debt because the price of the issuer's common stock might not be as high as
the Adviser expected.

Interest Rate Swap Transactions. The Fund can enter into interest rate swap
agreements. In an interest rate swap, the Fund and another party exchange their
right to receive or their obligation to pay interest on a

Selected Funds Statement of Additional Information 18

security. For example, they might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns. Also, the Fund will identify liquid assets on its books
(such as cash or U.S. government securities) to cover any amounts it could owe
under swaps that exceed the amounts it is entitled to receive, and it will
adjust that amount daily as needed.

Swap agreements entail both interest rate risk and credit risk. There is a risk
that based on movements of interest rates in the future; the payments made by
the Fund under a swap agreement will be greater than the payments it received.
Credit risk arises from the possibility that the counterparty will default. If
the counterparty defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Adviser
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis.

The Fund can enter into swap transactions with certain counterparties pursuant
to master netting agreements. A master netting agreement provides that all swaps
done between the Fund and that counterparty shall be regarded as parts of an
integral agreement. If amounts are payable on a particular date in the same
currency in respect of one or more swap transactions, the amount payable on that
date in that currency shall be the net amount. In addition, the master netting
agreement may provide that if one party defaults generally or on one swap, the
counterparty can terminate all of the swaps with that party. Under these
agreements, if a default results in a loss to one party, the measure of that
party's damages is calculated by reference to the average cost of a replacement
swap for each swap. It is measured by the mark-to-market value at the time of
the termination of each swap. The gains and losses on all swaps are then netted,
and the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on termination
generally is referred to as "aggregation."

Hedging Foreign Currency. To attempt to reduce exposure to currency
fluctuations, the Fund may trade in forward foreign currency exchange contracts
(forward contracts), currency futures contracts and options thereon and
securities indexed to foreign securities. These techniques are not always
effective and their use may expose the Fund to other risks, such as liquidity
and counterparty risk. The Adviser exercises its professional judgment as to
whether the reduction in currency risk justifies the expense and exposure to
liquidity and counterparty risk. These techniques may be used to lock in an
exchange rate in connection with transactions in securities denominated or
traded in foreign currencies, to hedge the currency risk in foreign securities
held by the Fund and to hedge a currency risk involved in an anticipated
purchase of foreign securities. Cross-hedging also may be utilized; that is,
entering into a hedge transaction with respect to a foreign currency different
from the one in which a trade is to be made or in which a portfolio security is
principally traded. There is no limitation on the amount of assets that may be
committed to currency hedging. However, the currency hedging transactions may be
utilized as a tool to reduce currency fluctuation risks due to a current or
anticipated position in foreign securities. The successful use of currency
hedging transactions usually depends on the Adviser's ability to forecast
interest rate and currency exchange rate movements. Should interest or exchange
rates move in an unexpected manner, the anticipated benefits of futures
contracts, options or forward contracts may not be achieved or losses may be
realized and thus the Fund could be in a worse position than if such strategies
had not been used. Unlike many exchange-traded futures contracts, there are no
daily price fluctuation limits with respect to options on currencies and forward
contracts, and adverse market movements therefore could continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of such instruments and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses. Unanticipated changes in currency prices may result in
poorer overall performance for the Fund than if it had not entered into such
contracts. When taking a position in an anticipatory hedge (when the Fund
purchases a futures contract or other similar instrument to gain market exposure
in anticipation of purchasing the underlying securities at a later date), the
Fund is required to set aside cash or high-grade liquid securities to fully
secure the obligation.

A forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date that is individually negotiated and privately
traded by currency traders and their customers. Such a contract gives the Fund a
position in a negotiated, currently non-regulated market. The Fund may enter
into a forward contract; for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security ("transaction

Selected Funds Statement of Additional Information 19

hedge"). Additionally, when the Adviser believes that a foreign currency may
suffer a substantial decline against the U.S. dollar, the Fund may enter into a
forward sale contract to sell an amount of that foreign currency approximating
the value of some or all of the Fund's portfolio securities denominated in such
foreign currency. When the Adviser believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, the Fund may enter into a
forward purchase contract to buy that foreign currency for a fixed dollar amount
in anticipation of purchasing foreign traded securities ("position hedge"). In
this situation the Fund may, in the alternative, enter into a forward contract
with respect to a different foreign currency for a fixed U.S. dollar amount
("cross hedge"). This may be done, for example, where the Adviser believes that
the U.S. dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. dollar value of the
currency in which portfolio securities of the Fund are denominated.

The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to the Fund's position,
it may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies to be written or purchased by the Fund are traded
on U.S. and foreign exchanges or over-the-counter. Currently, a significant
portion or all of the value of an over-the-counter option may be treated as an
illiquid investment and subject to the restriction on such investments as long
as the Securities and Exchange Commission ("SEC") requires that over-the-counter
options be treated as illiquid. Generally, the Fund would utilize options traded
on exchanges where the options are standardized.

The Fund may enter into contracts for the purchase or sale for future delivery
of foreign currencies ("currency futures contracts") and may purchase and write
put and call options to buy or sell currency futures contracts. A "sale" of a
currency futures contract means the acquisition of a contractual obligation to
deliver the foreign currencies called for by the contract at a specified price
on a specified date. A "purchase" of a currency futures contract means the
incurring of a contractual obligation to acquire the foreign currencies called
for by the contract at a specified price on a specified date. Options on
currency futures contracts to be purchased by the Fund will be traded on U.S. or
foreign exchanges or over-the-counter.

The Fund also may purchase securities (debt securities or deposits) that have
their coupon rate or value at maturity determined by reference to the value of
one or more foreign currencies. These strategies will be used for hedging
purposes only. The Fund will hold securities or other options or futures
positions whose values are expected to offset its obligations under the hedge
strategies. The Fund will not enter into a currency hedging position that
exposes the Fund to an obligation to another party unless it follows its
segregated account procedures.

The Fund's ability to dispose of its positions in futures contracts, options and
forward contracts will depend on the availability of liquid markets in such
instruments. Markets in options and futures with respect to currencies still are
developing. It is impossible to predict the amount of trading interest that may
exist in various types of futures contracts, options and forward contracts. If a
secondary market does not exist with respect to an option purchased or written
by the Fund over-the-counter, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the result that:
(i) an option purchased by the Fund would have to be exercised in order for the
Fund to realize any profit; and (ii) the Fund may not be able to sell currencies
covering an option written by the Fund until the option expires or it delivers
the underlying futures currency on exercise. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively for
the purposes set forth above. The Fund's ability to engage in currency hedging
transactions may be limited by tax considerations.

Selected Funds Statement of Additional Information 20

Risks of Hedging With Options and Futures. The use of hedging instruments
requires special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management. If the Adviser
uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund also
could experience losses if the prices of its futures and options positions were
not correlated with its other investments.

The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.

The Fund could pay a brokerage commission each time it buys a call or put, sells
a call or put, or buys or sells an underlying investment in connection with the
exercise of a call or put. Those commissions could be higher on a relative basis
than the commissions for direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the market value
of the underlying investments. Consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investment.

If a covered call written by the Fund is exercised on an investment that has
increased in value, the Fund will be required to sell the investment at the call
price. It will not be able to realize any profit if the investment has increased
in value above the call price.

An option position may be closed out only on a market that provides secondary
trading for options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option. The Fund might experience
losses if it could not close out a position because of an illiquid market for
the future or option.

There is a risk in using short hedging by selling futures or purchasing puts on
broad-based indices or futures to attempt to protect against declines in the
value of the Fund's portfolio securities. The risk is that the prices of the
futures or the applicable index will correlate imperfectly with the behavior of
the cash prices of the Fund's securities. For example, it is possible that while
the Fund has used hedging instruments in a short hedge, the market might advance
and the value of the securities held in the Fund's portfolio might decline. If
that occurred, the Fund would lose money on the hedging instruments and also
experience a decline in the value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio of securities will tend to move in the same
direction as the indices on which the hedging instruments are based. The risk of
imperfect correlation increases as the composition of the Fund's portfolio
diverges from the securities included in the applicable index. To compensate for
the imperfect correlation of movements in the price of the portfolio securities
being hedged and movements in the price of the hedging instruments, the Fund
might use hedging instruments in a greater dollar amount than the dollar amount
of portfolio securities being hedged. It might do so if the historical
volatility of the prices of the portfolio securities being hedged is more than
the historical volatility of the applicable index.

The ordinary spreads between prices in the cash and futures markets are subject
to distortions, due to differences in the nature of those markets. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions that could
distort the normal relationship between the cash and futures markets. Second,
the liquidity of the futures market depends on participants entering into
offsetting transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced, thus producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures market may cause temporary price
distortions.

Selected Funds Statement of Additional Information 21

The Fund can use hedging instruments to establish a position in the securities
markets as a temporary substitute for the purchase of individual securities
(long hedging) by buying futures and/or calls on such futures, broad-based
indices or on securities. It is possible that when the Fund does so, the market
might decline. If the Fund then concludes not to invest in securities because of
concerns that the market might decline further or for other reasons, the Fund
will realize a loss on the hedging instruments that is not offset by a reduction
in the price of the securities purchased.

Regulatory Aspects of Hedging Instruments. When using futures and options on
futures, the Fund is required to operate within certain guidelines and
restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund also must use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.

Transactions in options by the Fund are subject to limitations established by
the option exchanges. The exchanges limit the maximum number of options that may
be written or held by a single investor or group of investors acting in concert.
Those limits apply regardless of whether the options were written or purchased
on the same or different exchanges or are held in one or more accounts or
through one or more different exchanges or through one or more brokers. Thus,
the number of options that the Fund can write or hold may be affected by options
written or held by other entities, including other investment companies having
the same adviser as the Fund (or an adviser that is an affiliate of the Fund's
adviser). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.

Under the Investment Company Act, when the Fund purchases a future, it must
maintain cash or readily marketable short-term debt instruments in an amount
equal to the market value of the securities underlying the future, less the
margin deposit applicable to it.

Tax Aspects of Certain Hedging Instruments. Certain foreign currency exchange
contracts in which the Fund can invest are treated as "Section 1256 contracts"
under the Internal Revenue Code. In general, gains or losses relating to Section
1256 contracts are characterized as 60% long-term and 40% short-term capital
gains or losses under the Code. However, foreign currency gains or losses
arising from Section 1256 contracts that are forward contracts generally are
treated as ordinary income or loss. In addition, Section 1256 contracts held by
the Fund at the end of each taxable year are "marked-to-market," and unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of determining the excise tax applicable to
investment company distributions and for other purposes under rules prescribed
pursuant to the Internal Revenue Code. An election can be made by the Fund to
exempt those transactions from this marked-to-market treatment.

Certain forward contracts the Fund enters into may result in "straddles" for
federal income tax purposes. The straddle rules may affect the character and
timing of gains (or losses) recognized by the Fund on straddle positions.
Generally, a loss sustained on the disposition of a position making up a
straddle is allowed only to the extent that the loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. A previously disallowed
loss generally is allowed at the point when there is no unrecognized gain in the
offsetting positions making up the straddle or the offsetting position is
disposed of.

Under the Internal Revenue Code, the following gains or losses are treated as
ordinary income or loss: (1) gains or losses attributable to fluctuations in
exchange rates that occur between the time the Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities, and (2) gains or losses attributable to fluctuations in the value
of a foreign currency between the date of acquisition of a debt

Selected Funds Statement of Additional Information 22

security denominated in a foreign currency or foreign currency forward contracts
and the date of disposition.

Currency gains and losses are offset against market gains and losses on each
trade before determining a net "Section 988" gain or loss under the Internal
Revenue Code for that trade, which may increase or decrease the amount of the
Fund's investment income available for distribution to its shareholders.

PORTFOLIO TRANSACTIONS

The Adviser is responsible for the placement of portfolio transactions, subject
to the supervision of the Board of Directors. Following is a summary of the
Adviser's trading policies, which are, described in Part II of its Form ADV. The
Adviser is a discretionary investment adviser. Accordingly, The Adviser
determines the securities and quantities to be bought and sold for each client's
account.

BEST EXECUTION.

The Adviser follows procedures intended to provide reasonable assurance of best
execution. However, there can be no assurance that best execution will in fact
be achieved in any given transaction. Best execution can only be verified after
the fact. The Adviser seeks to place portfolio transactions with brokers or
dealers who will execute transactions as efficiently as possible and at the most
favorable net price. In placing executions and paying brokerage commissions or
dealer markups, the Adviser considers, among other factors, price, commission,
timing, aggregated trades, capable floor brokers or traders, competent block
trading coverage, ability to position, capital strength and stability, reliable
and accurate communication and settlement processing, use of automation,
knowledge of other buyers or sellers, arbitrage skills, administrative ability,
underwriting and provision of information on the particular security or market
in which the transaction is to occur, research, the range and quality of the
services made available to clients, and the payment of bona fide client
expenses. To the extent that Clients direct brokerage, the Adviser cannot be
responsible for achieving best execution. The applicability of specific criteria
will vary depending on the nature of the transaction, the market in which it is
executed and the extent to which it is possible to select from among multiple
broker-dealers.

CROSS TRADES.

When the Adviser deems it to be advantageous, one fund may purchase securities
directly from another fund, which is also managed by the Adviser. This may
happen due to a variety of circumstances, including situations when one fund
must purchase securities due to holding excess cash and, at the same time, a
different fund must sell securities in order to increase its cash position.
Cross trades are only executed when deemed beneficial to both funds. The Adviser
has adopted written procedures to ensure fairness to both funds.

INVESTMENT ALLOCATIONS.

The Adviser considers many factors when allocating securities among clients,
including but not limited to the client's investment style, applicable
restrictions, availability of securities, available cash and other current
holdings. The Adviser employs several portfolio managers, each of whom performs
independent research and develops different levels of conviction concerning
potential investments. Clients managed by the portfolio manager performing the
research may receive priority allocations of limited investment opportunities
that are in short supply, including initial public offerings ("IPOs").

Clients are not assured of participating equally or at all in particular
investment allocations. The nature of a client's investment style may exclude it
from participating in many investment opportunities, even if the client is not
strictly precluded from participation based on written investment restrictions.
For example, (i) large cap equity clients are unlikely to participate in initial
public offerings of small-capitalization companies, (ii) the Adviser is likely
to allocate short-term trading opportunities to clients pursuing active trading
strategies rather than clients pursing long-term buy-and-hold strategies, and
(iii) private accounts generally do not participate in purchases of foreign
securities.

The Adviser attempts to allocate limited investment opportunities, including
IPOs, among clients in a manner that is fair and equitable when viewed over a
considerable period of time and involving many

Selected Funds Statement of Additional Information 23

allocations. When the Adviser is limited in the amount of a particular security
it can purchase, due to a limited supply, limited liquidity, or other reason,
the Adviser may allocate the limited investment opportunity to a subset of
eligible clients. The Adviser would then allocate the next limited investment
opportunity to a different subset of eligible clients, rotating among subsets as
limited investment opportunities are identified.

The Adviser serves as investment adviser for a number of clients and may deal
with conflicts of interest when allocating investment opportunities among its
various clients. For example, (i) the Adviser receives different advisory fees
from different clients, (ii) the performance records of some clients are more
public than the performance records of other clients; and (iii) the Adviser and
its affiliates, owners, officers and employees have invested substantial amounts
of their own capital in some client accounts (notably the Davis Funds and
Selected Funds), but do not invest their own capital in every client's account.
The majority of the Adviser's clients pursue specific investment strategies,
many of which are similar. The Adviser expects that, over long periods of time,
most clients pursuing similar investment strategies should experience similar,
but not identical, investment performance. Many factors affect investment
performance, including but not limited to: (i) the timing of cash deposits and
withdrawals to and from an account, (ii) the fact that the Adviser may not
purchase or sell a given security on behalf of all clients pursuing similar
strategies, (iii) price and timing differences when buying or selling
securities, and (iv) the clients' own different investment restrictions. The
Adviser's trading policies are designed to minimize possible conflicts of
interest in trading for its clients.

ORDER PRIORITY.

The Adviser's trading desk prioritizes incoming orders of similar purchases and
sales of securities between institutional and managed accounts/wrap orders. The
Adviser's trading desk typically executes orders for institutional clients,
including investment companies, institutional private accounts, sub-advised
accounts and others. Managed account/wrap program sponsors typically execute
orders for managed account/wrap clients. The Adviser's trading desk attempts to
coordinate the timing of orders to prevent the Adviser from "bidding against
itself" on such orders.

PATTERN ACCOUNTS.

The Adviser serves as investment adviser for a number of clients, which are
patterned after model portfolios or designated mutual funds managed by the
Adviser. For example, a client pursuing Davis Large Cap Value investment
strategy may be patterned after Selected American Shares. The client portfolio
would be expected to own many, but not all, of the same portfolio securities as
Selected American Shares. Selected American Shares usually owns more securities
positions than the Adviser's typical Large Cap Value client. New portfolio
holdings are not usually added to a client account pursuing a Large Cap Value
strategy until the Adviser has enough confidence in the holding to make it a
significant holding in Selected American Shares. The Adviser may not purchase or
sell a given security on behalf of all clients (even clients managed in a
similar style), and it may not execute a purchase of securities or a sale of
securities for all participating clients at the same time.

