485BPOS 1 file1.htm 485BPOS



                       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. 92 UNDER THE SECURITIES ACT OF 1933
                       REGISTRATION STATEMENT NO. 2-10699

                                       AND

           AMENDMENT NO. 40 UNDER THE INVESTMENT COMPANY ACT OF 1940
                             REGISTRATION NO. 811-51

                          SELECTED SPECIAL SHARES, INC.
        POST-EFFECTIVE AMENDMENT NO. 65 UNDER THE SECURITIES ACT OF 1933
                      REGISTRATION STATEMENT NO. 002-27514

                                       AND

            AMENDMENT NO. 41 UNDER THE INVESTMENT COMPANY ACT OF 194
                           REGISTRATION NO. 811-01533

                       SELECTED CAPITAL PRESERVATION TRUST
        POST-EFFECTIVE AMENDMENT NO. 34 UNDER THE SECURITIES ACT OF 1933
                       REGISTRATION STATEMENT NO. 33-15807

                                       AND

            AMENDMENT NO. 36 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
                         312-781-8611

It is proposed that this filing will become effective:



   [_]  Immediately upon filing pursuant to paragraph (b)

   [x]  On  May 1, 2007__, pursuant to paragraph (b)

   [_]  60 days after filing pursuant to paragraph (a)(1)

   [_]  On ___________, 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 (Class S shares and Class D shares)

     (2)  Selected Special Shares Fund (Class S shares and Class D shares)

          Shares of Beneficial Interest of

     (3)  Selected Daily Government Fund (Class S shares and Class D shares)

                                EXPLANATORY NOTE

This Post-Effective Amendment to the Registration Statement contains:

     1.   A single prospectus offering Class S shares and Class D shares of

               Selected American Shares

               Selected Special Shares

               Selected Daily Government Fund

     2.   A single SAI offering the same three funds.

     3.   Part C and Signature Pages describing the same three funds

     4.   Exhibits relevant to the same three funds:

SELECTED FUNDS

Selected American Shares
Selected Special Shares
Selected Daily Government Fund

--------------------------------------------------------------------------------
PROSPECTUS

Class S shares
Class D shares

May 1, 2007

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.

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

TABLE OF CONTENTS

OVERVIEWS OF EACH SELECTED FUND:

5 SELECTED AMERICAN SHARES
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

12 SELECTED SPECIAL SHARES
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

19 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

26 SELECTED FUNDS MANAGEMENT
Davis Advisors
Investment Professionals
The Davis Investment Discipline
Additional Information about Investments

31 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
Fees Paid to Dealers and Other Financial Intermediaries

39 HOW TO CHOOSE A SHARE CLASS
Class S Shares
Class D Shares
Converting from Class S to Class D shares

TABLE OF CONTENTS (CONTINUED)

43 HOW TO OPEN AN ACCOUNT
Two Ways You Can Open An Account
Anti-Money Laundering Compliance
Retirement Plan Accounts

45 HOW TO BUY, SELL AND EXCHANGE SHARES
Right to Reject or Restrict any Purchase or Exchange Order
Four 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

57 OTHER INFORMATION
Dividends and Distributions
Financial Highlights
Householding
Privacy Notice

B/C OBTAINING ADDITIONAL INFORMATION

OVERVIEW OF
SELECTED AMERICAN SHARES

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. Davis Selected Advisers,
L.P. ("Davis Advisors" or the "Adviser") the Fund's investment adviser uses the
Davis Investment Discipline to invest the majority of the Fund's assets in
equity securities issued by large companies with market capitalizations of at
least $10 billion. See "The Davis Investment Discipline" in this prospectus.

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" in this prospectus.

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 THE FUND

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 (but not the only
factors) that could cause the value of your investment in the Fund to decline,
and which could prevent the Fund from achieving its stated objective.

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 historically has invested 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 setbacks if regulators change the rules under
which they operate; (ii) Changes in interest rates: unstable interest
rates, and/or rising interest rates, may have a disproportionate affect on
companies in the financial services sector; (iii) Non-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.

PROSPECTUS o SELECTED FUNDS o PAGE 6

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 may be
higher, and investments may be subject to more 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 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 durable business models
that can be purchased at attractive valuations relative to what Davis
Advisors believes to be the companies' intrinsic values. 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, 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
---- ------
1997 37.25%
1998 16.27%
1999 20.32%
2000 9.33%
2001 (11.17)%
2002 (17.06)%
2003 30.90%
2004 11.97%
2005 9.90%
2006 15.19%

During the period shown above, the Fund's highest quarterly return was 22.19%
for the quarter ended December 31, 1998, and the lowest quarterly return was
(14.78)% for the quarter ended September 30, 1998. Total return for the three
months ended March 31, 2007 (not annualized) was 0.37%.

PROSPECTUS o SELECTED FUNDS o PAGE 8

SELECTED AMERICAN SHARES AVERAGE ANNUAL TOTAL RETURNS
for the periods ended December 31, 2006

PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
------------------------------------------------------------------------------------

Selected American Shares 15.19% 9.00% 11.12%
Class S shares
return before taxes
------------------------------------------------------------------------------------
Selected American Shares 15.08% 8.85% 10.34%
Class S shares
return after taxes on distributions
------------------------------------------------------------------------------------
Selected American Shares 10.02% 7.77% 9.50%
Class S Shares
return after taxes on distributions
and sale of fund shares
------------------------------------------------------------------------------------
Selected American Shares 15.59% N/A 13.16%*
Class D shares
return before taxes
------------------------------------------------------------------------------------
S&P 500(R) Index 15.79% 6.19% 8.42%
------------------------------------------------------------------------------------

* Class D shares were first offered to the public on May 1, 2004. The return
presented is for the life of the class.

After-tax returns are calculated using the highest historical individual federal
marginal income tax rates for each year 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.

Class S and D shares are offered by this prospectus. After-tax returns are shown
only for Class S shares and will vary for Class D shares.

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.

S&P 500(R) Index returns do not reflect deductions for fees, expenses, or taxes.
You cannot invest directly in an index.

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 redemptions None None
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 dividends None None
------------------------------------------------------------------------------
Redemption fee None None
------------------------------------------------------------------------------
Exchange fee None None
------------------------------------------------------------------------------

A Wire Fee of $5 for domestic transfers may be deducted from sale proceeds. See
"Wiring Sale Proceeds to Your Bank Account" in this prospectus.

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

CLASS S SHARES CLASS D SHARES
-----------------------------------------------------------------
Management Fees 0.53% 0.53%
Distribution (12b-1) Fees 0.25% 0.00%
Other Expenses 0.12% 0.05%
-----------------------------------------------------------------
Total Annual Operating Expenses 0.90% 0.58%
=================================================================

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" in this prospectus to determine which Class of shares
best suits your 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 as shown above.
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 $92 $287 $498 $1,108
Class D shares $59 $186 $324 $ 726

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. Davis Advisors uses the Davis Investment Discipline to invest
the majority of the Fund's assets in equity securities issued by medium and
small companies with market capitalizations of less than $20 billion. See "The
Davis Investment Discipline" in this prospectus.

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 in a mixture of large, medium, and small capitalization
companies, with a focus primarily in medium 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.

o You are interested in earning current income.

o You are investing for the short term.