The Adviser generally attempts to aggregate trades for accounts that are
purchasing or selling the same security at approximately the same time. However,
at times the Adviser executes trades for patterned client accounts after the
trade has been executed for the designated mutual fund or the model portfolio
that the client account is patterned after. Since most of the Adviser's
transactions are in large capitalization exchange-traded equities, the Adviser
believes that this does not usually impact the long-term performance of these
clients.

Orders for accounts which are not patterned after model portfolios or designated
mutual funds are generally executed in the order received by the trading desk,
with the following exceptions: (i) the execution of orders for clients that have
directed that particular brokers be used may be delayed until the orders which
do not direct a particular broker have been filled; (ii) the execution of orders
may be delayed when the client (or responsible portfolio manager) requests such
delay due to market conditions in the security to be purchased or sold; and
(iii) the execution of orders which are to be bunched or aggregated.

Selected Funds Statement of Additional Information 24

AGGREGATED TRADES.

The Adviser frequently follows the practice of aggregating orders of various
institutional clients for execution, if the Adviser believes that this will
result in the best net price and most favorable execution. In some instances,
aggregating trades could adversely affect a given client. However, the Adviser
believes that aggregating trades generally benefits clients because larger
orders tend to have lower execution costs, and the Adviser clients do not
compete with one another trading in the market. Directed brokerage trades in a
particular security are typically executed separately from, and possibly after,
the Adviser's other client trades.

In general, all the Adviser clients (excluding clients who are directing
brokerage and managed money/wrap accounts) seeking to purchase or sell a given
security at approximately the same time will be aggregated into a single order.
When that order is filled, all participating clients receive the price at which
the order was executed. If, at a later time, the participating clients wish to
purchase or sell additional shares of the same security, or if additional
clients seek to purchase or sell the same security, then the Adviser will issue
a new order and the clients participating in the new order will receive the
price at which the new order was executed.

In the event that an aggregated order is not entirely filled, the Adviser will
allocate the purchases or sales among participating clients in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
all such clients. Generally, partially-filled orders are allocated pro rata
based on the initial order submitted by each participating client.

In accordance with the various managed account/wrap programs in which the
Adviser participates, the Adviser typically directs all trading to the
applicable program sponsor unless, in the Adviser's reasonable discretion, doing
so would adversely affect the client. Clients typically pay no commissions on
trades executed through program sponsors. In the event that an order to the
sponsor of a managed account/wrap program is not entirely filled, the Adviser
will allocate the purchases or sales among the clients of that sponsor in the
manner it considers to be most equitable and consistent with its fiduciary
obligations to all such clients. Generally, partially-filled orders are
allocated among the particular sponsor's participating clients on a random basis
that is anticipated to be equitable over time.

RESEARCH PAID FOR WITH COMMISSIONS, "SOFT DOLLARS".

The Adviser does not use client commissions, "soft dollars", to pay for (i)
computer hardware or software, or other electronic communications facilities;
(ii) publications, both paper based or electronic that are available to the
general public; and (iii) third-party research services. If the Adviser
determines to purchase such services, it pays for them using its own resources.

The Adviser's portfolio managers may take into account the research resources,
as well as the execution capacity, of a brokerage firm in selecting brokers.
Thus, transactions may be directed to a brokerage firm which provides (i)
important information concerning a company, (ii) introductions to key company
officers, (iii) industry and company conferences, and (iv) other value added
research services.

The Adviser follows the concepts of Section 28(e) of the Securities Exchange Act
of 1934. Subject to the criteria of Section 28(e), the Adviser may pay a broker
a brokerage commission in excess of that which another broker might have charged
for effecting the same transactions, in recognition of the value of the
brokerage and research services provided by or through the broker. The Adviser
believes it is important to its investment decision-making to have access to
independent research.

EXCEPTIONS.

There are occasions when the Adviser varies the trading procedures and
considerations described above. The Adviser exercises its best judgment in
determining whether clients should execute portfolio transactions simultaneously
with, prior to, or subsequent to the model portfolio or designated mutual fund
that they are patterned after. The factors that the Adviser considers in
exercising its judgment include, but are not limited to, the need for
confidentiality of the purchase or sale, market liquidity of the securities in
issue, the particular events or circumstances that prompt the purchase or sale
of the securities, and operational efficiencies. Even when transactions are
executed on the same day, clients may not receive the

Selected Funds Statement of Additional Information 25

same prices as the model portfolios or designated mutual funds they are
patterned after. If the transactions are not aggregated, such prices may be
better or worse.

Portfolio Turnover. Because the equity Funds' portfolios are managed using the
Davis Investment Discipline, portfolio turnover is expected to be low. The Funds
anticipate that, during normal market conditions, their annual portfolio
turnover rate will be less than 100%. However, depending upon market conditions,
portfolio turnover rate will vary. At times it could be high, which could
require the payment of larger amounts in brokerage commissions and possibly more
taxable distributions.

When the Adviser deems it to be appropriate, a Fund may engage in active and
frequent trading to achieve its investment objective. Active trading may include
participation in initial public offerings. Active trading may result in the
realization and distribution to shareholders of higher capital gains compared
with a fund with less active trading strategies, which would increase
shareholder tax liability. Frequent trading also increases transaction costs,
which could detract from the Fund's performance.

Portfolio Commissions
---------------------

The Funds paid the following brokerage commissions:

2004 2003 2002
----------------------------------
SELECTED AMERICAN SHARES
------------------------
Brokerage Commissions Paid $xx $1,143,805 $2,713,146
Amount Paid to Brokers Xx% 8% 7%
Providing Portfolio Research
Amount Paid to Brokers Xx% 21% 29%
Providing
Services to the Funds.

SELECTED SPECIAL SHARES
-----------------------
Brokerage Commissions Paid $xx $125,557 $134,355
Amount Paid to Brokers Xx% 12% 2%
Providing Portfolio Research
Amount Paid to Brokers N/A N/A N/A
Providing
Services to the Funds.

The Adviser reimbursed Selected American Shares and Selected Special Shares for
commissions paid to certain broker-dealers, which received brokerage, which was
directed for sale of fund shares from January 1, 2000 to July 31, 2003. The
amount paid to the Funds was: Selected American Shares $119,713, Selected
Special Shares $255.

Investments in Certain Broker-Dealers. As of December 31, 2004, the Funds owned
the following securities (excluding repurchase agreements) issued by any of the
10 broker-dealers with whom it transacted the most business during the fiscal
year ended December 31, 2004:

Selected Funds Statement of Additional Information 26

FUND $ VALUE
---- -------

SELECTED AMERICAN SHARES
Morgan Stanley $ xx
Citigroup Inc. $ xx

SELECTED SPECIAL SHARES
None

INVESTMENT RESTRICTIONS

The Funds follow investment strategies developed in accordance with the
investment objective, policies and restrictions described in their prospectus
and this Statement of Additional Information.

The Funds have adopted the fundamental investment policies set forth below,
which may not be changed without a shareholder vote. Where necessary, an
explanation beneath a fundamental policy describes the Funds' practices with
respect to that policy, as allowed by current law. If the law governing a policy
changes, the Funds' practices may change accordingly without a shareholder vote.

The fundamental investment restrictions set forth below may not be changed
without the approval of the holders of the lesser of: (i) 67% of the eligible
votes, if the holders of more than 50% of the eligible votes are represented; or
(ii) more than 50% of the eligible votes.

Except for the fundamental investment policies regarding illiquid securities and
borrowing, all percentage restrictions apply as of the time of an investment
without regard to any later fluctuations in the value of portfolio securities or
other assets. All references to the assets of a Fund are in terms of current
market value.

(1) DIVERSIFICATION. The Fund may not make any investment that is inconsistent
with its classification as a diversified investment company under the 1940
Act.

Further Explanation of Diversification Policy. To remain classified as a
diversified investment company under the 1940 Act, the Fund must conform with
the following: With respect to 75% of its total assets, a diversified investment
company may not invest more than 5% of its total assets, determined at market or
other fair value at the time of purchase, in the securities of any one issuer,
or invest in more than 10% of the outstanding voting securities of any one
issuer, determined at the time of purchase. These limitations do not apply to
investments in securities issued or guaranteed by the United States ("U.S.")
government or its agencies or instrumentalities.

(2) CONCENTRATION. The Fund may not concentrate its investments in the
securities of issuers primarily engaged in any particular industry.

Selected Funds Statement of Additional Information 27

Further Explanation of Concentration Policy. The Fund may not invest 25% or more
of its total assets, taken at market value, in the securities of issuers
primarily engaged in any particular industry (other than securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities). The
Fund generally uses BLP Equity Economic Sectors ("BLP Code") as published by
Bloomberg L.P. to determine industry classification. The Adviser may reclassify
a company if it believes that the BLP Code on a specific company does not
accurately describe the company.

(3) ISSUING SENIOR SECURITIES. The Fund may not issue senior securities, except
as permitted under applicable law, including the 1940 Act and published SEC
staff positions.

Further Explanation of Issuing Senior Securities. The Fund may not issue senior
securities, except as provided by the 1940 Act and any rules, regulations,
orders or letters issued thereunder. This limitation does not apply to selling
short against the box. The 1940 Act defines a "Senior Security" as any bond,
debenture, note or similar obligation constituting a security and evidencing
indebtedness.

(4) BORROWING. The Fund may not borrow money, except to the extent permitted by
applicable law; including the 1940 Act and published SEC staff positions.

Further Explanation of Borrowing Policy. The Fund may borrow from banks provided
that, immediately thereafter the Fund has 300% asset coverage for all
borrowings. The Fund may purchase additional securities so long as borrowings do
not exceed 5% of its total assets. The Fund may obtain such short-term credit as
may be necessary for the clearance of purchases and sales of portfolio
securities. In the event that market fluctuations cause borrowing to exceed the
limits stated above, the Adviser would act to remedy the situation as promptly
as possible (normally within three business days), although it is not required
to dispose of portfolio holdings immediately if the Fund would suffer losses as
a result.

(5) UNDERWRITING. The Fund may not underwrite securities of other issuers
except to the extent permitted by applicable law, including the 1940 Act
and published SEC staff positions.

Further Explanation of Underwriting Policy. The Fund may not underwrite
securities of other issuers, except insofar as the Fund may be deemed to be an
underwriter in connection with the disposition of its portfolio securities.

(6) INVESTMENTS IN COMMODITIES AND REAL ESTATE. The Fund may not purchase or
sell commodities or real estate, except to the extent permitted by
applicable law, including the 1940 Act and published SEC staff positions.

Further Explanation of Policy Restricting Investments in Commodities and Real
Estate. The Fund may purchase or sell financial futures contracts, options on
financial futures contracts, currency contracts and options on currency
contracts as described in its prospectus and Statement of Additional
Information. The Fund may not purchase or sell real estate, except that the Fund
may invest in securities that are directly or indirectly secured by real estate
or issued by issuers that invest in real estate.

(7) MAKING LOANS. The Fund may not make loans to other persons, except as
allowed by applicable law; including the 1940 Act and published SEC staff
positions.

Further Explanation of Lending Policy. The acquisition of investment securities
or other investment instruments, entering into repurchase agreements, leaving
cash on deposit with the Fund's custodian, and similar actions are not deemed to
be the making of a loan.

To generate income and offset expenses, the Fund may lend portfolio securities
to broker-dealers and other financial institutions that the Adviser believes to
be creditworthy in an amount up to 33 1/3% of its total assets, taken at market
value. While securities are on loan, the borrower will pay the Fund any income
accruing on the security. The Fund may invest any collateral it receives in
additional portfolio securities, such as U.S. Treasury notes, certificates of
deposit, other high-grade, short-term obligations or interest-

Selected Funds Statement of Additional Information 28

bearing cash equivalents. The Fund is still subject to gains or losses due to
changes in the market value of securities that it has lent.

When the Fund lends its securities, it will require the borrower to give the
Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.

(8) INVESTMENT OBJECTIVES. Selected American Shares investment objective is to
achieve both capital growth and income. Selected Special Shares' investment
objective is capital growth. Selected Daily Government Fund's investment
objective is to provide as high a level of current income as possible from
the type of short-term investments in which it invests, consistent with
prudent investment management, stability of principal and maintenance of
liquidity.

NON-FUNDAMENTAL RESTRICTIONS

In addition to the foregoing restrictions, the Funds each have adopted the
following non-fundamental policies that may be changed without shareholder
approval:

1. Illiquid Securities. The Fund may not purchase illiquid securities if more
than 15% of the value of the Fund's net assets would be invested in such
securities. Selected Daily Government Fund may not purchase illiquid
securities if more than 10% of the value of the Fund's net assets would be
invested in such securities.

2. High-Yield, High-Risk Securities. The Fund will not purchase debt
securities rated BB or Ba or lower if the securities are in default at the
time of purchase or if such purchase would then cause more than 35% of the
Fund's net assets to be invested in such lower-rated securities.

3. Options. The Fund will not purchase an option if the purchase would cause
the total premiums (at market) of all options then owned to exceed 5% of
the Fund's total assets. The Fund will not sell covered calls if the
transaction would cause the total premiums (at market) of all covered calls
then written to exceed 25% of the Fund's total assets. For additional
information concerning option strategies and their risks, see the section
entitled "Derivatives."

4. Futures Contracts. The Fund will not engage in a futures transaction if the
transaction would cause the nominal value of futures contracts then
purchased or sold to exceed 25% of the Fund's total assets.

5. Borrowing. The Fund will not borrow in excess of 35% of net assets. The
Board of Directors will be notified in the event borrowings exceed 10% of
the Fund's total assets.

6. Short Selling. The Fund will not sell any security short if it would cause
more than 5% of its total assets, taken at market value, to be sold short.
This limitation does not apply to selling short against the box.

7. Investing For Control. The Fund does not invest for the purpose of
exercising control or management of other companies.

8. Name Policy (All Funds Except Selected Special Shares). Under normal
circumstances Selected American Shares will invest at least 80% of net
assets plus any borrowing for investment purposes in securities issued by
American companies. Selected American Shares will comply with the Name
Policy as of the time an investment is made. In the event that market
fluctuations or shareholder actions cause the Fund's investments to fall
below the Name policy limits, the Fund would act to remedy the situation as
promptly as possible, normally within three business days. The Fund will
not be required to dispose of portfolio holdings or purchase additional
investments immediately if the Adviser believes such action would subject
the Fund to losses or unreasonable risks of loss.

Selected Funds Statement of Additional Information 29

Under normal circumstances Selected Daily Government Fund invests exclusively in
U.S. Government Securities and repurchase agreements collateralized by U.S.
Government Securities. The Fund also owns other assets that are not investments,
such as cash and receivables.

The Funds comply with the Name Policy under normal circumstances. However, each
Fund may depart from the Name Policy from time to time. For example, a Fund may
depart from the Name Policy in response to unusually large cash inflows or
redemptions, or to avoid losses in response to adverse market, economic,
political, or other conditions.

Selected American Shares and Selected Daily Government Fund will provide the
Fund's shareholders with at least 60 days' prior notice before changing their
Name Policy such that they would invest, under normal circumstances less than
80% of their net assets plus any borrowing for investment purposes in American
companies or U.S. Government Securities and repurchase agreements collateralized
with U.S. Government Securities, respectively.

SECTION II: KEY PERSONS
-----------------------

This Statement of Additional Information should be read in conjunction with the
prospectus. This Statement of Additional Information supplements the information
available in the prospectus.

ORGANIZATION OF THE FUNDS

THE FUNDS. Each Selected Fund is an open-end, diversified management investment
company registered under the 1940 Act. Selected American Shares, Inc., organized
in 1933, and Selected Special Shares, Inc., organized in 1939, are Maryland
corporations, which issue common stock. Selected Daily Government Fund is a
series of Selected Capital Preservation Trust. The Trust was organized as a
business trust under the laws of Ohio in 1987 and issues shares of beneficial
interest. Each of these legal entities are series investment companies, which
may issue multiple series, each of which would represent an interest in its
separate portfolio. The Board of Directors may increase the number of Selected
Funds in the future and may, at any time, discontinue offering shares of any
Fund to the public.

FUND SHARES. Each Fund may issue shares in different classes. The Fund's shares
currently are divided into two classes of shares: S and D. The Board of
Directors may offer additional series or classes in the future and may at any
time discontinue the offering of any series or class of shares. Each share, when
issued and paid for in accordance with the terms of the offering, is fully paid
and non-assessable. Shares have no preemptive or subscriptions rights and are
freely transferable. Each of the Funds' shares represent an interest in the
assets of the series issuing the share and have identical voting, dividend,
liquidation and other rights and the same terms and conditions as any other
shares except that: (i) the expenses related to a particular class, such as
those related to the distribution of each class and the transfer agency expenses
of each class are borne solely by each such class; (ii) each class of shares
votes separately with respect to provisions of the Rule 12b-1 Distribution Plan
that pertain to a particular class; and (iii) other matters for which separate
class voting is appropriate under applicable law. Each fractional share has the
same rights, in proportion, as a full share. Due to the differing expenses of
the classes, dividends are likely to be lower for Class S shares than for Class
D shares.

Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise to the
shareholders of the outstanding voting securities of an investment company will
not be deemed to have been effectively acted on unless approved by the holders
of a majority of the outstanding shares of each series affected by such matter.
Rule 18f-2 further provides that a series shall be deemed to be affected by a
matter unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series. Rule
18f-2 exempts the selection of independent accountants and the election of Board
members from the separate voting requirements of the Rule.

In accordance with applicable law (Maryland law for Selected American Shares and
Selected Special Shares, Ohio law for Selected Capital Preservation Trust) and
the Funds' bylaws, the Funds do not hold

Selected Funds Statement of Additional Information 30

regular annual shareholder meetings. Shareholder meetings are held when they are
required under the 1940 Act or when otherwise called for special purposes.
Special shareholder meetings may be called for Selected American Shares or
Selected Special Shares on the written request of shareholders of at least 25%
of the outstanding vote that could be cast at the meeting. Special shareholder
meetings may be called for Selected Capital Preservation Trust on the written
request of shareholders of at least 10% of the outstanding vote that could be
cast at the meeting. The Funds will provide assistance in calling and holding
such special meeting, in accordance with State law and SEC rules and regulations
then in effect.

DIRECTORS AND OFFICERS

Each of the directors and officers holds identical offices with each of the
Selected Funds (three registrants, a total of three separate series): Selected
American Shares, Inc., Selected Special Shares, Inc., and Selected Capital
Preservation Trust (offering Selected Daily Government Fund). As indicated
below, certain directors and officers also may hold similar positions with Davis
New York Venture Fund, Inc. Davis Series, Inc., and Davis Variable Account Fund,
Inc. (collectively the "Davis Funds"), mutual funds that are managed by the
Adviser.

The Board of Directors supervises the business and management of the Selected
Funds. The Board approves all significant agreements between the Selected Funds
and those companies that furnish services to the Selected Funds. The names and
addresses of the directors and officers are set forth below, together with their
principal business affiliations and occupations for the last five years.

DIRECTORS

For the purposes of their service as directors to the Selected Funds, the
business address for each of the directors is 2949 E. Elvira Road, Suite 101,
Tucson, Arizona 85706. Each Director serves until retirement, resignation, death
or removal. Directors must retire from the Board of Directors and cease being a
Director at the close of business on the last day of the calendar year in which
the Director attains age 75.

Selected Funds Statement of Additional Information 31

TERM OF NO. OF PORTFOLIOS
OFFICE AND IN FUND COMPLEX
NAME POSITION(S) LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY
(birthdate) HELD WITH FUND TIME SERVED DURING PAST FIVE YEARS DIRECTOR
-----------------------------------------------------------------------------------------------------------------

INDEPENDENT DIRECTORS:

WILLIAM P. BARR Director director Executive Vice President and 3
(5/23/50) since 1994 General Counsel, Verizon
(formerly GTE Corporation
before it merged with Bell
Atlantic) since July 1994;
Attorney General of the
United States from August
1991 to January 1993; Deputy
Attorney General from May
1990 to August 1991;
Assistant Attorney General
from April 1989 to May 1990;
Partner with the law firm of
Shaw, Pittman, Potts &
Trowbridge from 1984 to April
1989 and January 1993 to
August 1994.

OTHER DIRECTORSHIPS CURRENTLY SERVING: None

-----------------------------------------------------------------------------------------------------------------

FLOYD A. BROWN Director director Retired staff announcer and 3
(11/5/30) since 1975 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).

OTHER DIRECTORSHIPS CURRENTLY SERVED: None

-----------------------------------------------------------------------------------------------------------------

JEROME E. HASS Director director Professor of Finance and 3
(6/1/40) since 1997 Business Strategy, Johnson
Graduate School of
Management, Cornell
University; Consultant,
National Economic Research
Associates; former Chief of
Division of Economic Research
of the Federal Power
Commission and Special
Assistant to James R.
Schlesinger at the Executive
Office of the President of
the United States.

Selected Funds Statement of Additional Information 32

OTHER DIRECTORSHIPS CURRENTLY SERVING: None

-----------------------------------------------------------------------------------------------------------------

KATHERINE L. MACWILLIAMS Director director Vice President, International 3
(1/19/56) since 1997 Finance, Coors Brewing
Company; former Treasurer,
Coors Brewing Company and
Adolph Coors Company; former
Vice President of Capital
Markets for UBS Securities in
New York; former member of
the Board of International
Swaps and Derivatives
Association, Inc.

OTHER DIRECTORSHIPS CURRENTLY SERVING: None

-----------------------------------------------------------------------------------------------------------------

JAMES J. MCMONAGLE Director/ director Chairman of the Selected 3
(10/1/44) Chairman since 1990 Funds Board of Directors;
Of Counsel to Vorys, Sater,
Seymour and Pease LLP (law
firm); Formerly Senior Vice
President and General Counsel
of University Hospitals
Health System, Inc. and
University Hospitals of
Cleveland from 1990 to 2002;
Judge of the Court of Common
Pleas, Cuyahoga County, Ohio,
from 1976 to 1990.

OTHER DIRECTORSHIPS CURRENTLY SERVING: None

-----------------------------------------------------------------------------------------------------------------

RICHARD O'BRIEN Director director Retired Corporate Economist 3
(9/12/45) since 1996 for Hewlett-Packard Company;
former Chairman of the
Economic Advisory Council of
the California Chamber of
Commerce.

OTHER DIRECTORSHIPS CURRENTLY SERVING: Director and past President, Silicon
Valley Roundtable; Director, Family Services Agency of San Francisco.

Selected Funds Statement of Additional Information 33

MARSHA WILLIAMS Director director Chief Financial Officer of 14
(3/28/51) since 1996 Equity Office Properties
Trust (a real estate
investment trust); former
Chief Administrative Officer
of Crate & Barrel (home
furnishings retailer); former
Vice President and Treasurer,
Amoco Corporation (oil & gas
company).

OTHER DIRECTORSHIPS CURRENTLY SERVING: Director of the Davis Funds (consisting
of 12 portfolios); Director, Modine Manufacturing, Inc (heat transfer
technology).; Director, Chicago Bridge & Iron Company, N.V (industrial
construction and engineering).

INSIDE DIRECTORS:*

ANDREW A. DAVIS Director director President or Vice President 14
(6/25/63) since 1998 of each Selected Fund and
Davis Fund; President, Davis
Selected Advisers, L.P., and
also serves as an executive
officer in certain companies
affiliated with the Adviser.

OTHER DIRECTORSHIPS CURRENTLY SERVED: Director of the Davis Funds (consisting of 12 portfolios)

-----------------------------------------------------------------------------------------------------------------

CHRISTOPHER C. DAVIS Director Director Chief Executive Officer, 14
(7/13/65) since 1998 President or Vice President
of each Selected Fund and
Davis Fund; Chairman and
Chief Executive Officer,
Davis Selected Advisers,
L.P., and also serves as an
executive officer in certain
companies affiliated with the
Adviser, including sole
member of the Adviser's
general partner, Davis
Investments, LLC; Employee of
Shelby Cullom Davis & Co., a
registered broker/dealer.

OTHER DIRECTORSHIPS CURRENTLY SERVED: Director of the Davis Funds (consisting of 12 portfolios)

-----------------------------------------------------------------------------------------------------------------

* Andrew A. Davis and Christopher C. Davis own partnership units (directly,
indirectly or both) of the Adviser and are considered to be "interested
persons" of the Funds as defined in the Investment Company Act of 1940.
Andrew A. Davis and Christopher C. Davis are brothers.

Selected Funds Statement of Additional Information 34

INDEPENDENT DIRECTORS' COMPENSATION

During the fiscal year ended December 31, 2004, the compensation paid to the
Directors who are not considered to be interested persons of the Funds was as
follows:

----------------------------------------------------------------------------------------------------------
NAME SELECTED SELECTED SELECTED DAILY AGGREGATE TOTAL
AMERICAN SPECIAL GOVERNMENT SELECTED FUND COMPLEX
SHARES SHARES FUND COMPENSATION (1) COMPENSATION (2)
----------------------------------------------------------------------------------------------------------

William Barr
Floyd Brown
Jerome Hass
Katherine
MacWilliams
James
McMonagle
Richard O'Brien
Marsha Williams
----------------------------------------------------------------------------------------------------------

(1) "Aggregate Fund compensation" is the aggregate compensation paid for
service as a director by each of the Selected Funds, i.e., Selected
American Shares, Selected Special Shares, and Selected Daily Government
Fund. Aggregate compensation for 2004 also includes payments for Selected
U.S. Government Income Fund, which was liquidated on March 16, 2004.

(2) "Total complex compensation" is the aggregate compensation paid for service
as a director by all mutual funds with the same investment adviser. There
are six registered investment companies in the complex.

OFFICERS

All Selected Funds officers (including some Inside Directors) hold positions as
executive officers with the Adviser and its affiliates, including Davis Selected
Advisers, L.P. (the Adviser), Davis Selected Advisers - NY, Inc. (a
sub-adviser), Davis Distributors, LLC (the principal underwriter), Davis
Investments, LLC (the sole general partner of the Adviser), and Venture
Advisers, Inc. (a company holding some of the Adviser's limited partnership
units). The Selected Funds do not pay salaries to any of their officers. Each of
the Selected Funds' officers serves for one year and until his or her successor
is chosen and qualifies.

CHRISTOPHER C. DAVIS (BORN 7/13/65, SELECTED FUNDS OFFICER SINCE 1998). See
description in the section on Inside Directors.

ANDREW A. DAVIS (BORN 6/25/63, SELECTED FUNDS OFFICER SINCE 1998). See
description in the section on Inside Directors.

KENNETH C. EICH (BORN 8/14/53, SELECTED FUNDS OFFICER SINCE 1997). Executive
Vice President and Principal Executive Officer of each of the Davis Funds
(consisting of 12 portfolios) and Selected Funds (consisting of three
portfolios); Chief Operating Officer, Davis Selected Advisers, L.P.; and also
serves as an executive officer in certain companies affiliated with the Adviser;
Member, Board of Governors-Investment Company Institute.

Selected Funds Statement of Additional Information 35

DOUGLAS A. HAINES, CPA, (BORN 3/4/71, SELECTED FUNDS OFFICER SINCE 2004). Vice
President, Treasurer, Chief Financial Officer, Principal Financial Officer, and
Principal Accounting Officer of each of the Davis Funds (consisting of 12
portfolios) and Selected Funds (consisting of three portfolios).

SHARRA L. REED (BORN 9/25/66, SELECTED FUNDS OFFICER SINCE 1998). Vice
President, Chief Compliance Officer of the Davis Funds (consisting of 12
portfolios) and Selected Funds (consisting of three portfolios); Vice President
Davis Selected Advisers, L.P.; and also serves as an executive officer in
certain companies affiliated with the Adviser.

THOMAS D. TAYS, CPA, CFA (BORN 3/7/57, SELECTED FUNDS OFFICER SINCE 1998). Vice
President and Secretary of each of the Davis Funds (consisting of 12 portfolios)
and Selected Funds (consisting of three portfolios); Vice President, Chief Legal
Officer and Secretary, Davis Selected Advisers, L.P.; and also serves as an
executive officer in certain companies affiliated with the Adviser.

ARTHUR DON (BORN 9/24/53, SELECTED FUNDS OFFICER SINCE 1991). Assistant
Secretary (for clerical purposes only) of each of the Davis Funds and Selected
Funds; Partner, Seyfarth Shaw, LLP (a law firm); counsel to the Independent
Directors and the Davis Funds.

STANDING COMMITTEES OF THE BOARD OF DIRECTORS

EXECUTIVE COMMITTEE. The Selected Funds have an Executive Committee, which is
comprised entirely of Independent Directors (James McMonagle, Chair, Floyd Brown
and Marsha Williams). The Executive Committee may exercise all of the authority
of the Board of Directors in management of the Selected Funds, subject to
limitations imposed by the 1940 Act. The Executive Committee meets as often as
deemed appropriate by the Executive Committee. The Executive Committee did not
meet during calendar year 2004.

FIDUCIARY AND AUDIT COMMITTEE. The Selected Funds have a Fiduciary and Audit
Committee, which is comprised entirely of Independent Directors (Katherine
MacWilliams, Chairperson; William Barr, Jerome Hass, James McMonagle and Marsha
Williams). The Fiduciary and Audit Committee reviews financial statements and
other audit-related matters for the Selected Funds. The Fiduciary and Audit
Committee also holds discussions with management and with the Independent
Accountants concerning the scope of the audit and the Auditor's independence.
The Fiduciary and Audit Committee meets as often as deemed appropriate by the
Committee. The Fiduciary and Audit Committee met four times during calendar year
2004.

The Board of Directors has determined that both Katherine MacWilliams and Marsha
Williams are independent Audit Committee Financial Experts pursuant to Section
407 of the Sarbanes-Oxley Act and as defined by Item 3 of Form N-CSR of the
Investment Company Act of 1940. In their deliberations, the Board of Directors
considered Ms. MacWilliams and Ms. Williams' (1) professional experience; (ii)
independence as defined in Item 3 of Form N-CSR, and (iii) integrity and absence
of disciplinary history.

NOMINATING COMMITTEE. The Selected Funds have a Nominating Committee, which is
comprised entirely of Independent Directors (William Barr, Chair; and James
McMonagle), which meets as often as deemed appropriate by the Nominating
Committee. The Funds do not elect directors annually. Each Director serves until
retirement, resignation, death or removal. Directors must retire from the Board
of Directors and cease being a Director at the close of business on the last day
of the calendar year in which the Director attains age 75. The Nominating
Committee did not meet during calendar year 2004. The Nominating Committee
reviews and nominates persons to serve as members of the Board of Directors,
reviews and makes recommendations concerning the compensation of the Independent
Directors. The Nominating Committee does not have a charter. When the board of
directors is seeking a candidate to become a director, qualified candidates will
be men or women of proven character and talent who have achieved notable success
in their professional careers. The specific talents, which the Nominating
Committee seeks in a candidate, depends upon the board of directors' needs at
the time a vacancy occurs. When the board of directors is seeking a candidate to
become a director, it considers qualified candidates received from a variety of
sources, including the having authority to retain third parties that may receive
compensation related to identifying

Selected Funds Statement of Additional Information 36

and evaluating candidates. Shareholders may propose nominees by writing to the
Nominating Committee, in care of Thomas Tays, secretary of the Selected Funds,
at 2949 East Elvira, Suite 101, Tucson, Arizona 85706.

PORTFOLIO PERFORMANCE AND REVIEW COMMITTEE. The Selected Funds have a Portfolio
Performance and Review Committee (Richard O'Brien, Chair; Andrew Davis,
Christopher Davis, Jerome Hass and James McMonagle). The Portfolio Performance
and Review Committee reviews the Selected Fund's investment performance, and
investment strategies, both on an absolute basis and relative to each Fund's
peer group. The Portfolio Performance and Review Committee meets as often as
deemed appropriate by the Committee. The Portfolio Performance and Review
Committee met four times during calendar year 2004.

MARKETING COMMITTEE. The Selected Funds have a Marketing Committee, which is
comprised entirely of Independent Directors (Floyd Brown, Chair, Katherine
MacWilliams, and James McMonagle). The Marketing Committee reviews the Selected
Fund's Marketing program, including marketing communications, public relations,
advertising, telemarketing and attendance at conferences. The Marketing
Committee meets as often as deemed appropriate by the Marketing Committee. The
Marketing Committee met four times during calendar year 2004.

AMORTIZED COST PROCEDURES COMMITTEE. The Selected Funds have an Amortized Cost
Procedures Committee (James McMonagle, Chair, Andrew Davis, and Christopher
Davis). The Amortized Cost Procedures Committee reviews the Selected Fund's
procedures under Rule 2a-7 of the 1940 Act that are designed to ensure that
money market funds maintain a net asset value of $1.00 per share. The Amortized
Cost Procedures Committee meets as often as deemed appropriate by the Committee.
The Amortized Cost Procedures Committee met once during calendar year 2004.

PRICING COMMITTEE. The Selected Funds have a Pricing Committee (James McMonagle,
Chair, Kenneth Eich, and Douglas Haines) that meets as often as deemed
appropriate by the Pricing Committee. The Pricing Committee met more than 25
times during calendar year 2004. The Pricing Committee reviews and makes
recommendations concerning pricing of the Fund's portfolio securities.

DIRECTORS' FUND HOLDINGS

As of December 31, 2004, the Directors had invested the following amounts in all
Funds managed by the Adviser. Investments are listed in the following ranges:
none, $1-10,000, $10,001-50,000, $50,001-100,000 and over $100,000:

Xxupdate table
SELECTED AMERICAN SELECTED SPECIAL SELECTED DAILY TOTAL INVESTED IN
SHARES SHARES GOVERNMENT FUND ALL FUNDS*

WILLIAM BARR $50,001-100,000 None None $50,001 $100,000
FLOYD BROWN over $100,000 $50,001-100,000 $1-10,000 over $100,000
JEROME HASS over $100,000 $10,001-50,000 None over $100,000
KATHERINE MACWILLIAMS $50,001-100,000 None None $50,001 $100,000
JAMES MCMONAGLE over $100,000 $1-10,000 None over $100,000
RICHARD O'BRIEN over $100,000 $10,001-50,000 None over $100,000
MARSHA WILLIAMS over $100,000 $50,001-100,000 $10,001-50,000 over $100,000
ANDREW DAVIS** $10,001-50,000 $1-10,000 None over $100,000
CHRISTOPHER DAVIS** over $100,000 None None over $100,000

* Total Invested in All Funds is the aggregate dollar range of investments in
all Funds overseen by the individual director and managed by Davis Selected
Advisers, L.P. This includes the Selected Funds for all directors and also
includes the Davis Funds for Andrew Davis, Christopher Davis and Marsha
Williams.