PROSPECTUS o SELECTED FUNDS o PAGE 12

PRINCIPAL RISKS OF INVESTING IN THE FUND

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 (but not the only
factors) that could cause the value of your investment in the Fund to decline,
and which could prevent the Fund from achieving its stated objective.

o SMALL- AND MEDIUM-CAPITALIZATION RISK. Investing in small- and
medium-capitalization companies may be more risky than investing in
large-capitalization companies. Small and mid-size 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.

o FOREIGN COUNTRY RISK. The Fund may invest a 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 the Fund
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 may
be higher, and investments may be subject to more 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 generally does not hedge

PROSPECTUS o SELECTED FUNDS o PAGE 13

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
Russell 3000(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 14

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 Russell 3000(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

YEAR RETURN
---------------
1997 26.91%
1998 24.52%
1999 16.83%
2000 (1.10)%
2001 (14.41)%
2002 (17.62)%
2003 41.40%
2004 11.34%
2005 8.45%
2006 17.74%

During the period shown above, the Fund's highest quarterly return was 23.31%
for the quarter ended June 30, 2003, and the lowest quarterly return was
(19.08)% for the quarter ended September 30, 2002. Total return for the three
months ended March 31, 2007 (not annualized) was (0.43)%.

PROSPECTUS o SELECTED FUNDS o PAGE 15

SELECTED SPECIAL SHARES AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 2006

PAST 10
PAST 1 YEAR PAST 5 YEARS YEARS
-----------------------------------------------------------------------------
Selected Special Shares
Class S shares 17.74% 10.61% 9.97%
return before taxes
-----------------------------------------------------------------------------
Selected Special Shares
Class S shares 16.79% 9.77% 8.47%
return after taxes on distributions
-----------------------------------------------------------------------------
Selected Special Shares
Class S Shares 12.51% 9.01% 8.19%
return after taxes on distributions
and sale of fund shares
-----------------------------------------------------------------------------
Selected Special Shares
Class D shares 18.19% N/A 13.51%*
return before taxes
-----------------------------------------------------------------------------
Russell 3000(R) Index
Reflects no deduction for fees, 15.72% 7.17% 8.64%
expenses or taxes
-----------------------------------------------------------------------------

* Class D shares were first offered to the public on May 1, 2004. The return
presented is for the life of the class.

Class S and D shares are offered by this prospectus. After-tax returns are shown
only for Class S shares and will vary for Class D shares.

Russell 3000(R) Index returns do not reflect deductions for fees, expenses, or
taxes. You cannot invest directly in an index.

PROSPECTUS o SELECTED FUNDS o PAGE 16

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 redemptions None None
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 dividends None None
-------------------------------------------------------------------------------
Redemption fee None None
-------------------------------------------------------------------------------
Exchange fee None None
-------------------------------------------------------------------------------

A Wire Fee of $5 for domestic transfers may be deducted from sale proceeds. See
"Wiring Sale Proceeds to Your Bank Account" in this prospectus.

SELECTED SPECIAL SHARES ANNUAL OPERATING EXPENSES
deducted from the Fund's assets

CLASS S SHARES CLASS D SHARES
-----------------------------------------------------------------
Management Fees 0.68% 0.68%
Distribution (12b-1) Fees 0.25% 0.00%
Other Expenses 0.23% 0.15%
-----------------------------------------------------------------
Total Annual Operating Expenses 1.16% 0.83%
=================================================================

Expenses may vary in future years.

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 $118 $368 $638 $1,409
Class D shares $85 $265 $460 $1,025

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. The Fund 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 THE FUND

This section describes what we think are the most significant factors (but not
the only factors) that could prevent the Fund from achieving its stated
objective.

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 are likely to increase. When interest rates decrease,
the Fund's income distributions are likely to 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.

PROSPECTUS o SELECTED FUNDS o PAGE 20

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, and 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 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
---- ------
1997 4.91%
1998 4.85%
1999 4.48%
2000 5.80%
2001 3.73%
2002 1.32%
2003 0.54%
2004 0.73%
2005 2.57%
2006 4.33%

During the period shown above, the Fund's highest quarterly return was 1.52% for
the quarter ended September 30, 2000, and the lowest quarterly return was 0.10%
for the quarter ended September 30, 2003. Total return for the three months
ended March 31, 2007 (not annualized) was 1.13%.

PROSPECTUS o SELECTED FUNDS o PAGE 21

SELECTED DAILY GOVERNMENT FUND AVERAGE ANNUAL TOTAL RETURNS

For the periods ended December 31, 2006

PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
-----------------------------------------------------------
Class S shares 4.33% 1.89% 3.32%
Class D shares 4.61% N/A 3.03%*

* Class D shares were first offered to the public on May 1, 2004. The return
presented is for the life of the class.

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.

SELECTED DAILY GOVERNMENT FUND YIELD, CLASS S SHARES

As of December 31, 2006

7-Day SEC Yield 4.55%

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.

PROSPECTUS o SELECTED FUNDS o PAGE 22

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 a percentage of offering price None None
-------------------------------------------------------------------------------
Maximum deferred sales charge (load) imposed on redemptions None None
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 dividends None None
-------------------------------------------------------------------------------
Redemption fee None None
-------------------------------------------------------------------------------
Exchange fee None None
-------------------------------------------------------------------------------

A Wire Fee of $5 for domestic transfers may be deducted from sale proceeds. See
"Wiring Sale Proceeds to Your Bank Account" in this prospectus.

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.
See "Check Writing Privilege for Selected Daily Government Fund" under "Selling
Shares" in this prospectus.

SELECTED DAILY GOVERNMENT FUND ANNUAL OPERATING EXPENSES

Deducted from the Fund's assets

CLASS S SHARES CLASS D SHARES
--------------------------------------------------------------------
Management Fees 0.30% 0.30%
Distribution (12b-1) Fees 0.25% 0.00%
Other Expenses 0.36% 0.10%
--------------------------------------------------------------------
Total Annual Operating Expenses(1) 0.91% 0.40%
====================================================================

Expenses may vary in future years.

(1.) The Adviser is contractually committed to waive fees and/or reimburse Class
S shares' expenses to the extent necessary to cap total annual fund
operating expenses at 0.75% until March 31, 2008; after that date, there is
no assurance that expenses will be capped.

PROSPECTUS o SELECTED FUNDS o PAGE 23

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 $93 $290 $504 $1,120
Class D shares $41 $128 $224 $ 505

The Expense Table does not reflect the Adviser's commitment to waive fees and/or
reimburse Class S shares' expenses to the extent necessary to cap total annual
fund operating expenses at 0.75% until March 31, 2007; after that date, there is
no assurance that expenses will be capped.

PROSPECTUS o SELECTED FUNDS o PAGE 24

SELECTED FUNDS
MANAGEMENT

DAVIS ADVISORS

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, 2006, Davis Advisors' compensation from
the Funds for its services (based on average net assets) was: Selected American
Shares, 0.53%; Selected Special Shares, 0.68%; 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.

Every year the Funds' Board of Directors considers whether to re-approve the
Funds' advisory and sub-advisory agreements. The basis for the Board's decision
is described in the Funds' most recent Semi-Annual Report.

PROSPECTUS o SELECTED FUNDS o PAGE 25

INVESTMENT PROFESSIONALS

SELECTED AMERICAN SHARES

o CHRISTOPHER 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 has served as an analyst and portfolio manager
for Davis Advisors since 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 has served as an analyst and portfolio
manager for Davis Advisors since 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 by senior portfolio managers. The primary individual portfolio managers
responsible for Selected Special Shares are:

o CHRISTOPHER DAVIS has served as the research adviser of Selected Special
Shares since June 2001, and also manages other equity funds advised by
Davis Advisors. Mr. Davis has served as an analyst and portfolio manager
for Davis Advisors since 1989. As research adviser, Mr. Davis oversees the
Portfolio Managers of Selected Special Shares and allocates segments of the
Fund to each of them to invest. Among other factors, Mr. Davis considers
the portfolio managers' experience, results achieved, and the number of
investment opportunities which they have identified within their areas of
expertise.

o CHIP TUCKER, CFA, has managed a segment 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.

o DANTON GOEI has managed a segment 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.

PROSPECTUS o SELECTED FUNDS o PAGE 26

o TANIA POUSCHINE has managed a segment 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 CHARLES CAVANAUGH has managed a segment of Selected Special Shares since
May 2007, manages other equity funds advised by Davis Advisors, and also
serves as research analyst for Davis Advisors. Mr. Cavanaugh joined Davis
Advisors in March 2001.

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.

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 Funds.

THE DAVIS INVESTMENT DISCIPLINE

Davis Advisors manages equity funds using the Davis Investment Discipline. We
conduct extensive research to try to identify businesses that possess
characteristics which we believe foster the creation of long-term value, such as
proven management, a durable franchise and business model, and sustainable
competitive advantages. We aim to invest in such businesses when they are
trading at discounts to their intrinsic worth. 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. Such research, however
rigorous, involves predictions and forecasts that are inherently uncertain.

Over the years, Davis Advisors has developed a list of characteristics that we
believe help companies to create shareholder value over the long term and manage
risk. 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.

PROSPECTUS o SELECTED FUNDS o PAGE 27

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 SATISFACTORY PROFITABILITY

o Strong balance sheet

o Low cost structure

o High after-tax returns on capital

o High quality of earnings

STRONG COMPETITIVE POSITIONING

o Non-obsolescent products / services

o Dominant or growing market share

o Participation in a growing market

o Global presence and brand names

After determining which companies we wish to own, we then turn our analysis to
determining the intrinsic value of those companies' common stock. We seek common
stock which can be purchased at attractive valuations relative to their
intrinsic value. Our goal is to invest in companies for the long term. We
consider selling the stock in a company if we believe the stock's market price
exceeds Davis Advisors' estimates of intrinsic value, or if the ratio of the
risks and rewards of continuing to own the company is no longer attractive.

PROSPECTUS o SELECTED FUNDS o PAGE 28

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 could increase taxable
distributions), or employ other investment strategies that are not principal
investment strategies, if, in Davis Advisors' professional judgment, the
securities, trading, or investment strategies are appropriate. Factors that
Davis Advisors considers in pursuing these other strategies include whether the
strategies (i) would be consistent with shareholders' reasonable expectations;
(ii) may assist the Fund in pursuing its investment objective; (iii) are
consistent with the Fund's investment strategy; (iv) would cause the Fund to
violate any of its investment restrictions; or (v) would 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. 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 not be 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.

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

PROSPECTUS o SELECTED FUNDS o PAGE 29

EXECUTION OF PORTFOLIO TRANSACTIONS. Davis Advisors places orders with
broker-dealers for Selected Funds' portfolio transactions. Davis Advisors 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, Davis
Advisors considers price, commission, timing, competent block trading coverage,
capital strength and stability, research resources, and other factors. Subject
to best price and execution, Davis Advisors may place orders for Selected Funds'
portfolio transactions with broker-dealers who have sold shares of Selected
Funds. However, when Davis Advisors places orders for Selected Funds' portfolio
transactions, it does not give any consideration to whether a broker-dealer has
sold shares of Selected Funds.

Over the last three years the Funds paid the following brokerage commissions:

FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
2006 2005 2004
---------- ---------- ----------
SELECTED AMERICAN SHARES
Brokerage commissions paid: $2,016,516 $2,028,726 $1,358,929
Brokerage commissions as a
percentage of average net assets: 0.02% 0.02% 0.02%
SELECTED SPECIAL SHARES
Brokerage commissions paid: $ 102,355 $ 159,896 $ 102,065
Brokerage commissions as a
percentage of average net assets: 0.08% 0.14% 0.10%
SELECTED DAILY GOVERNMENT FUND N/A N/A N/A

PROSPECTUS o SELECTED FUNDS o PAGE 30

ONCE YOU
INVEST IN SELECTED FUNDS

This section describes how your investment in a Fund 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. Eastern time 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' daily 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 your
request to purchase or sell shares in good order.

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 Davis Advisors concludes that reliable market quotations for the Funds'
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 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.

PROSPECTUS o SELECTED FUNDS o PAGE 31

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 values 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
affect 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 values converted into U.S. dollar equivalents at the prevailing
exchange rates as computed by State Street Bank and Trust. Fluctuation in the
values 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 prices 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 Selected 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 shareholder reports which are mailed
approximately 60 days after the end of the Funds' second and fourth fiscal
quarters. In addition, each Fund publishes its portfolio holdings on the
Selected Funds' website www.selectedfunds.com and the SEC website

PROSPECTUS o SELECTED FUNDS o PAGE 32

(www.sec.gov) approximately 60 days after the end of each fiscal quarter. Other
information concerning the Funds' portfolio holdings may also be published on
the Selected Funds' website from time to time.

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.

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

PROSPECTUS o SELECTED FUNDS o PAGE 33

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 at any time.
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 the Funds 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
your Fund 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 34

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 will 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, and custodial fees, the costs of
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 35

TOTAL FUND OPERATING EXPENSES

The total cost of operating a mutual fund is reflected in its expense ratio. A
shareholder does not pay operating costs directly; instead, operating costs are
deducted 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 total
operating expenses closely in the prospectus, especially when comparing one fund
with another fund in the same investment category.

FEES PAID TO DEALERS AND OTHER FINANCIAL INTERMEDIARIES

Broker-dealers and other financial intermediaries ("Qualifying dealers") may
charge Davis Distributors, LLC (the "Distributor") substantial fees for selling
Selected Funds' shares and providing continuing support to shareholders.
Qualifying dealers may charge (i) transaction fees paid by purchasing
shareholders; (ii) distribution and service fees from the Funds' 12b-1
distribution plans; (iii) record-keeping fees from the Funds for providing
record-keeping services to investors who hold Selected Funds shares through
dealer-controlled omnibus accounts; and (iv) other fees, described below, paid
by the Distributor from its own resources.

Qualifying dealers may, as a condition to distributing shares of the Selected
Funds, request that the Distributor pay or reimburse the Qualifying dealer for
(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 charged to allow the Distributor to participate in and/or
present at conferences or seminars, sales or training programs for invited
financial professional and other employees, client and investor events and other
dealer-sponsored events. These additional fees are sometimes referred to as
"revenue sharing" payments. A number of factors are considered in determining
fees paid to Qualifying dealers, including the dealer's sales and assets, and
the quality of the dealer's relationship with the Distributor. Fees are
generally based on the value of shares of the Fund held by the dealer or
financial institution for its customers or based on sales of Fund shares by the
dealer or financial institution, or a combination thereof. Davis Advisors may
use its profits from the advisory fee it receives from the Funds to pay some or
all of these fees. Some dealers may also choose to pay additional compensation
to their financial professionals who sell the Funds.

PROSPECTUS o SELECTED FUNDS o PAGE 36

Such payments may be associated with the status of a Fund on a financial
intermediary's preferred list of funds or otherwise associated with the
financial intermediary's marketing and other support activities. The foregoing
arrangements may create an incentive for the brokers, dealers or other financial
institutions, as well as their financial professionals, to sell the Selected
Funds rather than other funds.

In 2006 Davis Advisors and the Distributor were charged additional fees by the
Qualifying dealers listed below. Davis Advisors and the Distributor paid these
fees from their own resources. These Qualifying dealers may provide the Selected
Funds enhanced sales and marketing support and financial advisers employed by
the Qualifying dealers may recommend the Selected Funds rather than other funds.
Qualifying dealers may be added or deleted at any time.

Ameriprise Financial Services, Inc.; Charles Schwab & Co., Inc.; Fidelity
Brokerage Services, LLC; Pershing, LLC; UBS Financial Services, Inc.; Citistreet
Associates; Marshall & IIsley Trust; Mercer HR Services LLC; Nationwide
Financial Services, Inc.; and Wells Fargo Bank, N.A.