Selected Funds Statement of Additional Information 37

** Andrew Davis and Christopher Davis are employed by the Adviser and are
considered to be "interested persons" of the Funds as defined in the
Investment Company Act of 1940.

The Directors considers ownership of the Selected Funds by Directors to be of
utmost importance, and believe that such ownership enhances the commitment of
the Directors to the Selected Funds' future and aligns the Directors' interests
with those of Funds' shareholders. Therefore, the Directors adopted minimum
director stock ownership guidelines. These guidelines require that each Director
shall beneficially own and maintain ownership of shares of the Selected Funds
with an aggregate value, measured as of December 31, of each year, of at least
three times their respective annual retainer (not including any meeting fees or
non-recurring compensation) for such year. Inside Directors do not receive
directors fees, but maintain stock ownership positions in the Selected Funds of
at least three times the base annual retainer for an Independent Director .

INDEPENDENT DIRECTORS' AFFILIATIONS AND TRANSACTIONS

None of the Independent Directors (or their immediate family members) owns any
securities issued by the Selected Funds' investment adviser, sub-adviser,
principal underwriter or any company (other than a registered investment
company) directly or indirectly controlling, controlled by or under common
control with the above listed companies (hereafter referred to as the "Adviser
and its affiliates"). Andrew A. Davis and Christopher C. Davis own partnership
units (directly, indirectly, or both) in the Adviser and are considered Inside
Directors.

None of the Independent Directors (or their immediate family members) have had
any direct or indirect interest, the value of which exceeds $60,000, during the
last two calendar years in the Adviser and its affiliates.

None of the Independent Directors (or their immediate family members) have had
any material interest in any transaction, or series of transactions, during the
last two years, in which the amount involved exceeds $60,000 and to which any of
the following persons was a party: any Selected Fund, an officer of the Selected
Funds, or any fund managed by the Adviser or the Adviser and its affiliates.

None of the Independent Directors (or their immediate family members) have had
any direct or indirect relationships during the last two years, in which the
amount involved exceeds $60,000 and to which any of the following persons was a
party: any Selected Fund, an officer of the Selected Funds, or any fund managed
by the Adviser, or the Adviser and its affiliates.

None of the officers of the Adviser and its affiliates have served during the
last two years on the board of directors of a company where an Independent
Director (or their immediate family members) served as an officer.

CERTAIN SHAREHOLDERS OF THE FUNDS

As of March 31, 2005, officers and directors owned the following percentages of
each of the Funds:

Percentage of
Outstanding Shares Owned
------------------------
Class S Class D
------- -------
Selected American Shares * *
Selected Special Shares * *
Selected Daily Government Fund 1% *

* Indicates that officers and directors as a group owned less than 1% of the
outstanding shares of the indicated Funds.

Selected Funds Statement of Additional Information 38

The following table sets forth as of February 27, 2005, the name and holdings of
each person known by the Funds to be a record owner of more than 5% of the
outstanding shares any of the Funds. Other than as indicated below, the Funds
are not aware of any shareholder who beneficially owns more than 25% of the
Funds' total outstanding shares. Selected Funds:

PERCENT OF SHARES
NAME OF FUND NAME AND ADDRESS OUTSTANDING
------------ ---------------- -----------

SELECTED AMERICAN SHARES Charles Schwab and Co. Inc.
CLASS S SHARES 101 Montgomery St.
San Francisco, CA 94014-4122 Xx%

FBSICO
National Financial Service
200 Liberty St., Fifth Floor
New York, NY 10281-5500 XX%

Shelby Cullom Davis & Co.
Investment No. 3
609 Fifth Avenue, 11th Floor
New York, NY 10017-1021 XX%

SELECTED AMERICAN SHARES xx XX
CLASS D SHARES

SELECTED SPECIAL SHARES Shelby Cullom Davis & Co.
CLASS S SHARES Investment No. 3
609 Fifth Avenue, 11th Floor
New York, NY 10017-1021 XX%

Charles Schwab and Co. Inc.
101 Montgomery St.
San Francisco, CA 94014-4122 XX%

FBSICO XX%
National Financial Sercive
200 Liberty St., Fifth Floor
New York, NY 10281-5500

SELECTED SPECIAL xx XX
CLASS D SHARES

SELECTED DAILY GOVERNMENT FUND Shelby Cullom Davis & Co.
CLASS S SHARES Investment No. 3
609 Fifth Avenue, 11th Floor
New York, NY 10017-1021 XX%

SELECTED DAILY GOVERNMENT FUND xx XX
CLASS D SHARES

Selected Funds Statement of Additional Information 39

INVESTMENT ADVISORY SERVICES

DAVIS SELECTED ADVISERS, L.P. AND DAVIS SELECTED ADVISERS-NY, INC. Davis
Selected Advisers, L.P. (the "Adviser"), whose principal office is at 2949 East
Elvira Road, Suite 101, Tucson, Arizona 85706, serves as investment adviser for
Davis New York Venture Fund, Inc., Davis Series, Inc., Davis Variable Account
Fund, Inc. (collectively the "Davis Funds"), Selected American Shares, Inc.,
Selected Special Shares, Inc., and Selected Capital Preservation Trust
(collectively the "Selected Funds"). The Adviser also provides advisory or
sub-advisory services to other parties including other registered investment
companies, private accounts, offshore funds, and managed money/wrap accounts.
Davis Investments, LLC, an entity controlled by Christopher C. Davis is the
Adviser's sole general partner. Christopher C. Davis is Chief Executive Officer
of the Adviser and, as the sole member of the general partner, controls the
Adviser. Davis Distributors, LLC (the "Distributor"), a subsidiary of the
Adviser, serves as the distributor or principal underwriter of the funds that
the Adviser administers, including Davis Funds, Selected Funds, and offshore
funds. Davis Selected Advisers - NY, Inc. ("Sub-Adviser") a wholly owned
subsidiary of the Adviser, performs investment management, research and other
services for the Selected Funds on behalf of the Adviser under sub-advisory
agreements with the Adviser.

Selected Funds Statement of Additional Information 40

ADVISORY AGREEMENT WITH DAVIS SELECTED ADVISERS, L.P. AND SUB-ADVISORY AGREEMENT
WITH DAVIS SELECTED ADVISERS-NY, INC. Pursuant to Advisory Agreements, each
Selected Fund pays the Adviser a fee according to the following fee schedule.

Selected American Shares Adviser Fee Schedule
---------------------------------------------

Assets Cum. Assets
(millions) (millions) Fee*
-----------------------------------------
$500 $500 0.65%
$500 $1,000 0.60%
$2,000 $3,000 0.55%
$1,000 $4,000 0.54%
$1,000 $5,000 0.53%
$1,000 $6,000 0.52%
$1,000 $7,000 0.51%
$3,000 $10,000 0.50%
Excess Over $10,000 0.485%

*fee expressed as a percentage of average net assets.

Selected Special Shares Adviser Fee Schedule
--------------------------------------------

Assets Cum. Assets
(millions) (millions) Fee*
-----------------------------------------
$50 $50 0.70%
$100 $150 0.675%
$100 $250 0.65%
Excess $250 0.60%

*fee expressed as a percentage of average net assets.

Selected Daily Government Fund pays the Adviser a flat fee at an annual rate of
0.30% of average net assets.

The aggregate advisory fees paid by each of the Selected Funds to the Adviser
were:

FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
NAME 2004 2003 2002
---------------------------------------------------------------------------------------------

SELECTED AMERICAN SHARES $xx $27,228,113 $27,266,379
---------------------------------------------------------------------------------------------
SELECTED SPECIAL SHARES Xx 506,345 463,622
---------------------------------------------------------------------------------------------
SELECTED DAILY GOVERNMENT FUND xx 344,997 339,547
---------------------------------------------------------------------------------------------

The Adviser agreed to temporarily reduce the advisory fee for Selected Special
Shares from June 1, 2001 through December 31, 2002. The reduction in advisory
fee amounted to $47,474.

In accordance with the provisions of the 1940 Act, the Advisory Agreement and
Sub-Advisory Agreement will terminate automatically on assignment and are
subject to cancellation on 60 days' written notice by the Board of Directors,
the vote of the holders of a majority of the Funds' outstanding shares or the
Adviser.

Selected Funds Statement of Additional Information 41

The continuance of the Advisory Agreement and Sub-Advisory Agreement must be
approved at least annually by the Funds' Board of Directors or by the vote of
holders of a majority of the outstanding shares of the Funds. In addition, any
new agreement, or the continuation of the existing agreement, must be approved
by a majority of Directors who are not parties to the agreements or interested
persons of any such party. The Advisory Agreement also makes provisions for
portfolio transactions and brokerage policies of the Fund, which are discussed
above under "Portfolio Transactions."

The Adviser has entered into a Sub-Advisory Agreement with its wholly owned
subsidiary, Davis Selected Advisers - NY, Inc., where the Sub-Adviser performs
research and other services on behalf of the Adviser. Under the Agreement, the
Adviser pays all of the Sub-Adviser's direct and indirect costs of operation.
All of the fees paid to the Sub-Adviser are paid by the Adviser and not the
Funds.

Pursuant to the Advisory Agreement, the Adviser, subject to the general
supervision of the Funds' Board of Directors, provides management and investment
advice, and furnishes statistical, executive and clerical personnel,
bookkeeping, office space and equipment necessary to carry out its investment
advisory functions and such corporate managerial duties as requested by the
Board of Directors of the Funds. The Funds bear all expenses other than those
specifically assumed by the Adviser under the Advisory Agreement, including
preparation of its tax returns, financial reports to regulatory authorities,
dividend determinations, transaction and accounting matters related to its
custodian bank, transfer agency, custodial and shareholder services, and
qualification of its shares under federal and state securities laws. The Funds
pay or reimburse the Adviser for providing certain shareholder services.

FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
NAME 2004 2003 2002
--------------------------------------------------------------------------
SELECTED AMERICAN SHARES $xx $176,828 $194,432
--------------------------------------------------------------------------
SELECTED SPECIAL SHARES xx 10,974 12,203
--------------------------------------------------------------------------
SELECTED DAILY GOVERNMENT FUND xx 3,842 4,408
--------------------------------------------------------------------------

APPROVAL OF THE ADVISORY AND SUB-ADVISORY AGREEMENTS. The Board of Directors is
scheduled to meet four times a year. The Directors, including the Independent
Directors, believe that matters bearing on the Advisory and Sub-Advisory
Agreements are considered at most, if not all, of their meetings. The
Independent Directors are advised by independent legal counsel selected by the
Independent Directors.

In April 2005 the directors, including a majority of the Independent Directors,
approved the continuation of existing advisory and sub-advisory agreements for
each of the Selected Funds without material change.

In preparation for this review the Independent Directors submitted a set of
questions to the Adviser and Sub-Adviser specifically relating to renewal of the
agreements. The Independent Directors met with representatives of the Adviser
and Sub-Adviser, and with counsel for the Independent Directors, and reviewed
the answers and supporting exhibits. The Directors reviewed and considered a
number of factors in recommending renewal of the exiting agreements, including:

(i) The investment performance of the each Fund. Results were compared
against both a peer group of funds and an appropriate index. The
Directors focused on long-term performance, noting that both equity
funds generally performed well measured against both their peers and
the indexes. The money market fund's performance was comparable to its
peers.;

(ii) Sales and redemptions of each Fund;

(iii) the expenses of each Fund compared against a peer group of funds. The
Directors noted that total expenses were generally on par with their
peers; and

(iv) The Adviser's and Sub-Adviser's operations, financial condition, and
profitability.

Based on their review, the Directors, including a majority of the Independent
Directors, concluded that the advisory fees and other expenses of each of the
Selected Funds are fair, both absolutely and in comparison with those of other
funds in the industry, and that shareholders have received reasonable value in
return for paying such fees and expenses.

Selected Funds Statement of Additional Information 42

The Directors, including the Independent Directors, regularly review, among
other issues: (i) arrangements in respect of the distribution of Selected Funds'
shares; (ii) the allocation of Selected Funds' brokerage, including allocations
to brokers affiliated with the Adviser and the use of "soft" commission dollars
to pay Fund expenses and to pay for certain research and other similar services;
(iii) the Adviser's management of the relationships with the Selected Funds'
third party providers, including custodian and transfer agents; (iv) the
resources devoted to and the record of compliance with the Selected Funds'
investment policies and restrictions and with policies on personal securities
transactions; and (v) the nature, cost and character of non-investment
management services provided by the Adviser and its affiliates.

UNIQUE NATURE OF EACH FUND. The Adviser may serve as the investment adviser or
sub-adviser to other funds that have investment objectives and principal
investment strategies similar to those of the Selected Funds. While the Selected
Funds may have many similarities to these other funds, the investment
performance of each fund will be different due to a number of differences
between the funds, including differences in sales charges, expense ratios and
cash flows.

CODE OF ETHICS. The Adviser, Sub-Adviser, Distributor and the Selected Funds
have adopted a Code of Ethics meeting the requirements of Rule 17j-1 that
regulate the personal securities transactions of the Adviser's investment
personnel, other employees and affiliates with access to information regarding
securities transactions of the Selected Funds. Such employees may invest in
securities, including securities that may be purchased or held by the Selected
Funds. A copy of the Code of Ethics is on public file with, and available from,
the Securities and Exchange Commission.

LITIGATION MATTERS. On June 2, 2004, a proposed class action lawsuit was filed
in the United States District Court for the Southern District of New York on
behalf of investors in certain mutual funds ("Funds") managed by Davis Selected
Advisers L.P. (the "Adviser") including the Selected Funds. The plaintiffs claim
that the Adviser and its affiliates, and the individual directors of the Funds
(collectively the "Defendants") used Fund assets to pay brokers to market the
Funds and that the Defendants disguised such payments as brokerage commissions
and further failed to disclose such payments in public filings or elsewhere. The
lawsuit seeks damages of unspecified amounts. Three substantially identical
proposed class action lawsuits were filed against the Defendants later in June
and July 2004 in the United States Court for the Southern District of New York.
All four suits have been consolidated into a single action. The Adviser believes
the actions are without merit and the Defendants intend to vigorously defend the
proceedings.

OTHER INVESTIGATIONS. Like many other investment advisers, the Adviser is
subject to ongoing inquiries by the staff of the U.S. Securities and Exchange
Commission ("SEC") and National Association of Securities Dealers ("NASD"). The
Adviser firmly believes it has acted in full compliance with all material rules
and regulations.

PORTFOLIO MANAGERS.

SELECTED AMERICAN SHARES

The Portfolio Managers of Selected American Shares are Christopher Davis and
Kenneth Feinberg. They are the persons primarily responsible for investing the
Fund's assets on a daily basis.

Other Accounts Managed As of December 31, 2004 Christopher Davis served as
portfolio manager for (i) 23 registered investment companies with approximately
$42 billion in total net assets, (ii) 6 other pooled investment vehicles with
approximately $717 million in total net assets, and (iii) approximately 30
thousand other accounts (primarily managed money/wrap accounts) with
approximately $8.6 billion in total net assets.

As of December 31, 2004 Kenneth Feinberg served as portfolio manager for (i) 21
registered investment companies with approximately $42 billion in total net
assets, (ii) 6 other pooled investment vehicles with

Selected Funds Statement of Additional Information 43

approximately $717 million in total net assets, and (iii) approximately 30
thousand other accounts (primarily managed money/wrap accounts) with
approximately $8.6 billion in total net assets.

Structure of Compensation
-------------------------

Kenneth Feinberg's compensation for serves provided to the Adviser consists of
(i) a base salary, (ii) an annual bonus equal to a percentage of growth in the
Adviser's profits, (iii) awards of equity ("Units") in the Adviser including
Units, options on Units, and/or phantom Units, and (iv) an incentive plan
whereby the Adviser purchases shares in selected funds managed by the Adviser.
At the end of specified periods, generally five-years following the date of
purchase, some, all, or none of the fund shares will be registered in the
employee's name based on fund performance, after expenses on a pre-tax basis,
versus the S&P 500 Index, and versus peer groups as defined by Morningstar or
Lipper. The Adviser's portfolio managers are provided benefits packages
including life insurance, health insurance, and participation in company 401(k)
plan comparable to that received by other company employees.

Christopher Davis' compensation for serves provided to the Adviser consists of a
base salary. The Adviser's portfolio managers are provided benefits packages
including life insurance, health insurance, and participation in company 401(k)
plan comparable to that received by other company employees.

Ownership of Fund Shares
------------------------

As of December 31, 2004, the Portfolio Managers of Selected American Shares had
invested the following amounts in the Fund:

---------------------------------------------------------------------------------------------------------
SELECTED AMERICAN SHARES NONE $1 $10K $50K $100K $500K OVER
TO $10K TO TO TO TO $1 MILL
$50K $100K $500K $1 MILL
---------------------------------------------------------------------------------------------------------

C. DAVIS
---------------------------------------------------------------------------------------------------------
K. FEINBERG
---------------------------------------------------------------------------------------------------------

SELECTED SPECIAL SHARES
-----------------------
The Portfolio Managers of Selected Special Shares are Christopher Davis, Kenneth
Feinberg, Chip Tucker, CFA, Danton Goei, Kent Whitaker, Jae Chung, Tania
Poushine, and Dwight Blazin. They are the persons primarily responsible for
investing the Fund's assets on a daily basis.

Other Accounts Managed as of December 31, 2004
----------------------------------------------

Christopher Davis and Kenneth Feinberg
See description above for Selected American Shares.

Chip Tucker, CFA, Danton Goei, Kent Whitaker, Jae Chung, and Tania Poushine
Served as portfolio managers for (i) four registered investment companies with
approximately $602 million in total net assets, (ii) one other pooled investment
vehicles with approximately $21 million in total net assets, and no (iii) other
accounts.

Dwight Blazin
Served as portfolio manager for (i) two registered investment companies with
approximately $571 million in total net assets, (ii) one other pooled investment
vehicles with approximately $21 million in total net assets, and (iii) no other
accounts.

Structure of Compensation
-------------------------

Christopher Davis and Kenneth Feinberg
See description above for Selected American Shares.

Chip Tucker,CFA, Danton Goei, Kent Whitaker, Jae Chung, Tania Poushine, and
Dwight Blazin Compensation for serves provided to the Adviser consists of (i) a
base salary, (ii) an annual discretionary

Selected Funds Statement of Additional Information 44

bonus, (iii) awards of equity ("Units") in the Adviser including Units, options
on Units, and/or phantom Units, and (iv) an incentive plan whereby the Adviser
purchases shares in selected funds managed by the Adviser. At the end of
specified periods, generally five-years following the date of purchase, some,
all, or none of the fund shares will be registered in the employee's name based
on fund performance, after expenses on a pre-tax basis, versus an appropriate
index, and versus peer groups as defined by Morningstar or Lipper. The Adviser's
portfolio managers are provided benefits packages including life insurance,
health insurance, and participation in company 401(k) plan comparable to that
received by other company employees.

Ownership of Fund Shares
As of December 31, 2004, the Portfolio Managers of Selected Special Shares had
invested the following amounts in the Fund.

---------------------------------------------------------------------------------------------------------
SELECTED SPECIAL SHARES NONE $1 $10K $50K $100K $500K OVER
TO $10K TO TO TO TO $1 MILL
$50K $100K $500K $1 MILL
---------------------------------------------------------------------------------------------------------

C. DAVIS
---------------------------------------------------------------------------------------------------------
K FIENBERG
---------------------------------------------------------------------------------------------------------
C. TUCKER
---------------------------------------------------------------------------------------------------------
D. GOEI
---------------------------------------------------------------------------------------------------------
K. WHITAKER
---------------------------------------------------------------------------------------------------------
J. CHUNG
---------------------------------------------------------------------------------------------------------
T. POUSHINE
---------------------------------------------------------------------------------------------------------
D. BLAZIN
---------------------------------------------------------------------------------------------------------

SELECTED DAILY GOVERNMENT FUND
------------------------------

The Portfolio Manager of Selected Daily Government Fund is Creston King. CFA.
Mr. King is the person primarily responsible for investing the Fund's assets on
a daily basis.

Other Accounts Managed as of December 31, 2004
----------------------------------------------

Served as portfolio manager for (i) three registered investment companies (two
of which are money market funds) with approximately $791 million in total net
assets, (ii) no other pooled investment vehicles, and (iii) no other accounts.
In addition, Mr. King managed the cash positions of other registered investment
companies and pooled investment vehicles managed or sub-advised by the Adviser.

Structure of Compensation
-------------------------

Mr. King's compensation for serves provided to the Adviser consists of (i) a
base salary, (ii) an annual bonus based principally upon short- and long-term
fund performance relative to similar funds, and (iii) awards of equity ("Units")
in the Adviser including options on Units, and/or phantom Units.

Ownership of Fund Shares
------------------------

As of December 31, 2004, the Portfolio Manager of Selected Daily Government Fund
had invested the following amounts in the Fund.

---------------------------------------------------------------------------------------------------------
SELECTED DAILY GOVERNMENT FUND NONE $1 $10K $50K $100K $500K OVER
TO $10K TO TO TO TO $1 MILL
$50K $100K $500K $1 MILL
---------------------------------------------------------------------------------------------------------

C. KING.
---------------------------------------------------------------------------------------------------------

POTENTIAL CONFLICTS OF INTEREST

Actual or apparent conflicts of interest may arise when a portfolio manager has
day-to-day management responsibilities with respect to more than one portfolio
or other account. More specifically, portfolio

Selected Funds Statement of Additional Information 45

managers who manage multiple portfolios and /or other accounts are presented
with the following potential conflicts:

The management of multiple portfolios and/or other accounts may result in a
portfolio manager devoting unequal time and attention to the management of each
portfolio and/or other account. The Adviser seeks to manage such competing
interests for the time and attention of portfolio managers by having portfolio
managers focus on a particular investment discipline. Most other accounts
managed by a portfolio manager are managed using the same investment models that
are used in connection with the management of the portfolios.

If a portfolio manager identifies a limited investment opportunity which may be
suitable for more than one portfolio or other account, a portfolio may not be
able to take full advantage of that opportunity due to an allocation of filled
purchase or sale orders across all eligible portfolios and other accounts. To
deal with these situations, the Adviser has adopted procedures for allocating
portfolio transactions across multiple accounts.

With respect to securities transactions for the portfolios, the Adviser
determines which broker to use to execute each order, consistent with its duty
to seek best execution of the transaction. However, with respect to certain
other accounts (such as mutual funds, other pooled investment vehicles that are
not registered mutual funds, and other accounts managed for organizations and
individuals), the Adviser may be limited by the client with respect to the
selection of brokers or may be instructed to direct trades through a particular
broker. In these cases, the Adviser may place separate, non-simultaneous,
transactions for a portfolio and another account which may temporarily affect
the market price of the security or the execution of the transaction, or both,
to the detriment of the portfolio or the other account.

Finally, substantial investment of the Adviser or Davis Family assets in certain
mutual funds may lead to conflicts of interest. To mitigate these potential
conflicts of interest, the Adviser has adopted policies and procedures intended
to ensure that all clients are treated fairly overtime. The Adviser does not
receive an incentive based fee on any account.

DISCLOSURE OF PORTFOLIO HOLDINGS. Selected Funds' portfolio holdings are
proprietary information which the Adviser is committed to protecting. Selected
Funds have adopted procedures reasonably designed to ensure that portfolio
holdings are not released on a selective basis except to qualified persons
rendering services to the Funds which require that they receive information
concerning portfolio holdings.

Selected Funds may disclose portfolio holdings to outside persons in a number of
situations, including the following: (1) disclosure to a broker-dealer of one or
more securities in connection with the purchase or sale by a Fund of such
securities; (2) requests for price quotations on individual securities from a
broker-dealer for the purpose of calculating the Fund's net asset value; (3)
requests for bids on one or more securities; (4) disclosures in connection with
litigation involving Fund portfolio securities; (5)disclosure to regulatory
authorities; (6) Selected Funds' portfolio managers may from time to time make
statements to the press about a Fund's portfolio and the securities subject to
these statements may or may not have been previously disclosed; (7) employees of
the Adviser may attend due diligence meetings with existing or potential
investors in which specific Fund holdings are discussed and other information
which the employee reasonably believes cannot be used in a manner which would be
harmful to the Funds; and the Adviser may provide a wide variety of information
about Selected Funds (other than portfolio holdings) to existing and potential
investors and intermediaries working on behalf of such investors. Such
information may not be available from publicly available information and may
consist of statistical and analytical information concerning the portfolio as a
whole and how it has performed, without naming specific portfolio securities.

Selected Funds Statement of Additional Information 46

PUBLIC DISCLOSURE. Information about portfolio holdings which has previously
been made public may be freely shared. Information about portfolio holdings may
become "public" by (1) publication on the Selected Funds' website, (2) filing
with the SEC on Form N-CSR or Form N-Q (only quarterly filings, not voluntary
filings), or (3) other publication determined by the Adviser's Chief Legal
Officer or his designee, in writing stating his rational, to be public.

Selected Funds generally publish their portfolio holdings on fiscal quarters
with a 60-day lag. Selected Funds' Executive Vice President, or his designee,
may authorize publication portfolio holdings on a more frequent basis. Portfolio
holdings will then be published on the Selected Funds' website.

Selected Funds' portfolio holdings procedures prohibit release of information
concerning portfolio holdings which have not previously been made public to
individual investors, institutional investors, intermediaries which distribute
the Funds' shares and other parties which are not employed by the Adviser or its
affiliates. Portfolio holdings may be reviewed by third parties for legitimate
business purposes, but only if: (1) The Chief Operating Officer, or his
designee, considers the application for review and, in his or her business
judgment, the requesting third party (i) has a legitimate business purpose for
reviewing the portfolio holdings and (ii) does not pose a material risk to the
client(s) whose portfolios will be reviewed; and (2) The third party enters into
an acceptable Confidentiality Agreement (including a duty not to trade).
Selected Funds' board of directors are notified of the addition of new third
parties at the next scheduled quarterly meeting of the board of directors. The
directors review the addition of new third parties, considering whether or not
the release of information to the third parties is in the best interest of the
Funds and shareholders.

As of December 1, 2004, each of the below listed third parties have been
approved to receive information concerning Selected Funds' portfolio holdings:
(1) KPMG LLP, Independent Registered Public Accounting Firm; (2) ISS, Proxy
Voting; (3) UBS, Securities Lending; (4) Vestek, Attribution Reports; and (5)
State Street Bank and Trust, Custodian.

DISTRIBUTION OF FUND SHARES

DISTRIBUTION PLANS. Each of the Selected Funds' Class S shares use distribution
plans to pay asset-based sales charges or distribution and/or services fees of
0.25% of average daily net assets in connection with the distribution of shares,
including payments to financial intermediaries for providing distribution
assistance. Financial intermediaries that receive these fees may pay some or all
of them to their investment professionals. Because these fees are paid out of a
Class S assets on an on-going basis, over time these fees will increase the cost
of an investment and may cost more than other types of sales and marketing
charges.

The Distribution Plans were approved by the Board of Directors of each Selected
Fund in accordance with Rule 12b-1 under the 1940 Act. Rule 12b-1 regulates the
manner in which a mutual fund may assume costs of distributing and promoting the
sale of its shares. Payments pursuant to a Distribution Plan are included in the
operating expenses of the Class.

Class D shares have not adopted distribution plans.

To the extent that any investment advisory fees paid by a Fund may be deemed to
be indirectly financing any activity that primarily is intended to result in the
sale of Fund shares within the meaning of Rule 12b-1, the Distribution Plans
authorize the payment of such fees.

The Distribution Plans continue annually so long as they are approved in the
manner provided by Rule 12b-1, or unless earlier terminated by vote of the
majority of the Independent Directors or a majority of a Fund's outstanding
Class of shares. The Distributor is required to furnish quarterly written
reports to the Board of Directors detailing the amounts expended under the
Distribution Plans. The Distribution Plans may be amended, provided that all
such amendments comply with the applicable requirements then in effect under
Rule 12b-1. Currently, Rule 12b-1 provides that as long as the Distribution
Plans are in effect,

Selected Funds Statement of Additional Information 47

the Funds must commit the selection and nomination of candidates for new
Independent Directors to the sole discretion of the existing Independent
Directors.

THE DISTRIBUTOR. Davis Distributors, LLC ("the Distributor"), 2949 East Elvira
Road, Suite 101, Tucson, Arizona 85706, is a wholly owned subsidiary of the
Adviser and pursuant to a Distributing Agreement acts as principal underwriter
of the Funds' shares on a continuing basis. By the terms of the Distributing
Agreement, the Distributor pays for all expenses in connection with the
preparation, printing and distribution of advertising and sales literature for
use in offering the Funds' shares to the public, including reports to
shareholders to the extent they are used as sales literature. The Distributor
also pays for the preparation and printing of prospectuses other than those
forwarded to existing shareholders. The continuance and assignment provisions of
the Distributing Agreement are the same as those of the Advisory Agreement.

The Distributor has agreements with securities dealers and other persons (such
as financial planners) for distributing shares of the Funds and/or providing
services to shareholders. The Distributor may pay such firms service fees for
accounts for which representatives of the dealers are responsible and provide
services. The sources for these payments include the distribution fees paid by
Class S shares and the Distributor or Adviser may also use their own resources.

Selected Funds have successfully marketed Class S shares through financial
intermediaries, primarily fee-only financial planners and mutual fund
supermarkets. Both financial planners and mutual fund supermarkets demand a fee
for their services. Class S shares pay financial planners a service fee at an
annual rate of 25 basis points on assets their clients have invested in Class S
shares. In addition, Class S shares pay a service fee at an annual rate of 55
basis points to approximately 15 financial planners who were "grandfathered in"
as of May 1, 2000. Mutual fund supermarkets currently demand 30 to 40 basis
points for marketing and shareholder services.

As Selected Funds are sold without imposing front- or back-end sales charges,
the Distributor does not collect sales charges on the sale of Fund shares.

The Distributor received the following amounts as compensation under the
Distribution Plans:

FISCAL YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
NAME 2004 2003 2002
----------------------------------------------------------------------------------

SELECTED AMERICAN SHARES $xx $12,166,768 $12,185,899
----------------------------------------------------------------------------------
SELECTED SPECIAL SHARES xx 182,906 167,082
----------------------------------------------------------------------------------
SELECTED DAILY GOVERNMENT FUND xx 287,497 282,956
----------------------------------------------------------------------------------

* All amounts are for Class S shares. Class D shares have not adopted
distribution plans.

OTHER COMPENSATION PAID TO DEALERS AND OTHER FINANCIAL INTERMEDIARIES

Selected Funds Statement of Additional Information 48

meetings, sales representatives and management representatives of the dealer;
and (ii) financial assistance paid to dealers that enable the Distributor to
participate in and/or present at conferences or seminars, sales or training
programs for invited registered representatives and other employees, client and
investor events and other dealer-sponsored events. A number of factors are
considered in determining payments, including the dealer's sales and assets, and
the quality of the dealer's relationship with the Distributor.

The Distributor may offer other compensation to the extent not prohibited by
state or federal laws, the Securities and Exchange Commission, or any
self-regulatory agency, such as the NASD. The Statement of Additional
Information provides more information concerning these payments. Investors
should consult their financial intermediary regarding the details of the
payments they may receive in connection with the sale of Selected Fund shares.

In 2004 the Adviser and Distributor made payments to the following firms. These
firms may provide the Selected Funds enhanced sales and marketing support and
financial advisers employed by the firms may recommend the Selected Funds rather
than other funds: Charles Schwab & Co., Inc., Fidelity Brokerage Services, Inc.,
and Putnam Fiduciary Trust Company.

TRAINING AND EDUCATION. Davis Distributors, LLC may, from time to time, pay
additional cash or other incentives to financial intermediaries in connection
with the sale of shares of a Fund and may also defray certain expenses of
intermediaries incurred in connection with seminars and other educational
efforts subject to Davis Distributors, LLC's policies and procedures governing
payments for such seminars. Such cash or other incentives may include sharing
expenses with financial intermediaries that distribute the Selected Funds for
costs incurred in conducting training and educational meetings about various
aspects of the Funds for the employees of financial intermediaries. In addition,
Davis Distributors, LLC may share expenses with financial intermediaries that
distribute the Funds' shares for costs incurred in hosting client seminars where
the Fund is discussed.

RECORDKEEPING FEES. Certain financial institutions have chosen to maintain
omnibus accounts with the Selected Funds. In an "omnibus account" the Fund
maintains a single account in the name of the dealer and the dealer maintains
all of the individual shareholder accounts. Likewise, for many retirement plans,
a third party administrator may open an omnibus account with the Selected Funds
and the administrator will then maintain all of the participant accounts. The
Adviser, on behalf of the Funds, enters into agreements whereby the Funds
compensate the dealer or administrator for recordkeeping services.

FUND SUPERMARKETS. The Funds' Class S shares participate in various "Fund
Supermarkets" in which a supermarket sponsor (usually a broker-dealer) offers
many mutual funds to the sponsor's clients without charging the clients a sales
charge. The Funds pay the supermarket sponsor a negotiated fee for distributing
the Funds' shares and for continuing services provided to their shareholders.

A portion of the supermarket sponsor's fee (that portion related to sales,
marketing or distribution of shares) is paid with fees authorized under the
Distribution Plans.

Selected Funds Statement of Additional Information 49

A portion of the supermarket sponsor's fee (that portion related to shareholder
services such as new account set-up, shareholder accounting, shareholder
inquires, transaction processing and shareholder confirmations and reporting) is
paid as a shareholder-servicing fee of the Funds. The Funds would typically be
paying these shareholder servicing fees directly, were it not that the
supermarket sponsor holds all customer accounts in a single omnibus account with
the Funds. If the supermarket sponsor's fees exceed the sum available from the
Distribution Plans and shareholder servicing fees, then the Adviser pays the
remainder out of its profits.

OTHER IMPORTANT SERVICE PROVIDERS

CUSTODIAN. State Street Bank and Trust Company ("State Street" or "Custodian"),
P.O Box 8406, Boston, MA 02266-8406, serves as custodian of each Selected Fund's
assets. The Custodian maintains all of the instruments representing the Selected
Fund's investments and all cash. The Custodian delivers securities against
payment on sale and pays for securities against delivery on purchase. The
Custodian also remits the Selected Fund's assets in payment of their expenses,
pursuant to instructions of officers or resolutions of the Board of Directors.
The Custodian also provides certain fund accounting and transfer agent services.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. KPMG LLP ("KPMG"), 707 17th
Street, Suite 2700, Denver, CO 80202, serves as independent registered public
accountants for each of the Selected Funds. KPMG consults on financial
accounting and reporting matter and meet with the Audit Committee of the Board
of Directors. In addition, KPMG reviews federal and state income tax returns and
related forms.