In addition, the Distributor may, from time to time, pay additional cash
compensation or other promotional incentives to authorized dealers or agents who
sell shares of the Selected Funds. In some instances, such cash compensation or
other incentives may be offered only to certain dealers or agents who employ
financial professionals who have sold or may sell significant amounts of shares
of the Selected Funds during specified periods of time.

Although Selected Funds may use brokers who sell shares of the Funds to execute
portfolio transactions, the Funds do not consider the sale of fund shares as a
factor when selecting brokers to execute portfolio transactions.

Investors should consult their financial intermediaries regarding the details of
payments they may receive in connection with the sale of Fund shares.

DUE DILIGENCE MEETINGS. The Distributor routinely sponsors due diligence
meetings for financial professionals during which they receive updates on
various Selected Funds and are afforded the opportunity to speak with investment
professionals. 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

PROSPECTUS o SELECTED FUNDS o PAGE 37

permitted by their firm's policies and procedures, financial professionals'
expenses in attending these meetings may be covered by the Distributor.

SEMINARS AND EDUCATIONAL MEETINGS. The Distributor may defray certain expenses
of Qualifying dealers incurred in connection with seminars and other educational
efforts subject to the Distributor's policies and procedures governing payments
for such seminars. The Distributor may share expenses with Qualifying dealers
for costs incurred in conducting training and educational meetings about various
aspects of the Funds for the employees of Qualifying dealers. In addition, the
Distributor may share expenses with Qualifying dealers for costs incurred in
hosting client seminars at which the Fund is discussed.

RECORDKEEPING FEES. Certain Qualifying dealers 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 its
clients' 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. Davis
Advisors, on behalf of the Funds, enters into agreements whereby the Funds are
charged by the dealer or administrator for such recordkeeping services.

Recordkeeping services typically include (i) establishing and maintaining
shareholder accounts and records; (ii) recording shareholder account balances
and changes thereto; (iii) arranging for the wiring of funds; (iv) providing
statements to shareholders; (v) furnishing proxy materials, periodic Selected
Funds reports, prospectuses and other communications to shareholders as
required; (vi) transmitting shareholder transaction information; and (vii)
providing information in order to assist Selected Funds in their compliance with
state securities laws. Each Selected Fund typically would be paying these
shareholder servicing fees directly, were it not that the Qualifying dealer
holds all customer accounts in a single omnibus account with each Selected Fund.

OTHER COMPENSATION. The Distributor may, from its own resources and not the
Funds, pay additional fees to the extent not prohibited by state or federal
laws, the Securities and Exchange Commission, or any self-regulatory agency,
such as the NASD.

PROSPECTUS o SELECTED FUNDS o PAGE 38

HOW TO
CHOOSE A SHARE CLASS

Before you 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 Selected 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 will 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 39

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 $10,000
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"
in this prospectus.

PROSPECTUS o SELECTED FUNDS o PAGE 40

HOW TO
OPEN AN ACCOUNT

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

TWO WAYS YOU CAN OPEN AN ACCOUNT

o BY MAIL. Complete and sign the Application Form and mail it to our service
provider, State Street Bank and Trust. Include a check made payable to
SELECTED FUNDS. 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.

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 the source of your funds. If you do not provide the requested 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, the Fund and the Distributor 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.

PROSPECTUS o SELECTED FUNDS o PAGE 41

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 for these retirement plans and
charges each 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
Shareholder Services.

PROSPECTUS o SELECTED FUNDS o PAGE 42

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 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 describe 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.

FOUR 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 ONLINE ACCOUNT ACCESS. You may initiate most account transactions
through online account access on our website, www.selectedfunds.com. Please
note that certain account types may be restricted from online access.

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

PROSPECTUS o SELECTED FUNDS o PAGE 43

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

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

o BY DEALER. Contact a dealer who will execute the transaction through our
Distributor. Please note that your dealer may charge service fees or
commissions 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
distributions, purchases through automatic investment plans and certain
retirement plans, and automatic exchanges and withdrawals will be confirmed at
least quarterly.

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; and

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

PROSPECTUS o SELECTED FUNDS o PAGE 44

BUYING MORE SHARES

You may buy more shares at any time, by mail, through a dealer, or by wire. The
minimum purchase amount is $25 for Class S shares and $100 for Class D shares.

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

o THROUGH A DEALER. When you buy shares through a dealer, you may be charged
service fees or commissions for these transactions.

o BY WIRE. You may wire federal funds directly to our service provider, State
Street Bank and Trust. To ensure that the purchase is credited properly,
follow these wire instructions:

State Street Bank and Trust Company
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 45

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 predetermined
amount of money to be withdrawn 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.

Purchases can be processed electronically on any day of the month if the
institution that services your bank account is a member of the Automated
Clearing House system. Each debit should be reflected on your next bank
statement.

To sign up for the Automatic Investment Plan, complete 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 Investor
Services.

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

Note: The Automated Clearing House system is used by most banks for electronic
transfers of money into and out of their clients' bank accounts 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 (also known as redeeming your shares) on any business day at net asset
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).

PROSPECTUS o SELECTED FUNDS o PAGE 46

When you sell shares through a dealer, you may be charged service fees or
commissions by the dealer for these transactions.

Redemption proceeds are usually paid to you by check within seven days after
State Street Bank and Trust receives your proper redemption 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 or $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.

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

PROSPECTUS o SELECTED FUNDS o PAGE 47

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.
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).

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.

PROSPECTUS o SELECTED FUNDS o PAGE 48

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 Fund 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 $1,000 in any Fund
as a result of a redemption, exchange, or transfer, or if your account does not
meet the $1,000 minimum investment requirement for any other reason (except a
decline in net asset value), we may redeem your remaining Class S shares in the
Fund at net asset value. We first will notify you, giving you at least sixty
days' notice that an INVOLUNTARY REDEMPTION may take place. If you increase your
account balance to above $1,000 for Class S shares during the notice period the
Involuntary Redemption will be cancelled.

If your Class D shares account balance declines to less than $10,000 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 will convert your remaining Class D
shares into Class S shares at relative net asset value.

MAKING SYSTEMATIC 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 predetermined 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 Fund shares
at around the same time that you make a withdrawal,

PROSPECTUS o SELECTED FUNDS o PAGE 49

you may have to pay taxes. When you participate in this plan, known as the
SYSTEMATIC WITHDRAWAL PLAN, shares are sold so that you will receive payment by
one of three methods:

o You may receive a check at the address of record provided that this address
has not changed for a period of at least 30 days.

o You may also choose to receive funds sent by Automated Clearing House (ACH)
to the banking institution of your choice. You must complete the
appropriate section of the Application Form. If you wish to execute a
Systematic 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 systematic withdrawals at any time without charge or penalty by
calling Shareholder Services.

WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT

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, and receiving banks may also
charge for this service. Proceeds of redemption by federal funds wire are
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.

PROSPECTUS o SELECTED FUNDS o PAGE 50

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 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 "What You Need to Know Before You Sell Your Shares" in
this prospectus 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.

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 intends to seek to restrict or reject such trading or take
other action if in the judgment of Davis Advisors 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.

Selected Funds' Board of Directors has adopted policies and procedures with
respect to the frequent purchases and redemption of fund shares. Currently,

PROSPECTUS o SELECTED FUNDS o PAGE 51

four round-trip exchanges between Selected Funds are allowed during any twelve
month period. You may make an unlimited number of exchanges out of Selected
Daily Government Fund. Automatic exchanges are excluded from this provision.
Certain financial intermediaries, such as 401(k) plan administrators, may apply
purchase and exchange limitations which are different than the limitations
discussed above. These limitations may be more or less restrictive than the
limitations imposed by the Selected Funds, but are designed to detect and
prevent excessive trading. Shareholders should consult their financial
intermediaries to determine what purchase and exchange limitations may be
applicable to their transactions in the Selected Funds through that financial
intermediary. To the extent reasonably feasible, the Funds' market timing
procedures apply to all shareholder accounts and neither Selected Funds nor
Davis Advisors have entered into agreements to exempt any shareholder from
application of either the Selected Funds' or a financial intermediary's
market-timing procedures, as applicable.