COUNSEL. Seyfarth Shaw LLP, 55 E. Monroe St., Suite 4200, Chicago, IL
60603-5803, serves as counsel to the Selected Funds and also serves as counsel
for the Independent Directors.

SECTION III: CLASSES OF SHARES, PURCHASES, EXCHANGES AND REDEMPTIONS
--------------------------------------------------------------------

SELECTING THE APPROPRIATE CLASS OF SHARES

Each of the Selected Funds offers both Class S and D shares. The prospectus
provides full directions on how to select the appropriate Class of shares.

Selected Funds Statement of Additional Information 50

HOW TO PURCHASE SHARES

Selected Funds and the Distributor reserve the right to reject any purchase
order for any reason. The Selected Funds prospectus provides full directions on
how to purchase shares.

SPECIAL SERVICES

Selected Funds' prospectus describes a number of special services offered by the
Selected Funds. This Statement of Additional Information supplements that
discussion.

PROTOTYPE RETIREMENT PLANS. The Distributor and certain qualified dealers have
available prototype retirement plans (e.g., profit sharing, money purchase,
Simplified Employee Pension ("SEP") plans, model 403(b) and 457 plans for
charitable, educational and governmental entities) sponsored by the Selected
Funds for corporations and self-employed individuals. The Distributor and
certain qualified dealers also have prototype Individual Retirement Account
("IRA") plans (deductible IRAs; and non-deductible IRAs, including "Roth IRAs"),
Education Savings Accounts and SIMPLE IRA plans for both individuals and
employers. These plans utilize the shares of the Selected Funds as their
investment vehicle. State Street Bank and Trust acts as custodian or trustee for
certain retirement plans and charges the participant an annual maintenance fee
of $15 per Social Security Number regardless of the number of plans established.
The maintenance fee will be redeemed automatically at year-end from your
account, unless you elect to pay the fee directly prior to that time. The
maintenance fee will be waived for accounts sharing the same Social Security
Number if the accounts total at least $50,000 in cumulative assets (including
taxable accounts). If an IRA account is closed, a $15 fee will be assessed.

IN-KIND PURCHASES. Shares of the Selected Funds are continuously offered at
their public offering price next determined after an order is accepted. The
methods available for purchasing shares of a fund are described in the fund's
Prospectus. In addition, shares of the Selected Funds may be purchased using
securities if the Adviser determines that doing so is in the best interest of
the applicable fund and its shareholders. The Adviser must review the securities
that are offered in exchange for the "in-kind" purchase to determine that the
securities delivered to the fund: (i) meet the investment objective, strategy
and policies of the fund; (ii) do not cause the violation of any investment
restrictions at the time of acceptance; (iii) are readily marketable; (iv) may
be accurately and objectively valued on a daily basis; and (v) represent
securities that are desirable for the fund to own given the fund's investment
strategy and the Adviser's view of market conditions. The Adviser reserves the
right to reject all or any part of the securities offered in exchange for shares
of the fund. On any such in-kind purchase, the following conditions will apply:

(1) The securities offered by the investor in exchange for shares of a fund
must not be in any way restricted as to resale or otherwise be illiquid;

(2) The securities must have a value that is readily ascertainable (and not
established only by evaluation procedures) as evidenced by a listing on the
NYSE, AMEX or NASDAQ or other appropriate method; and

(3) The transaction involves a net purchase of $1 million or more in fund
shares.

Selected Funds believe that this ability to purchase shares of a fund using
securities provides a means by which holders of certain securities may obtain
diversification and continuous professional management of their investments
without the expense of selling those securities in the public market. Benefits
to the fund include the ability to purchase desirable securities without
brokerage commissions.

An investor who wishes to make an in-kind purchase must provide the Adviser with
a full and exact written description of each security that he or she proposes to
deliver to the applicable Selected Fund. The fund will advise the investor as to
those securities that it is prepared to accept and will provide the forms
required to be completed and signed by the investor. The investor should then
send the securities, in proper form for transfer and with the necessary forms,
to the Adviser and certify that there are no legal or contractual restrictions
on the free transfer and sale of the securities. The securities will be valued
as of the

Selected Funds Statement of Additional Information 51

close of business on the day of receipt by the fund in the same manner as
portfolio securities of the fund are valued. The number of shares of the fund,
having a net asset value as of the close of business on the day of receipt equal
to the value of the securities delivered by the investor, will be issued to the
investor, less applicable stock transfer taxes, if any.

The exchange of securities by the investor pursuant to this in-kind offer will
constitute a taxable transaction and may result in a gain or loss for federal
income tax purposes. Each investor should consult his tax adviser to determine
the tax consequences under Federal and state law of making such an in-kind
purchase. This service may be discontinued at any time without prior notice.

EXCHANGE OF SHARES

The prospectus describes exchange procedures. This Statement of Additional
Information supplements that discussion.

MARKET TIMING. Selected Funds have not entered into any arrangements which
permit organizations or individuals to market time the Funds. Although the
Selected Funds will not knowingly permit investors to excessively trade the
Funds, shareholders seeking to engage in market timing may employ a variety of
strategies to avoid detection, and, there can be no guarantee that all market
timing will be prevented, despite the Funds' best efforts. The Funds receive
purchase and sales order through financial intermediaries and cannot always know
or reasonably detect excessive trading which may be facilitated by these
intermediaries or by the use of omnibus accounts by intermediaries. Selected
Funds reserve the right to terminate or amend the exchange privilege at any time
by filing amended registration statements.

REDEMPTION OF SHARES

The prospectus describes redemption procedures. This Statement of Additional
Information supplements that discussion.

CERTIFICATES. In the past the Selected Funds issued share certificates, and some
still are outstanding. If shares to be redeemed are represented by a
certificate, the certificate must be sent to State Street Bank and Trust with a
letter of instruction signed by all account owner(s).

REDEMPTION PROCEEDS. Redemption proceeds normally are paid to you within seven
days after State Street Bank and Trust receives your proper redemption request.
Payment for redemptions can be suspended under certain emergency conditions
determined by the SEC, or if the New York Stock Exchange is closed for other
than customary or holiday closings. You may redeem shares on any business day.
Redemption proceeds may be withheld until a sufficient period of time has passed
for State Street Bank and Trust to be reasonably sure that all checks or drafts
(including certified or cashiers checks) for shares purchased have cleared,
normally not exceeding fifteen calendar days. You can avoid any redemption delay
by paying for your shares with a bank wire or federal funds.

Redemptions are ordinarily paid to you in cash. However, the Board of Directors
is authorized to decide if conditions exist making cash payments undesirable
(although the Board has never reached such a decision). If the Board of
Directors should decide to make payments other than in cash, redemptions could
be paid in securities, valued at the value used in computing a Fund's net asset
value. There would be brokerage costs incurred by the shareholder in selling
such redemption proceeds. We must, however, redeem shares solely in cash up to
the lesser of $250,000 or 1% of the Fund's net asset value, whichever is
smaller, during any 90-day period for any one shareholder.

FEDERAL FUNDS WIRE. You may be eligible to have your redemption proceeds
electronically transferred to a commercial bank account by federal funds wire.
There is a $5 charge by State Street Bank and Trust for wire service (State
Street Bank and Trust charges $50 for wiring money internationally), and
receiving banks also may charge for this service. Redemption by federal funds
wire is usually credited to your bank account on the next business day after the
sale. Alternatively, redemption through Automated Clearing

Selected Funds Statement of Additional Information 52

House usually will arrive at your bank two banking days after the sale. To have
redemption proceeds sent by federal funds wire to your bank, you must first fill
out the "Banking Instruction" section on the account application form and attach
a voided check or deposit slip. If the account has already been established, an
Account Service Form or letter of instruction must be submitted with a medallion
guarantee and a copy of a voided check or deposit slip.

SELECTED DAILY GOVERNMENT FUND CHECK WRITING PRIVILEGE. A shareholder may issue
a "Stop Payment" on any draft by calling State Street Bank and Trust at (617)
985-8704. The "Stop Payment" order will become effective if it is given on a
timely basis pursuant to the "Stop Payment" rules in effect at State Street Bank
and Trust with respect to their regular checking accounts.

If a shareholder seeks to use the check writing privilege or expedited
redemption privilege to a pre-designated bank account to redeem Selected Daily
Government Fund shares recently purchased by check (whether by regular or
expedited method), the Fund will refuse to accept telephone redemption requests
when made and to honor redemption drafts when presented unless it is then
reasonably assured of the collection of the check representing the purchase
(normally up to 15 days after receipt of such check). This result can be avoided
by investing by wire.

SECTION IV: GENERAL INFORMATION
-------------------------------

This Statement of Additional Information should be read in conjunction with the
prospectus. This Statement of Additional Information supplements the information
available in the prospectus.

DETERMINING THE PRICE OF SHARES

The prospectus describes procedures used to determine the price of shares. This
Statement of Additional Information supplements that discussion.

NET ASSET VALUE. The price per share for purchases or redemptions made directly
through State Street Bank and Trust generally is the value next computed after
State Street Bank and Trust receives the purchase order or redemption request.
In order for your purchase order or redemption request to be effective on the
day you place your order with your broker-dealer or other financial institution,
such broker-dealer or financial institution must (i) receive your order before 4
p.m. Eastern Standard Time; and (ii) promptly transmit the order to State Street
Bank and Trust. The broker-dealer or financial institution is responsible for
promptly transmitting purchase orders or redemption requests to State Street
Bank and Trust so that you may receive the same day's net asset value. Note that
in the case of redemptions and repurchases of shares owned by corporations,
trusts or estates, or of shares represented by outstanding certificates (in the
past Selected Funds issued share certificates), State Street Bank and Trust may
require additional documents to effect the redemption and the applicable price
will be determined as of the close of the next computation following the receipt
of the required documentation or outstanding certificates. See "Redemption of
Shares."

The Funds do not price their shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange is closed. Such days
currently include New Year's Day, Martin Luther King, Jr. Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

Certain brokers and certain designated intermediaries on their behalf may accept
purchase and redemption orders. The Distributor will be deemed to have received
such an order when the broker or the designee has accepted the order. Customer
orders are priced at the net asset value next computed after such acceptance.
Such order may be transmitted to the Selected Funds or their agents several
hours after the time of the acceptance and pricing.

VALUATION OF PORTFOLIO SECURITIES. The valuation of each Fund's portfolio
securities is described in the Fund's prospectus and annual report.

Selected Funds Statement of Additional Information 53

DIVIDENDS AND DISTRIBUTIONS

The prospectus describes the Funds' dividend and distribution policies. This
Statement of Additional Information supplements that discussion.

There are two sources of income, net income and realized capital gains, paid to
you by a fund. You will receive confirmation statements for dividends declared
and shares purchased through reinvestment of dividends. You also will receive
confirmations after each purchase or redemption. Different classes of shares may
be expected to have different expense ratios due to differing distribution
services fees and certain other expenses. Classes with higher expense ratios
will pay correspondingly lower dividends than classes with lower expense ratios.
For tax purposes, information concerning distributions will be mailed annually
to shareholders. Shareholders have the option of receiving all dividends and
distributions in cash, of having all dividends and distributions reinvested, or
of having income dividends paid in cash and capital gain distributions
reinvested. Reinvestment of all dividends and distributions is automatic for
accounts utilizing the Automatic Withdrawal Plan. The reinvestment of dividends
and distributions is made at net asset value (without any initial or contingent
deferred sales charge) on the payment date.

RETURNED CHECK POLICY. For the protection of the shareholder, on receipt of the
second dividend check that has been returned to State Street Bank and Trust as
undeliverable, undelivered dividends will be invested in additional shares at
the current net asset value and the account designated as a dividend
reinvestment account.

SELECTED AMERICAN SHARES AND SELECTED SPECIAL SHARES. Income dividends and
distributions from net realized capital gains, if any, are usually distributed
annually.

SELECTED DAILY GOVERNMENT FUND. Dividends from net income are usually declared
daily on shares outstanding as of the close of business the preceding day and
are paid monthly. You will receive monthly confirmation statements for dividends
declared and shares purchased through reinvestment of dividends. Income for
Saturdays, Sundays and holidays are accrued on Fridays. Dividends declared
during each calendar month are paid on the last business day of the month.
Shares earn dividends as of the first business day after the effective purchase
date up through the date of redemption.

DIVIDENDS AND DISTRIBUTIONS MAY CHANGE. Usually dividends and capital gains
distributions are paid as discussed above. However, the Board of Directors
reserves the right to suspend payments or to make additional payments.

FEDERAL INCOME TAXES

The prospectus provides an introduction to federal income taxes. This Statement
of Additional Information supplements that discussion. This discussion is not
intended to be a full discussion of all the aspects of the federal income tax
law and its effects on the Funds and their shareholders. Shareholders may be
subject to state and local taxes on distributions. Each investor should consult
his or her own tax adviser regarding the effect of federal, state and local
taxes on any investment in the Selected Funds.

Each of the Selected Funds intend to continue to qualify as a regulated
investment company under the Internal Revenue Code (the "Code") and, if so
qualified, will not be liable for federal income tax to the extent its earnings
are distributed. If, for any calendar year, the distribution of earnings
required under the Code exceeds the amount distributed, an excise tax, equal to
4% of the excess, will be imposed on the applicable Fund. Each Selected Fund
intends to make distributions during each calendar year sufficient to prevent
imposition of the excise tax.

Distributions of net investment income and net realized short-term capital gains
will be taxable to shareholders as ordinary income. Distributions of net
long-term capital gains will be taxable to shareholders

Selected Funds Statement of Additional Information 54

as long-term capital gain regardless of how long the shares have been held.
Distributions will be treated the same for tax purposes whether received in cash
or in additional shares. Dividends declared in the last calendar month to
shareholders of record in such month and paid by the end of the following
January are treated as received by the shareholder in the year in which they are
declared. A gain or loss for tax purposes may be realized on the redemption of
shares. If the shareholder realizes a loss on the sale or exchange of any shares
held for six months or less and if the shareholder received a capital gain
distribution during that period, then the loss is treated as a long-term capital
loss to the extent of such distribution.

We recommend that you consult with a tax advisor about dividends and capital
gains that may be received from the Selected Funds.

PERFORMANCE DATA

From time to time, the Funds may advertise information regarding their
performance. Such information will be calculated separately for each class of
shares. These performance figures are based on historical results and are not
intended to indicate future performance.

AVERAGE ANNUAL TOTAL RETURNS (REFLECTING THE EFFECTS OF FEDERAL INCOME TAX) The
Fund may advertise its investment performance on an after-tax basis.

SELECTED AMERICAN SHARES: CLASS S SHARES

------------------------------------------------------------------------------------------------------------
for the periods ended December 31, 2004 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS PERIOD FROM
05/01/93*
------------------------------------------------------------------------------------------------------------

RETURN BEFORE TAXES Xx% Xx% Xx% Xx%
------------------------------------------------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS Xx% Xx% Xx% Xx%
------------------------------------------------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS Xx% xx% xx% Xx%
AND SALE OF FUND SHARES
------------------------------------------------------------------------------------------------------------

*Period from 05/01/93 (when the Adviser assumed management).

SELECTED AMERICAN SHARES: CLASS D SHARES

-------------------------------------------------------------
for the periods ended December 31, 2004 PERIOD FROM
05/01/04*
-------------------------------------------------------------
RETURN BEFORE TAXES Xx%
-------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS Xx%
-------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS Xx%
AND SALE OF FUND SHARES
-------------------------------------------------------------

*Period from 05/01/04 initial public offering of Class D shares.

Selected Funds Statement of Additional Information 55

SELECTED SPECIAL SHARES: CLASS S SHARES

*Period from 05/01/93 (when the Adviser assumed management).

SELECTED SPECIAL SHARES CLASS D SHARES

*Period from 05/01/04 initial public offering of Class D shares.

NOTES FOR CALCULATING RETURNS

After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local
taxes.

Actual after-tax returns depend on an investor's tax situation and may differ
from those shown, and after-tax returns shown are not relevant to investors who
hold their Fund shares through tax-deferred arrangements, such as 401(k) plans
or individual retirement accounts.

"Average Annual Total Return" represents the average annual compounded rate of
return for the periods presented. Periods of less than one year are not
annualized. 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 portfolio. Average
annual total return is calculated separately for each Fund in accordance with
the standardized method prescribed by the SEC 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 = hypothetical initial payment of
$1,000

T = average annual total return

n = number of years

ERV = ending redeemable value at the
end of the 1, 5, and 10 year
periods of a hypothetical $1,000
payment made at the beginning of
such period

Selected Funds Statement of Additional Information 56

This calculation: (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates; (ii) assumes a
hypothetical initial $1,000 investment; and (iii) deducts all recurring fees,
such as advisory fees, charged as expenses to all shareholder accounts.