Selected Funds and Davis Advisors 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.

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, Selected
Funds are limited in their ability to monitor the trading activity or enforce
the Funds' market timing policy with respect to 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 and technological limitations.

MAKING AUTOMATIC EXCHANGES

PROSPECTUS o SELECTED FUNDS o PAGE 52

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 $100 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 Shareholder Services 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 Selected Funds you can perform a transaction 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(s).

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 30 days.

When you buy, sell or exchange shares by telephone instruction, 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 whose name is 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.

PROSPECTUS o SELECTED FUNDS o PAGE 53

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 Shareholder Services.

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. 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 54

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.

o 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.

o If a dividend or capital gain distribution is for an amount less than $10,
the Fund will not issue a check. Instead, the dividend or capital gain
distribution will be automatically reinvested in additional shares of the
Fund.

o If a dividend or capital gain distribution check remains uncashed for six
months or is undeliverable by the Post Office, we will reinvest the
dividend or distribution in additional shares of the Fund promptly after
making this determination; and future dividends and capital gains
distributions will be automatically reinvested in additional shares of the
Fund.

PROSPECTUS o SELECTED FUNDS o PAGE 55

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.

PROSPECTUS o SELECTED FUNDS o PAGE 56

SELECTED FUNDS FINANCIAL HIGHLIGHTS
SELECTED AMERICAN SHARES, INC.
CLASS S

The following financial information represents selected data for each share of
capital stock outstanding throughout each period:

YEAR ENDED DECEMBER 31,
--------------------------------------------
2006 2005 2004 2003 2002
------ ------ ------ ------ -------

NET ASSET VALUE, BEGINNING OF PERIOD $40.24 $36.87 $33.17 $25.51 $ 30.99
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.30(4) 0.31 0.26 0.22 0.17
Net Realized and Unrealized Gains
(Losses) 5.81 3.34 3.71 7.65 (5.45)
Total From Investment Operations 6.11 3.65 3.97 7.87 (5.28)
DIVIDENDS AND DISTRIBUTIONS
Dividends from Net Investment Income (0.29) (0.28) (0.26) (0.20) (0.17)
Return of Capital -- -- (0.01) (0.01) (0.03)
Total Dividends and Distributions (0.29) (0.28) (0.27) (0.21) (0.20)
NET ASSET VALUE, END OF PERIOD $46.06 $40.24 $36.87 $33.17 $ 25.51
TOTAL RETURN(1) 15.19% 9.90% 11.97% 30.90% (17.06)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000,000 omitted) $7,509 $7,978 $6,660 $5,978 $ 4,346
Ratio of Expenses to Average Net Assets:
Gross 0.90% 0.90% 0.92% 0.94% 0.94%
Net(3) 0.90% 0.90% 0.92% 0.93% 0.93%
Ratio of Net Investment Income to Average
Net Assets 0.72% 0.81% 0.76% 0.80% 0.61%
Portfolio Turnover Rate(2) 9% 4% 3% 8% 19%

(1.) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period.

(2.) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.

(3.) The Net ratio of expenses to average net assets reflects the impact, if
any, of the reduction of expenses paid indirectly and of certain
reimbursements from the Adviser.

(4.) Per share calculations were based on average shares outstanding for the
period.

PROSPECTUS o SELECTED FUNDS o PAGE 57

SELECTED FUNDS FINANCIAL HIGHLIGHTS
SELECTED AMERICAN SHRES, INC.
CLASS D

The following financial information represents selected data for each share of
capital stock outstanding throughout each period:

YEAR ENDED DECEMBER 31,
---------------------------------
MAY 3, 2004
(INCEPTION OF
CLASS)
THROUGH
DECEMBER 31,
2006 2005 2004
------ ------ -------------
NET ASSET VALUE, BEGINNING OF PERIOD $40.23 $36.86 $34.12
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.45(4) 0.41(4) 0.18
Net Realized and Unrealized Gains 5.81 3.35 2.91
Total From Investment Operations 6.26 3.76 3.09
DIVIDENDS AND DISTRIBUTIONS
Dividends from Net Investment Income (0.42) (0.39) (0.34)
Return of Capital -- -- (0.01)
Total Dividends and Distributions (0.42) (0.39) (0.35)
NET ASSET VALUE, END OF PERIOD $46.07 $40.23 $36.86
TOTAL RETURN(1) 15.59% 10.19% 9.08%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000,000 omitted) $4,407 $1,675 $ 681
Ratio of Expenses to Average Net Assets:
Gross 0.58% 0.61% 0.65%*
Net(3) 0.58% 0.60% 0.65%*
Ratio of Net Investment Income to
Average Net Assets 1.04% 1.11% 1.10%*
Portfolio Turnover Rate(2) 9% 4% 3%

(1.) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Total returns are not annualized
for periods of less than one full year.

(3.) The Net ratio of expenses to average net assets reflects the impact, if
any, of the reduction of expenses paid indirectly and of certain
reimbursements from the Adviser.

(4.) Per share calculations were based on average shares outstanding for the
period.

* Annualized.

PROSPECTUS o SELECTED FUNDS o PAGE 58

SELECTED FUNDS FINANCIAL HIGHLIGHTS
SELECTED SPECIAL SHARES, INC.
CLASS S

The following financial information represents selected data for each share of
capital stock outstanding throughout each period.

YEAR ENDED DECEMBER 31,
---------------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------

NET ASSET VALUE, BEGINNING OF PERIOD $ 12.47 $ 12.44 $ 11.70 $ 8.61 $ 10.50
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03)(4) 0.02 0.05 (0.04) (0.04)
Net Realized and Unrealized Gains (Losses) 2.22 1.03 1.26 3.60 (1.81)
Total From Investment Operations 2.19 1.05 1.31 (3.56) (1.85)
DIVIDENDS AND DISTRIBUTIONS
Dividends from Net Investment Income (0.11) (0.13) (0.04) -- --
Distributions from Realized Gains (0.57) (0.89) (0.53) (0.47) (0.04)
Total Dividends and Distributions (0.68) (1.02) (0.57) (0.47) (0.04)
NET ASSET VALUE, END OF PERIOD $ 13.98 $ 12.47 $ 12.44 $ 11.70 $8.61
TOTAL RETURN(1) 17.74% 8.45% 11.34% 41.40% (17.62)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted) $55,014 $68,238 $90,536 $95,653 $59,762
Ratio of Expenses to Average Net Assets
Gross 1.16% 1.16% 1.17% 1.21% 1.21%
Net(3) 1.16% 1.12% 1.17% 1.21% 1.17%
Ratio of Net Investment (Loss) to
Average Net Assets (0.20)% 0.11% 0.37% (0.39)% (0.46)%
Portfolio Turnover Rate(2) 41% 53% 30% 46% 46%

(3.) The Net ratio of expenses to average net assets reflects the impact, if
any, of the reduction of expenses paid indirectly and of certain
reimbursements from the Adviser.

(4.) Per share calculations were based on average shares outstanding for the
period.

PROSPECTUS o SELECTED FUNDS o PAGE 59

SELECTED FUNDS FINANCIAL HIGHLIGHTS
SELECTED SPECIAL SHARES, INC.
CLASS D

The following financial information represents selected data for each share of
capital stock outstanding throughout each period.

YEAR ENDED DECEMBER 31,
------------------------------------------
MAY 3, 2004
(INCEPTION OF CLASS)
THROUGH
DECEMBER 31,
2006 2005 2004
------- ------- --------------------

NET ASSET VALUE, BEGINNING OF PERIOD $ 12.46 $ 12.42 $ 11.97
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02(4) 0.05(4) 0.05
Net Realized and Unrealized Gains 2.23 1.04 1.00
Total From Investment Operations 2.25 1.09 1.05
DIVIDENDS AND DISTRIBUTIONS
Dividends from Net Investment Income (0.16) (0.16) (0.07)
Distributions from Realized Gains (0.57) (0.89) (0.53)
Total Dividends and Distributions (0.73) (1.05) (0.60)
NET ASSET VALUE, END OF PERIOD $ 13.98 $ 12.46 $ 12.42
TOTAL RETURN(1) 18.19% 8.83% 8.91%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $94,654 $55,194 $19,505
Ratio of Expenses to Average Net Assets
Gross 0.83% 0.87% 0.91%*
Net(3) 0.83% 0.86% 0.91%*
Ratio of Net Investment Income to
Average Net Assets 0.13% 0.37% 0.86%*
Portfolio Turnover Rate(2) 41% 53% 30%

(3.) The Net ratio of expenses to average net assets reflects the impact, if
any, of the reduction of expenses paid indirectly and of certain
reimbursements from the Adviser.

(4.) Per share calculations were based on average shares outstanding for the
period.

* Annualized.

PROSPECTUS o SELECTED FUNDS o PAGE 60

SELECTED FUNDS FINANCIAL HIGHLIGHTS
SELECTED DAILY GOVERNMENT FUND
CLASS S

The following financial information represents selected data for each share of
capital stock outstanding throughout each period.

YEAR ENDED DECEMBER 31,
---------------------------------------------------
2006 2005 2004 2003 2002
------- -------- -------- -------- --------

NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.043 0.025 0.007 0.005 0.013
DIVIDENDS AND DISTRIBUTIONS
Dividends from Net Investment Income (0.043) (0.025) (0.007) (0.005) (0.013)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN(1) 4.33% 2.57% 0.73% 0.54% 1.32%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted) $ 5,916 $100,383 $106,643 $112,853 $116,187
Ratio of Expenses to Average Net Assets:
Gross 0.67% 0.68% 0.68% 0.67% 0.67%
Net(2) 0.67% 0.67% 0.68% 0.67% 0.67%
Ratio of Net Investment Income to Average
Net Assets 4.28% 2.54% 0.72% 0.54% 1.30%

(2.) The Net ratio of expenses to average net assets reflects the impact, if
any, of the reduction of expenses paid indirectly and of certain
reimbursements from the Adviser.

PROSPECTUS o SELECTED FUNDS o PAGE 61

SELECTED FUNDS FINANCIAL HIGHLIGHTS
SELECTED DAILY GOVERNMENT FUND
CLASS D

The following financial information represents selected data for each share of
capital stock outstanding throughout each period.

YEAR ENDED DECEMBER 31,
-----------------------------------------
MAY 3, 2004
(INCEPTION OF CLASS)
THROUGH
2006 2005 DECEMBER 31, 2004
-------- ------- --------------------

NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.045 0.027 0.007
DIVIDENDS AND DISTRIBUTIONS
Dividends from Net Investment Income (0.045) (0.027) (0.007)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN(1) 4.61% 2.75% 0.74%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted) $103,653 $11,439 $ 4,963
Ratio of Expenses to Average Net Assets:
Gross 0.40% 0.50% 0.44%*
Net(2) 0.40% 0.50% 0.44%*
Ratio of Net Investment Income to Average
Net Assets 4.55% 2.71% 1.21%*

(2.) The Net ratio of expenses to average net assets reflects the impact, if
any, of the reduction of expenses paid indirectly and of certain
reimbursements from the Adviser.

* Annualized.

PROSPECTUS o SELECTED FUNDS o PAGE 62

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 current prospectuses and reports will be sent to you
within 30 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 execute 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 63

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)

o 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.

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

o ON THE INTERNET. www.selectedfunds.com.

o 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.

[Selected FUNDS LOGO] The Funds' Investment Company Act File Numbers are:
Selected American Shares, Inc. 811-51
Selected Special Shares, Inc. 811-1550
Selected Daily Government Fund, an authorized series of
Selected Capital Preservation Trust 811-5240

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2007

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, 2007. 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

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............................................... 27

SECTION II: KEY PERSONS.................................................. 30
Organization of the Funds............................................. 30
Directors and Officers................................................ 31
Directors............................................................. 31
Independent Directors' Compensation................................... 34
Officers.............................................................. 34
Standing Committees of the Board of Directors......................... 35
Directors' Fund Holdings.............................................. 36
Independent Directors' Affiliations and Transactions.................. 37
Certain Shareholders of the Funds..................................... 37
Investment Advisory Services.......................................... 39
Investment Professionals.............................................. 41
Disclosure of Portfolio Holdings...................................... 44
Distribution of Fund Shares........................................... 45
Other Important Service Providers..................................... 46

SECTION III: CLASSES OF SHARES, PURCHASES, EXCHANGES AND REDEMPTIONS..... 47
Selecting the Appropriate Class of Shares............................. 47
How to Purchase Shares................................................ 47
Special Services...................................................... 47
Exchange of Shares.................................................... 48
Redemption of Shares.................................................. 48

SECTION IV: GENERAL INFORMATION.......................................... 49
Determining the Price of Shares....................................... 49
Dividends and Distributions........................................... 50
Federal Income Taxes.................................................. 51
Performance Data...................................................... 51

APPENDIX A: QUALITY RATINGS OF DEBT SECURITIES........................... 56
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
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 a Fund uses 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. Many are companies that have only 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 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.

Selected Funds Statement of Additional Information 3

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 equity funds may, from time to time, invest
a significant portion of their assets in the financial services sector, if the
Adviser believes that such investments are (a) consistent with the Fund's
investment strategy; (b) may contribute to the Fund achieving its investment
objectives, and (c) 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 other
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 borrowers or
other third parties have a potentially adverse effect on companies in this
industry. Investment banking,

Selected Funds Statement of Additional Information 4

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. Selected Funds do 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
by 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-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

Selected Funds Statement of Additional Information 5

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 and fixed income securities are issued by both
domestic and foreign companies. Sometimes a company may be classified as either
"domestic" or "foreign" depending upon which factors the Adviser considers 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 by 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 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

Selected Funds Statement of Additional Information 6

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.

PASSIVE FOREIGN INVESTMENT COMPANIES. Some securities of companies domiciled
outside the U.S. which the Fund may purchase, may be considered passive foreign
investment companies ("PFICs") under U.S. tax laws. PFICs are those foreign
corporations, which generate primarily passive income. They tend to be growth
companies or "start-up" companies. For federal tax purposes, a corporation is
deemed a PFIC if 75% or more of the foreign corporation's gross income for the
income year is passive income or if 50% or more of its assets are assets that
produce or are held to produce passive income. Passive income is further defined
as any income to be considered foreign personal holding company income within
the subpart F provisions defined by Internal Revenue Code section 954.

Investing in PFICs involves the risks associated with investing in foreign
securities, as described above. There is also the risk that the Fund may not
realize that a foreign corporation it invests in is a PFIC for federal tax
purposes. Federal tax laws impose severe tax penalties for failure to properly
report investment income from PFICs. Following industry standards, the Fund
makes efforts to ensure compliance with federal tax reporting of these
investments.

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 Fund if the Adviser believes that they are consistent with that
Fund's investment strategies may contribute to the Fund's investment objective
and will not cause that 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

Selected Funds Statement of Additional Information 7

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 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 are also 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

Selected Funds Statement of Additional Information 8

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 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 Selected American Shares
and Selected Special Shares 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 Appendix A titled
"Quality Ratings of Debt Securities."