"Average Annual Total Return After-Taxes on Distributions" adjusts the before
taxes quotation for the effects of paying the highest individual marginal
federal income tax rate on distributions paid by the Fund. Average annual total
return after-taxes on distributions is calculated separately for each Fund in
accordance with the standardized method prescribed by the SEC 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) = ATV(D)

Where: P = hypothetical initial payment of
$1,000

T = average annual total return
(after taxes on distributions)

n = number of years

ATV(D) = ending redeemable value, after
taxes on fund distributions but
not after taxes on sale of fund
shares, at the end of the 1, 5,
and 10 year periods of a
hypothetical $1,000 payment made
at the beginning of such period

"Average Annual Total Return After-Taxes on Distributions and Sale of Fund
Shares" adjusts the after-taxes quotation for the effects of paying the highest
individual marginal federal income tax rate on the sale of Fund shares. Average
annual total return after-taxes on distributions and sale of Fund shares is
calculated separately for each Fund in accordance with the standardized method
prescribed by the SEC 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) = ATV(DR)

Where: P = hypothetical initial payment of
$1,000

T = average annual total return (after
taxes on distributions and sale of
Fund shares)

n = number of years

ATV(DR) = ending redeemable value, after
taxes on fund distributions and sale
of fund shares, at the end of the
period of a hypothetical $1,000
payment made at the beginning of
such period

Selected Funds Statement of Additional Information 57

OTHER PERFORMANCE MEASURES

"Cumulative Total Return" is a measure of a fund's performance encompassing all
elements of return. Total return reflects the change in share price over a given
period and assumes all distributions are taken in additional fund shares. Total
return is determined by assuming a hypothetical investment at the beginning of
the period, adding in the reinvestment of all income dividends and capital
gains, calculating the ending value of the investment at the net asset value as
of the end of the specified time period and subtracting the amount of the
original investment, and by dividing by the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100. Periods of less
than one year are not annualized.

30-DAY SEC YIELD

The 30-Day SEC Yield (defined below) for the period ended December 31, 2004
Selected American Shares:

Class S Shares xx%
Class D Shares xx%

"30-Day SEC Yield" is computed in accordance with a standardized method
prescribed by the rules of the SEC. Thirty-Day SEC Yield is a measure of the net
investment income per share (as defined) earned over a specified 30-day period
expressed as a percentage of the maximum offering price of the Funds' shares at
the end of the period. Such yield figure was determined by dividing the net
investment income per share on the last day of the period, according to the
following formula:

30-Day SEC Yield = 2 [(a - b + 1) 6 - 1]
-----
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period.

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = the maximum offering price per share on the last day
of the period.

The Funds' 30-Day SEC Yields will fluctuate depending on prevailing interest
rates, quality, maturities, types of instruments held, and operating expenses.
Thus, any yield quotation should not be considered representative of future
results. If a broker-dealer charges investors for services related to the
purchase or redemption of Fund shares, the yield will effectively be reduced.

CURRENT AND EFFECTIVE YIELDS.

The current and effective yields (defined below) for the seven-day period ended
December 31, 2004e Selected Daily Government Fund:

Class S Shares:
Current Yield: xx%
Effective Yield: xx%

Class D Shares:
Current Yield: xx%
Effective Yield: xx%

Yield quotations are calculated in accordance with the following formulas:

Current Yield = [(C-D) - BV] x (365/7)

Effective Yield = [ [ [ (C-D) - BV] + 1]365/7] - 1

Selected Funds Statement of Additional Information 58

C = Net change (excluding capital change in
value of hypothetical account with balance
of one share at beginning of seven-day
period).

D = Deductions charged to hypothetical account.

BV = Value of hypothetical account at beginning
of seven-day period for which yield is
quoted.

Selected Daily Government Fund's Current and Effective Yields will fluctuate
depending on prevailing interest rates, quality, maturities, types of
instruments held, and operating expenses. Thus, any yield quotation should not
be considered representative of future results. If a broker-dealer charges
investors for services related to the purchase or redemption of Fund shares, the
yield effectively will be reduced.

PERFORMANCE RANKINGS

Lipper Rankings. From time to time the Fund may publish the ranking of the
performance of its Classes of shares by Lipper Analytical Services, Inc. Lipper
is a widely recognized independent mutual fund monitoring service. Lipper
monitors the performance of regulated investment companies, including the Fund,
and ranks their performance for various periods in categories based on
investment style. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gain distributions and income dividends
but do not take taxes into consideration. Lipper also publishes "peer-group"
indices of the performance of all mutual funds in a category that it monitors
and averages of the performance of the funds in particular categories.

Morningstar Ratings and Rankings. From time to time each Fund may publish the
ranking and/or star rating of the performance of its Classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.

Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is
proprietary to Morningstar and/or its content providers, (2) may not be copied
or distributed, and (3) is not warranted to be accurate, complete or timely.
Neither Morningstar nor its content providers are responsible for any damages or
losses arising from any use of this information. Past performance is no
guarantee of future result.

For each fund with at least a three-year history, Morningstar calculates a
Morningstar Rating(TM) metric each month by subtracting the return on a 90-day
U.S. Treasury Bill from the fund's load-adjusted return for the same period, and
then adjusting this excess return for risk. The top 10% of funds in each broad
asset class receive five stars, the next 22.5% receive four stars, the next 35%
receive three stars, the next 22.5% receive two stars and the bottom 10% receive
one star. The Overall Morningstar Rating for a fund is derived from a weighted
average of the performance figures associated with its three-, five- and 10-year
(if applicable) Morningstar Rating metrics. Past performance is no guarantee of
future results.

Each Fund also may compare its total return ranking to that of other funds in
its Morningstar category, in addition to its star ratings. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk-adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.

Performance Rankings and Comparisons by Other Entities and Publications. From
time to time the Fund may include in its advertisements and sales literature
performance information about the Fund cited in newspapers and other periodicals
such as The New York Times, The Wall Street Journal, Barron's or similar
publications. That information may include performance quotations from other
sources, including Lipper and Morningstar. The performance of the Funds' Classes
of shares may be compared in publications to the performance of various market
indices or other investments and averages, performance rankings or other
benchmarks prepared by recognized mutual fund statistical services.

Selected Funds Statement of Additional Information 59

Investors also may wish to compare the returns on each Selected Fund's Class of
shares to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts and other forms of fixed- or variable-time
deposits and various other instruments such as Treasury bills. However, none of
the Selected Funds' returns or share prices are guaranteed or insured by the
FDIC or any other agency and will fluctuate daily, while bank depository
obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is backed
by the full faith and credit of the U.S. government.

From time to time, the Fund may publish rankings or ratings of the Adviser or
Transfer Agent, and of the investor services provided by them to shareholders of
the Selected Funds, other than performance rankings of the Selected Funds
themselves. Those ratings or rankings of shareholder and investor services by
third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based on the opinions of the rating or ranking service itself, using its
research or judgment, or based on surveys of investors, brokers, shareholders or
others.

OTHER PERFORMANCE STATISTICS

In reports or other communications to shareholders and in advertising material,
the performance of the Fund may be compared to recognized unmanaged indices or
averages of the performance of similar securities. Also, the performance of the
Fund may be compared to that of other funds of comparable size and objectives as
listed in the rankings prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc., or similar independent mutual fund rating services, and the
Fund may use evaluations published by nationally recognized independent ranking
services and publications. Any given performance comparison should not be
considered representative of the Fund's performance for any future period.

In advertising and sales literature the Selected Funds may publish various
statistics describing its investment portfolio such as the Fund's average Price
to Book and Price to Earnings ratios, beta, alpha, R-squared, standard
deviation, etc.

The performance of the Funds may be compared in publications to the performance
of various indices and investments for which reliable performance data is
available and to averages, performance rankings or other information prepared by
recognized mutual fund statistical services. The Fund's Annual Report and
Semi-Annual Report contain additional performance information and will be made
available on request and without charge by calling Selected Funds toll-free at
1-800-243-1575, Monday through Friday, 9 a.m. to 6 p.m. Eastern Standard Time.

Selected Funds Statement of Additional Information 60

APPENDIX A:
QUALITY RATINGS OF DEBT SECURITIES

MOODY'S CORPORATE BOND RATINGS

Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and generally are referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what generally are known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present that make the
long-term risks appear somewhat larger than Aaa securities.

A - Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds that 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 that are rated Ba are judged to have speculative elements as 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 that 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 that 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 that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C - Bonds that 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 CORPORATE BOND RATINGS

AAA - Debt rated AAA has the highest rating assigned by Standard and Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
also is used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default and
is dependent on favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC - The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.

C - The rating C is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used on the
filing of a bankruptcy petition if debt service payments are jeopardized.

MOODY'S COMMERCIAL PAPER RATINGS

Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 (superior capacity), Prime-2 (strong capacity) and Prime-3 (acceptable
capacity). In assigning ratings to an issuer that represents that its commercial
paper obligations are supported by the credit of another entity or entities,
Moody's evaluates the financial strength of the indicated affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

The S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded in four categories, ranging from A for the highest quality to
D for the lowest. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Within the A category, the numbers 1, 2
and 3 indicate relative degrees of safety. The addition of a plus sign to the
category A-1 denotes that the issue is determined to possess overwhelming safety
characteristics.

Statement of Additional Information 2 Davis New York Venture Fund

APPENDIX B

SUMMARY OF DAVIS ADVISORS'
--------------------------
PROXY VOTING PROCEDURES AND POLICIES
------------------------------------
APRIL 1, 2004

Davis Selected Advisers, L.P. ("Davis Advisors") votes on behalf of its clients
in matters of corporate governance through the proxy voting process. Davis
Advisors takes its ownership responsibilities very seriously and believes the
right to vote proxies for its clients' holdings is a significant asset of the
clients. Davis Advisors exercises its voting responsibilities as a fiduciary,
solely with the goal of maximizing the value of its clients' investments.

Davis Advisors votes proxies with a focus on the investment implications of each
issue. For each proxy vote, Davis Advisors takes into consideration its duty to
clients and all other relevant facts available to Davis Advisors at the time of
the vote. Therefore, while these guidelines provide a framework for voting,
votes are ultimately cast on a case-by-case basis.

Davis Advisors has adopted written Proxy Voting Procedures and Policies and
established a Proxy Oversight Group to oversee voting policies and deal with
potential conflicts of interest. In evaluating issues, the Proxy Oversight Group
may consider information from many sources, including the portfolio manager for
each client account, management of a company presenting a proposal, shareholder
groups, and independent proxy research services.

Clients may obtain a copy of Davis Advisors' Proxy Voting Procedures and
Policies, and/or a copy of how their own proxies were voted, by writing to:

Davis Selected Advisers, L.P.
Attn: Chief Compliance Officer
2949 East Elvira Road, Suite 101
Tucson, Arizona, 85706

A copy of Davis Advisors' Proxy Voting Procedures and Policies is also included
in Davis Advisors' Form ADV Part II.

GUIDING PRINCIPLES

Creating Value for Existing Shareholders. The most important factors that we
consider in evaluating proxy issues are: (i) the Company's or management's
long-term track record of creating value for shareholders. In general, we will
consider the recommendations of a management with a good record of creating
value for shareholders as more credible than the recommendations of managements
with a poor record; (ii) whether, in our estimation, the current proposal being
considered will significantly enhance or detract from long-term value for
existing shareholders; and (iii) whether a poor record of long term performance
resulted from poor management or from factors outside of managements control.

Other factors which we consider may include:

(a) Shareholder Oriented Management. One of the factors that Davis Advisors
considers in selecting stocks for investment is the presence of
shareholder-oriented management. In general, such managements will have a large
ownership stake in the company. They will also have a record of taking actions
and supporting policies designed to increase the value of the company's shares
and thereby enhance shareholder wealth. Davis Advisors' research analysts are
active in meeting with top management of portfolio companies and in discussing
their views on policies or actions which could enhance shareholder value.
Whether management

shows evidence of responding to reasonable shareholder suggestions, and
otherwise improving general corporate governance, is a factor which may be taken
into consideration in proxy voting.

(b) Allow responsible management teams to run the business. Because we try
generally to invest with "owner oriented" managements (see above), we vote with
the recommendation of management on most routine matters, unless circumstances
such as long standing poor performance or a change from our initial assessment
indicate otherwise. Examples include the election of directors and ratification
of auditors. Davis Advisors supports policies, plans and structures that give
management teams appropriate latitude to run the business in the way that is
most likely to maximize value for owners. Conversely, Davis Advisors opposes
proposals that limit management's ability to do this. Davis Advisors will
generally vote with management on shareholder social and environmental proposals
on the basis that their impact on share value is difficult to judge and is
therefore best done by management.

(c) Preserve and expand the power of shareholders in areas of corporate
governance. Equity shareholders are owners of the business, and company boards
and management teams are ultimately accountable to them. Davis Advisors supports
policies, plans and structures that promote accountability of the board and
management to owners, and align the interests of the board and management with
owners. Examples include: annual election of all board members, cumulative
voting, and incentive plans that are contingent on delivering value to
shareholders. Davis Advisors generally opposes proposals that reduce
accountability or misalign interests, including but not limited to classified
boards, poison pills, excessive option plans, and repricing of options.

Davis Advisors exercises its professional judgment in applying these principles
to specific proxy votes. Davis Advisors Proxy Procedures and Policies provides
additional explanation of the analysis which Davis Advisors may conduct when
applying these guiding principles to specific proxy votes.

CONFLICTS OF INTEREST

A potential conflict of interest arises when Davis Advisors has business
interests that may not be consistent with the best interests of its client. In
reviewing proxy issues to identify any potential material conflicts between
Davis Advisors' interests and those of its clients,

Davis Advisors' Proxy Oversight Group is charged with resolving material
potential conflicts of interest which it becomes aware of. It is charged with
resolving conflicts in a manner that is consistent with the best interests of
clients. There are many acceptable methods of resolving potential conflicts, and
the Proxy Oversight Group exercises its judgment and discretion to determine an
appropriate means of resolving a potential conflict in any given situation:

(1) Votes consistent with the "General Proxy Voting Policies," are presumed
to be consistent with the best interests of clients;

(2) Davis Advisors may disclose the conflict to the client and obtain the
client's consent prior to voting the proxy;

(3) Davis Advisors may obtain guidance from an independent third party;

(4) The potential conflict may be immaterial; or

(5) Other reasonable means of resolving potential conflicts of interest
which effectively insulate the decision on how to vote client proxies
from the conflict.

Statement of Additional Information 2 Davis New York Venture Fund

FORM N-1A

JOINT
PART C OF FORM N-1A
FOR
SELECTED AMERICAN SHARES, INC.
SELECTED SPECIAL SHARES, INC.
SELECTED CAPITAL PRESERVATION TRUST

PART C

OTHER INFORMATION

SELECTED AMERICAN SHARES ("SAS")
SELECTED SPECIAL SHARES ("SSS")
SELECTED CAPITAL PRESERVATION TRUST ("SCPT")

Item 22. Exhibits:
--------

(a)(1) Articles of Incorporation (SAS), dated
February 2, 1976. Incorporated by reference
to Exhibit 23(a)(1) of Registrant's
registration statements 2-10699, filed on
Edgar February 26, 2001.

(a)(2) Articles of Incorporation (SSS), dated
February 2, 1976. Incorporated by reference
to Exhibit 23(a)(2) of Registrant's
registration statements 2-27514, filed on
Edgar February 26, 2001.

(a)(3) Amended Declaration of Trust (SCPT), dated
November 17, 1987. Incorporated by reference
to Exhibit 23(a)(3) of Registrant's
registration statements 33-15807, filed on
Edgar February 26, 2001.

(a)(4) Articles Supplementary to Articles of
Incorporation (SAS), increasing shares,
dated July 6, 1998. Incorporated by
reference to Exhibit 23(a)(4) of
Registrant's registration statements
2-10699, filed on Edgar February 26, 2001.

(a)(5) Articles of Amendment of Articles of
Incorporation (SAS), redeeming small
accounts, dated April 12, 1990. Incorporated
by reference to Exhibit 23(a)(5) of
Registrant's registration statements
2-10699, filed on Edgar February 26, 2001.

(a)(6) Articles of Amendment of Articles of
Incorporation (SAS), increasing shares,
setting shareholder rights and
responsibilities and calculating Net Asset
Value, dated April 15, 1987. Incorporated by
reference to Exhibit 23(a)(6) of
Registrant's registration statements
2-10699, filed on Edgar February 26, 2001.

(a)(7) Articles of Amendment of Articles of
Incorporation (SSS), redeeming small
accounts, dated April 12, 1990. Incorporated
by reference to Exhibit 23(a)(7) of
Registrant's registration statements
2-27514, filed on Edgar February 26, 2001.

(a)(8) Articles of Amendment of Articles of
Incorporation (SSS), increasing shares,
setting shareholder rights and
responsibilities and calculating Net Asset
Value, dated April 15, 1987. Incorporated by
reference to Exhibit 23(a)(8) of
Registrant's registration statements
2-27514, filed on Edgar February 26, 2001.

(a)(9) Articles of Amendment of Articles of
Incorporation (SAS); designating Class D
shares. Incorporated by reference to Exhibit
23(a)(9) of Registrant's registration
statements 2-10699, filed on Edgar May 3,
2004.

(a)(10) Articles of Amendment of Articles of
Incorporation (SSS); designating Class D
shares. Incorporated by reference to Exhibit
23(a)(10) of Registrant's registration
statements 2-27514, filed on Edgar May 3,
2004.

(a)(11) Amended Declaration of Trust (SCPT),
Reflecting liquidation of Selected U.S.
Government Income Fund and designating Class
D shares. Incorporated by reference to
Exhibit 23(a)(11) of Registrant's
registration statements 33-15807, filed on
Edgar May 3, 2004.