While likely to have some quality and protective characteristics, high-yield,
high-risk debt securities, whether or not 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

Selected Funds Statement of Additional Information 9

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 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

Selected Funds Statement of Additional Information 10

management fees paid to the other investment companies are for the same or
similar services as the management fees paid by 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.

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 other

Selected Funds Statement of Additional Information 11

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 purchase price. For example, changes in interest
rates in a direction other than that expected by the Adviser before settlement
will

Selected Funds Statement of Additional Information 12

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 off-setting 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. The Adviser and the
Fund have claimed exclusions from the definition of the term "commodity pool
operator" under the Commodities Exchange Act and, therefore, are not subject to
registration or regulation as a pool operator under the Commodities Exchange
Act. Some derivative investments the Fund can use are the 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 off-setting 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 off-setting 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.

Selected Funds Statement of Additional Information 14

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 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 write/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

Selected Funds Statement of Additional Information 15

Fund must fulfill its obligation to purchase the underlying investment at the
exercise price. The 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 exercised. 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 regardless of 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.

Selected Funds Statement of Additional Information 16

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 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.

Selected Funds Statement of Additional Information 17

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 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 off-setting 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
off-setting 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.

Selected Funds Statement of Additional Information 18

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 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

Selected Funds Statement of Additional Information 19

foreign currency in order to "lock in" the U.S. dollar price of the security
("transaction 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 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 are still
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.

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

Selected Funds Statement of Additional Information 20

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
a loss 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 off-setting 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 off-setting 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.

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

Selected Funds Statement of Additional Information 21

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 off-setting positions making up the straddle. A previously
disallowed loss generally is allowed at the point when there is no unrecognized
gain in the off-setting positions making up the straddle or the off-setting
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 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.

Selected Funds Statement of Additional Information 22

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 or sell securities directly from or to another client account which is
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 investment professionals,
each of whom performs independent research and develops different levels of
conviction concerning potential investments. Clients managed by the investment
professional 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 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,

Selected Funds Statement of Additional Information 23

Selected Funds, and Clipper Fund), 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 the Davis large cap value
strategy may be patterned after Selected American Shares. A client patterned
after Selected American Shares will usually have all of its trading (other than
trading reflecting cashflows due to client deposits or withdrawals) aggregated
with Selected American Shares . In unusual circumstances, 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.

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 investment professional) 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.

AGGREGATED TRADES. The Adviser generally 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's
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' other client trades.

In general, all of the Adviser's clients (excluding clients who are directing
brokerage and managed account/wrap clients) seeking to purchase or sell a given
security at approximately the same time will be aggregated into a single order
or series of orders. When an aggregated 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

Selected Funds Statement of Additional Information 24

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.

TRADING ERROR CORRECTION. In the course of managing client accounts, it is
possible that trading errors will occur from time to time. The Adviser has
adopted Trading Error Correction Policies & Procedures which, when the Adviser
is at fault, seeks to place a client's account in the same position it would
have been had there been no error. The Adviser retains flexibility in attempting
to place a client's account in the same position it would have been had there
been no error. The Adviser attempts to treat all material errors uniformly,
regardless of whether they would result in a profit or loss to the client. For
example, the Adviser may purchase securities from a client account at cost if
they were acquired due to a trading error. If more than one trading error, or a
series of trading errors, is discovered in a client account, then gains and
losses on the erroneous trades may be netted.

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 investment professionals 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 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 objectives. 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 a Fund's performance.

Selected Funds Statement of Additional Information 25

Portfolio Commissions

The Funds paid the following brokerage commissions:

2006 2005 2004
------------ ---------- ----------
SELECTED AMERICAN SHARES

Brokerage Commissions Paid $2,016,516 $2,028,726 $1,358,929

Amount Paid to Brokers
Providing Portfolio Research None None None

Amount Paid to Brokers
Providing Services to the Funds Less than 1% None 19%

SELECTED SPECIAL SHARES

Brokerage Commissions Paid $ 102,355 $ 159,896 $ 102,065

Amount Paid to Brokers None None None
Providing Portfolio Research

Amount Paid to Brokers
Providing Services to the Funds 1% 7% 1%

Selected Daily Government Fund did not pay any commissions in the preceding
three years.

Investments in Certain Broker-Dealers. As of December 31, 2006, 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, 2006:

FUND $ VALUE
------------------------ ------------
SELECTED AMERICAN SHARES
Morgan Stanley $ 84,676,126
Citigroup Inc. $262,023,327
SELECTED SPECIAL SHARES
None

Selected Funds Statement of Additional Information 26

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.

Further Explanation of Concentration Policies (for Selected American Shares and
Selected Special Shares). 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 Global
Industry Classification Standard ("GICS") as developed by Morgan Stanley Capital
International and Standard & Poors Corporation to determine industry
classification. GICS presents industry classification as a series of levels
(i.e. sector, industry group, industry, and sub-industry). For purposes of
measuring concentration, the Fund generally classifies companies at the
"industry" level. However, further analysis may lead the Adviser to classify
companies at the sub-industry level. The Adviser will only measure concentration
at the sub-industry level when it believes that the various sub-industries in
question can reasonably be expected to be impacted differently to a material
extent by future economic events. For example, in the "Insurance" industry, the
Adviser believes that the sub-industries (insurance brokers, life & health
insurance, multi-line insurance, property & casualty insurance, and reinsurance)
can reasonably be expected to be impacted differently to a material extent by
future economic events such natural disasters, global politics, inflation,
unemployment, technology, etc. In addition, the Adviser may reclassify a company
in to an entirely different sector if it believes that the GICS classification
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. See the non-fundamental restriction further limiting
short selling below. The 1940

Selected Funds Statement of Additional Information 27

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-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.

Selected Funds Statement of Additional Information 28

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. For additional
information concerning futures contracts and their risks, see the section
entitled "Derivatives."

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.

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

Selected Funds Statement of Additional Information 29

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 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.

Selected Funds Statement of Additional Information 30

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"), and Clipper Fund, Inc., 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. Information
about the Directors, including their business addresses, ages, principal
occupations during the past five years, and other current Directorships of
publicly traded companies or funds, are set forth in the table below.

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.

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

INDEPENDENT DIRECTORS:

WILLIAM P. BARR Director Director since 1994 Executive Vice President and General Counsel, 3
(5/23/50) Verizon (formerly GTE Corporation before it
merged with Bell Atlantic) since July 1994.

OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES CURRENTLY SERVING: None

FRANCISCO L. BORGES Director Director since 2006 Chairman and Managing Partner, Landmark Partners, 3
(11/17/51) Inc. since March 1999; former Managing Director,
Financial Guaranty Insurance Company; former
Treasurer, State of Connecticut.

OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES CURRENTLY SERVING: Director, Hartford Foundation for Public Giving; Director, University of
Connecticut Foundation, Inc.

Selected Funds Statement of Additional Information 31

JEROME E. HASS Director Director since 1997 Professor of Finance and Business Strategy, 3
(6/1/40) Johnson Graduate School of Management, Cornell
University; Consultant, National Economic
Research Associates. Chief Financial Officer and
Co-Owner of B&H Enterprises of Ithica (hardware
store).

OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES CURRENTLY SERVING: None

KATHERINE L. MACWILLIAMS Director Director since 1997 Former Chief Financial Officer, Coors Brewers 3
(1/19/56) Limited

OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES CURRENTLY SERVING: None

JAMES J. MCMONAGLE Director/ Director since 1990 Chairman of the Selected Funds Board of Directors 3
(10/1/44) Chairman since 1990; Of Counsel to Vorys, Sater, Seymour
and Pease LLP (law firm) since 2002;

OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES CURRENTLY SERVING: None

RICHARD O'BRIEN Director Director since 1996 Retired Corporate Economist for Hewlett-Packard 3
(9/12/45) Company;

OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES CURRENTLY SERVING: None.