(b)(1) By-laws (SAS, SSS). Joint Amended and
Restated Bylaws as of January 26, 2001.
Incorporated by reference to Exhibit
23(b)(1) of Registrant's registration
statements 2-10699 and 2-27514, filed on
Edgar April 25, 2002

(b)(2) By-laws (SCPT). Amended and Restated Bylaws
as of January 26, 2001. Incorporated by
reference to Exhibit 23(b)(2) of
Registrant's registration statement
33-15807, filed on Edgar April 25, 2002

(d)(1) Investment Advisory Contracts (SAS).
Management Agreement with Davis Selected
Advisers, L.P. dated January 1, 2001.
Incorporated by reference to Exhibit
23(d)(1) of Registrant's registration
statements 2-10699, filed on Edgar February
26, 2001.

(d)(2) Sub-Advisory Agreements (SAS). Sub-Advisory
Agreements with Davis Selected Advisers -
NY, Inc. dated January 1, 2001. Incorporated
by reference to Exhibit 23(d)(2) of
Registrant's registration statements
2-10699, filed on Edgar February 26, 2001.

(d)(3) Investment Advisory Contracts (SSS).
Management Agreement with Davis Selected
Advisors, L.P. dated January 1, 2001.
Incorporated by reference to Exhibit
23(d)(3) of Registrant's registration
statements 2-27514, filed on Edgar February
26, 2001.

(d)(4) Sub-Advisory Agreements (SSS). Sub-Advisory
Agreement with Davis Selected Advisers-NY,
dated January 1, 2001. Incorporated by
reference to Exhibit 23(d)(5) of
Registrant's registration statements
2-27514, filed on Edgar February 26, 2001.

(d)(5) Investment Advisory Contracts (SCPT).
Management Agreement with Davis Selected
Advisers, L.P. dated January 1, 2001.
Incorporated by reference to Exhibit
23(d)(6) of Registrant's registration
statements 33-15807, filed on Edgar February
26, 2001.

(d)(6) Sub-Advisory Agreements (SCPT). Sub-Advisory
Agreement with Davis Selected Advisers - NY,
Inc. dated January 1, 2001. Incorporated by
reference to Exhibit 23(d)(7) of
Registrant's registration statements
33-15807, filed on Edgar February 26, 2001.

(d)(7)* Amendment to Investment Advisory Contracts
(SAS).Amendment to Management Agreement
dated May 1, 2004.

(e)(1) Underwriting Contracts (SAS). Distribution
Services Agreement and Plan of Distribution
dated January 1, 2001. Incorporated by
reference to Exhibit 23(e)(1) of
Registrant's registration statements
2-10699, filed on Edgar April 25, 2001.

(e)(2) Underwriting Contracts (SSS). Distribution
Services Agreement and Plan of Distribution
dated January 1, 2001. Incorporated by
reference to Exhibit 23(e)(2) of
Registrant's registration statements
2-27514, filed on Edgar April 25, 2001.

(e)(3) Underwriting Contracts (SCPT). Amended
Distribution Services Agreement and Plan of
Distribution dated January 1, 2001 as
amended January 30, 2004. Incorporated by
reference to Exhibit 23(e)(3) of
Registrant's registration statements
33-15807, filed on Edgar May 3, 2004.

(e)(4) Form of Dealer Agreement (SAS, SCPT and SSS)
between principal underwriter and
distributing broker-dealers. Incorporated by
reference to Exhibit 23(e)(4) of
Registrants' registration statements (SAS:
2-10699, SSS: 2-27514, and SCPT:33-15807),
filed on Edgar February 26, 2001.

(f) Bonus or Profit Sharing Contracts. Not
applicable.

(g) Custodian Agreements (SAS, SSS and SCPT).
Custodian Agreement with State Street Bank
and Trust Company, dated September 5, 2000.
Incorporated by reference to Exhibit 23(g)
of Registrants' registration statements
(SAS: 2-10699, SSS: 2-27514, and
SCPT:33-15807), filed on Edgar February 26,
2001.

(h)(1) Other Material Contracts (SAS). Transfer
Agency and Service Agreement dated October
17, 1997. Incorporated by reference to
Exhibit 23(h)(1) of Registrant's
registration statements 2-10699, filed on
Edgar February 26, 2001.

(h)(2) Other Material Contracts (SSS). Transfer
Agency and Service Agreement dated October
17, 1997. Incorporated by reference to
Exhibit 23(h)(2) of Registrant's
registration statements 2-27514, filed on
Edgar February 26, 2001.

(h)(3) Other Material Contracts (SCPT). Transfer
Agency and Service Agreement dated October
17, 1997. Incorporated by reference to
Exhibit 23(h)(3) of Registrant's
registration statements 33-15807, filed on
Edgar February 26, 2001.

(i)** Legal Opinion. Opinion and Consent of
Counsel, (Seyfarth Shaw LLP).

(j)** Other Opinions. Consent of Current Auditors.
KPMG LLP.

(k) Omitted Financial Statements. Incorporated
from the Annual Report.

(l) Initial Capital Agreements. Not applicable.

(m)(1) Rule 12b-1 Plan (SAS). Distribution Services
Agreement and Plan of Distribution dated
January 1, 2001. Incorporated by reference
to Exhibit 23(e)(1) of this registration
statement..

(m)(2) Rule 12b-1 Plan (SSS). Distribution Services
Agreement and Plan of Distribution dated
January 1, 2001. Incorporated by reference
to Exhibit 23(e)(2) of this registration
statement.

(m)(3) Rule 12b-1 Plan (SCPT). Distribution
Services Agreement and Plan of Distribution
dated May 1, 1993. Incorporated by reference
to Exhibit 23(e)(3) of this registration
statement.

(n)* Rule 18f-3 Plan Amended. . Plan pursuant to
Rule 18f-3, adopted January 30, 2004 and
amended July 30, 2004to designate Class S
and Class D shares.

(o) Reserved.

(p)(1) Codes of Ethics (SAS, SSS, SCPT, Adviser,
and Principal Underwriter). Code of Ethics
as amended January 29, 2000. Incorporated by
reference to Exhibit 23(p)(1) of
Registrants' registration statements (SAS:
2-10699, SSS: 2-27514, and SCPT:33-15807),
filed on Edgar February 26, 2001.

(q)(1) Other Exhibits (SAS, SSS, SCPT). Powers of
Attorney of the Registrant, Officers and
Board of Directors appointing Arthur Don,
Kenneth Eich and Thomas Tays, as
attorneys-in-fact dated October 2001.
Incorporated by reference to Exhibit
23(q)(1) of Registrants' registration
statements (SAS: 2-10699, SSS: 2-27514, and
SCPT:33-15807), filed on Edgar April 25,
2002.

(q)(2) Other Exhibits (SAS, SSS, SCPT). Powers of
Attorney of Kenneth Eich and Sharra Reed
appointing Arthur Don and Thomas Tays, as
attorneys-in-fact dated January 24, 2003.
Incorporated by reference to Exhibit
23(q)(2) of Registrants' registration
statements (SAS: 2-10699, SSS: 2-27514, and
SCPT:33-15807), filed on Edgar April 30,
2003.

(q)(3)* Other Exhibits. (SAS, SSS, SCPT) Powers of
Attorney of Douglas Haines as PFO dated
September 14, 2004 appointing Arthur Don and
Thomas Tays as attorneys-in-fact.

* filed herein
** to be filed by amendment prior to being declared
effective

Item 23. Persons Controlled by or Under Common Control With Registrant

Information pertaining to persons controlled by or under common control with
Registrant is incorporated by reference from the Statement of Additional
Information contained in Part B of this Registration Statement.

Item 24. Indemnification

SAS and SSS. Articles of Incorporation for SAS and SSS indemnify directors,
officers and employees to the full extent permitted by Section 2-418 of the
Maryland General Corporation Law, subject only to the provisions of the
Investment Company Act of 1940. The indemnification provisions of the Maryland
General Corporation Law (the "Law") permit, among other things, corporations to
indemnify directors and officers unless it is proved that the individual (1)
acted in bad faith or with active and deliberate dishonesty, (2) actually
received an improper personal benefit in money, property or services, or (3) in
the case of a criminal proceeding, had reasonable cause to believe that his act
or omission was unlawful. The Law was also amended to permit corporations to
indemnify directors and officers for amounts paid in settlement of stockholders'
derivative suits.

In addition to the foregoing indemnification, SAS and SSS Articles of
Incorporation exculpate directors and officers with respect to monetary damages
except to the extent that an individual actually received an improper benefit in
money property or services or to the extent that a final adjudication finds that
the individual acted with active and deliberate dishonesty.

SCPT. Article V of the Amended Declaration of Trust of SCPT indemnifies
trustees, officers and employees to the full extent permitted under Ohio law.

SAS, SSS, and SCPT. In addition, directors, trustees and officers are covered
under a policy to indemnify them for loss (subject to certain deductibles)
including costs of defense incurred by reason of alleged errors or omissions,
neglect or breach of duty. The policy has a number of exclusions including
alleged acts, errors, or omissions which are finally adjudicated or established
to be deliberate, dishonest, malicious or fraudulent or to constitute willful

misfeasance, bad faith, gross negligence or reckless disregard of their duties
in respect to any registered investment company. This coverage is incidental to
a general policy carried by the Registrant's adviser.

Item 25. Business and Other Connections of Investment Adviser

Davis Selected Advisers, L.P. ("DSA") and affiliated companies comprise a
financial services organization whose business consists primarily of providing
investment management services as the investment adviser and manager for
investment companies registered under the Investment Company Act of 1940,
unregistered domestic and off-shore investment companies, and as an investment
adviser to institutional and individual accounts. DSA also serves as sub-adviser
to other investment companies. Affiliated companies include:

Davis Investments, LLC: the sole general partner of DSA. Controlled by its sole
member, Christopher C. Davis.

Venture Advisers, Inc.: is a corporation whose primary purpose is to hold
limited partner units in DSA.

Davis Selected Advisers - NY, Inc.: a wholly-owned subsidiary of DSA, is a
federally registered investment adviser which serves as sub-adviser for may of
DSA's advisory clients.

Davis Distributors LLC: a wholly-owned subsidiary of DSA, is a registered
broker-dealer which serves as primary underwriter of the Davis Funds and
Selected Funds.

Other business of a substantial nature that directors or officers of DSA are or
have been engaged in the last two years:

ANDREW A. DAVIS (6/25/63), 124 East Marcy Street, Santa Fe, NM 87501. Director
and President or Vice President of each of the Davis Funds and the Selected
Funds. President of Davis Investments, LLC. Also serves as a director and/or
senior officer for several companies affiliated with DSA which are described
above.

CHRISTOPHER C. DAVIS (7/13/65), 609 Fifth Avenue, New York, NY 10017. Director
and Chief Executive Officer, President, and/or Vice President of each of the
Davis Funds and the Selected Funds; Director, Chairman and Chief Executive
Officer of Davis Investments, LLC. Also serves as a director and/or senior
officer for several companies affiliated with DSA, which are described above. Is
an employee of Shelby Cullom Davis & Co., a registered broker/dealer.

KENNETH C. EICH (8/14/53), 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.
Executive Vice President and Principal Executive Officer of each of the Davis
Funds and Selected Funds; Chief Operating Officer of Davis Investments, LLC.
Also serves as a senior officer for several companies affiliated with DSA which
are described above.

DOUGLAS HAINES (3/4/71) 2949 East Elvira Road, Suite 101, Tucson, AZ 85706. Vice
President, Treasurer Chief Financial Officer, Principal Financial Officer, and
Principal Accounting Officer of each of the Davis Funds and Selected Funds.

SHARRA L. REED (9/25/66) 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.
Vice President Chief Compliance Officer of each of the Davis Funds and Selected
Funds; Vice President of Davis Investments, LLC. Also serves as Chief Compliance
Officer for DSA and as a senior officer for several companies affiliated with
DSA which are described above.

THOMAS D. TAYS (3/7/57), 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.
Vice President, Chief Legal Officer and Secretary, Davis Investments, LLC. Also
serves as a senior officer for several companies affiliated with DSA which are
described above.

GARY TYC (05/27/56), 2949 East Elvira Road, Suite 101, Tucson, AZ 85706. Vice
President, Chief Financial Officer Treasurer, and Assistant Secretary of Davis
Investments, LLC. Also serves as a senior officer for several companies
affiliated with DSA which are described above.

RUSSELL O. WIESE (05/18/66) 609 Fifth Avenue, New York, NY 10017. Chief
Marketing Officer of Davis Investments, LLC. Also serves as a director and/or
senior officer for several companies affiliated with DSA which are described
above.

Item 26. Principal Underwriter

(a) Davis Distributors, LLC, a wholly owned subsidiary of the Adviser, located
at 2949 East Elvira Road, Suite 101, Tucson, AZ 85706, is the principal
underwriter for each of the Davis Funds and Selected Funds: Davis New York
Venture Fund Inc., Davis Series, Inc., Davis Variable Account Fund, Inc.,
Selected American Shares, Inc., Selected Special Shares, Inc., and Selected
Capital Preservation Trust.

(b) Management of the Principal Underwriters:

NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
---------------- ----------- ---------------

Kenneth C. Eich President Executive Vice President and
2949 East Elvira Road, Suite 101 Principal Executive Officer
Tucson, AZ 85706
Russell Wiese Chief Marketing Officer None
609 Fifth Avenue,
New York, NY 10017.

Gary P. Tyc Vice President, Treasurer and None
2949 East Elvira Road, Suite 101 Assistant Secretary
Tucson, AZ 85706
Anthony Frazia Chief Compliance Officer None
609 Fifth Avenue,
New York, NY 10017.

Thomas D. Tays Vice President and Secretary Vice President and Secretary
2949 East Elvira Road, Suite 101
Tucson, AZ 85706

Item 27. Location of Accounts and Records

Accounts and records are maintained at the offices of Davis Selected Advisers,
L.P., 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706, and at the
offices of the Registrant's custodian, State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02107, and the Registrant's transfer
agent State Street Bank and Trust, c/o Service Agent, BFDS, Two Heritage Drive,
7th Floor, North Quincy, Massachusetts 02107.

Item 28. Management Services

Not applicable

Item 29. Undertakings

Registrant undertakes to furnish each person to whom a prospectus is delivered
with a copy of Registrant's latest annual report to shareholders upon request
and without charge.

SELECTED AMERICAN SHARES, INC.
SELECTED SPECIAL SHARES, INC.
SELECTED CAPITAL PRESERVATION TRUST

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrants have caused these Registration Statements
to be signed on their behalf by the undersigned, thereunto duly authorized, in
the City of Tucson and State of Arizona on the 23rd day of February, 2005.

The Registrant hereby certifies that this Post Effective Amendment meets all the
requirements for effectiveness under paragraph (b) of Rule 485 of the Securities
Act of 1933.

SELECTED AMERICAN SHARES, INC.
SELECTED SPECIAL SHARES, INC.
SELECTED CAPITAL PRESERVATION TRUST

*By: /s/ Thomas Tays
----------------------------
Thomas Tays
Attorney-in-Fact

Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement for each of the Registrants has been signed below by the following
persons in the capacities indicated.

Signature Title Date
--------- ----- ----

Kenneth Eich* Principal Executive Officer February 23, 2005
--------------
Kenneth Eich

Douglas Haines* Principal Financial Officer; and
--------------- Principal Accounting Officer February 23, 2005
Douglas Haines

*By: /s/ Thomas Tays
----------------------------
Thomas Tays
Attorney-in-Fact

*Thomas Tays signs this document on behalf of each of the Registrants and each
of the foregoing officers pursuant to the powers of attorney referenced as
Exhibits 23(q)(1), 23(q)(2), and 23(q)(3) of Part C of this registration
statement.

/s/ Thomas Tays
---------------------------------
Thomas Tays
Attorney-in-Fact

SELECTED AMERICAN SHARES, INC.
SELECTED SPECIAL SHARES, INC.
SELECTED CAPITAL PRESERVATION TRUST

Pursuant to the requirements of the Securities Act of 1933, these Registration
Statements have been signed on February 23, 2005 by the following persons in the
capacities indicated.

Signature Title
--------- -----

William P. Barr* Director
-------------------------------
William P. Barr

Floyd A. Brown* Director
-------------------------------
Floyd A. Brown

Andrew A. Davis* Director
-------------------------------
Andrew A. Davis

Christopher C. Davis* Director
-------------------------------
Christopher C. Davis

Jerome E. Hass* Director
-------------------------------
Jerome E. Hass

Katherine L. MacWilliams* Director
-------------------------
Katherine L. MacWilliams

James J. McMonagle* Director
-------------------------------
James J. McMonagle

Richard C. O'Brien* Director
-------------------------------
Richard C. O'Brien

Marsha Williams* Director
-------------------------------
Marsha Williams

*Thomas Tays signs this document on behalf of each of the Registrants and each
of the foregoing officers pursuant to the power of attorney referenced as
Exhibit 23(q)(1) of Part C of this registration statement.

/s/Thomas Tays
---------------------------------------
Thomas Tays
Attorney-in-Fact

EXHIBIT LIST

(d)(7) Amendment to Investment Advisory Contracts
(n) Rule 18f-3 Plan Amended
(q)(3) POA Douglas Haines