MARSHA WILLIAMS Director Director since 1996 Through March 2007, Executive Vice President and 16
(3/28/51) Chief Financial Officer of Equity Office
Properties Trust (a real estate investment
trust).

OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES CURRENTLY SERVING: Director of the Davis Funds (consisting of 13 portfolios); Director,
Modine Manufacturing, Inc: (heat transfer technology). Director, Chicago Bridge & Iron Company, N.V (industrial construction and
engineering).

INSIDE DIRECTORS:*

Selected Funds Statement of Additional Information 32

ANDREW A. DAVIS Director Director since 1998 President or Vice President of each Selected Fund 16
(6/25/63) 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 FOR PUBLIC COMPANIES CURRENTLY SERVED: Director of the Davis Funds (consisting of 13 portfolios).

CHRISTOPHER C. DAVIS Director Director since 1998 President or Vice President of each Selected 16
(7/13/65) Fund, Davis Fund and Clipper Fund; Chairman,
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 FOR PUBLIC COMPANIES CURRENTLY SERVED: Director of the Davis Funds (consisting of 13 portfolios); Director,
Washington Post Co. (Newspaper Publisher).

* 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 33

INDEPENDENT DIRECTORS' COMPENSATION

During the fiscal year ended December 31, 2006 the compensation paid to the
Directors who are not considered to be interested persons of the Funds is listed
in the table below. Inside Directors are not compensated by the Funds.

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

William Barr $ 57,824 $ 737 $ 639 $ 59,200 $ 59,200
Francisco Borges(3) $ 10,774 $ 134 $ 112 $ 11,020 $ 11,020
Jerome Hass $ 57,824 $ 737 $ 639 $ 59,200 $ 59,200
Katherine MacWilliams $ 65,736 $ 837 $ 727 $ 67,300 $ 67,300
James McMonagle $107,930 $1,376 $1,194 $110,500 $110,500
Richard O'Brien $ 57,824 $ 737 $ 639 $ 59,200 $ 59,200
Marsha Williams $ 52,319 $ 666 $ 579 $ 53,564 $157,164

(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.

(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 seven registered investment companies in the complex.

(3.) Francisco Borges became a Director in October 2006.

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 other affiliated
companies. 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 13 portfolios), Selected Funds (consisting of three portfolios),
and Clipper Fund, Inc. (consisting of one portfolio); Chief Operating Officer,
Davis Selected Advisers, L.P.; and also serves as an executive officer in
certain companies affiliated with the Adviser. Mr. Eich serves on the board of
governors of the Investment Company Institute and on the board of directors of
ICI Mutual.

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 13
portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund,
Inc. (consisting of one portfolio); Vice president and Director of Fund
Accounting, Davis Selected Advisers, L.P.

Selected Funds Statement of Additional Information 34

SHARRA L. HAYNES (BORN 9/25/66, SELECTED FUNDS OFFICER SINCE 1997). Vice
President, Chief Compliance Officer of each of the Davis Funds (consisting of 13
portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund,
Inc. (consisting of one portfolio); Vice President and Chief Compliance Officer,
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 1997). Vice
President and Secretary of each of the Davis Funds (consisting of 13
portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund,
Inc. (consisting of one portfolio); 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 Selected 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, William
Barr, 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 met
one time during calendar year 2006.

AUDIT COMMITTEE. The Selected Funds have an Audit Committee, which is comprised
entirely of Independent Directors (Katherine MacWilliams, Chairperson; William
Barr, Jerome Hass, Richard O'Brien, and James McMonagle). 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 2006.

The Board of Directors has determined that Katherine MacWilliams is an
independent Audit Committee Financial Expert 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' (1) professional experience (ii) independence as defined in
Item 3 of Form N-CSR, and (iii) integrity and absence of disciplinary history.

NOMINATING & GOVERNANCE COMMITTEE. The Selected Funds have a Nominating &
Governance Committee, which is comprised entirely of Independent Directors
(William Barr, Chair; Katherine MacWilliams, and James McMonagle), which meets
as often as deemed appropriate by the Nominating & Governance 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 & Governance
Committee met two times during calendar year 2006.

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

Selected Funds Statement of Additional Information 35

The Nominating & Governance Committee oversees corporate governance functions,
including (1) review compliance with fund governance standards and other
government-related rules under the 1940 Act, (2) review the committee structure
and make recommendations on changes in committees and committee powers, (3)
generally review "best practices" for fund governance and adherence by the Funds
with such practices.

INVESTMENT COMMITTEE. The Selected Funds have an Investment Committee (Richard
O'Brien, Independent Chair, Andrew Davis (inside director), Christopher Davis
(inside director), Jerome Hass (Independent Director), and James McMonagle
(independent Director)). The Investment 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 Investment Committee meets as often as
deemed appropriate by the Committee. The Investment Committee met four times
during calendar year 2006.

PRICING COMMITTEE. The Selected Funds have a Pricing Committee (Marsha Williams
(Independent Chair), James McMonagle (independent Director) Kenneth Eich (an
officer of the Funds), and Douglas Haines (an officer of the Funds)) that meets
as often as deemed appropriate by the Pricing Committee. The Pricing Committee
met 4 times during calendar year 2006. The Pricing Committee reviews and makes
recommendations concerning pricing of the Fund's portfolio securities, including
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.

DIRECTORS' FUND HOLDINGS

As of December 31, 2006, 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:

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

INDEPENDENT DIRECTORS
William Barr over $100,000 None None over $100,000
Francisco Borges $50,001-100,000 $50,001-100,000 None over $100,000
Jerome Hass over $100,000 over $100,000 over $100,000 over $100,000
Katherine MacWilliams over $100,000 $50,001-100,000 $10,001-50,000 over $100,000
James McMonagle over $100,000 over $100,000 $10,001-50,000 over $100,000
Richard O'Brien over $100,000 $10,001-50,000 None over $100,000
Marsha Williams over $100,000 over $100,000 $10,001-50,000 over $100,000
INSIDE DIRECTORS
Andrew Davis** over $100,000 $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, the
Davis Funds for Andrew Davis, Christopher Davis and Marsha Williams, and
the Clipper Fund for Christopher Davis.

** 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.

Selected Funds Statement of Additional Information 36

Stock Ownership Guidelines

The Directors consider 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. As of
December 31, 2006, all Directors met these suggested stock ownership guidelines.
Newly elected Independent Director shall have three years from the date the
Director is first elected on the board of any of the Selected Funds to reach
this ownership level.

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 $120,000, 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 $120,000 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 $120,000 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 March 31, 2007, the Fund's Directors and officers as a group owned the
following percentages of each of the Funds:

Percentage of
Outstanding Shares Owned
------------------------
Class S Class D
------- -------
Selected American Shares * *
Selected Special Shares * 1%
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 37

The following table sets forth as of March 31, 2007, the name and holdings of
each person known by the Funds to be a record owner of more than 5% of the
outstanding shares of 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. Shareholders owning a significant percentage of
the Funds' shares do not effect the voting rights of other shareholders.

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

SELECTED AMERICAN SHARES FBSICO
CLASS S SHARES New York, NY 37.43%

Charles Schwab and Co. Inc.
San Francisco, CA 34.34%

SELECTED AMERICAN SHARES Shelby Cullom Davis & Co.
CLASS D SHARES New York, NY 32.56%

Charles Schwab
San Francisco, CA 17.37%

FBSICO
New York, NY 7.96%

SELECTED SPECIAL SHARES National Financial Services
CLASS S SHARES New York, NY 24.06%

Charles Schwab and Co. Inc.
San Francisco, CA 22.09%

National Investors Services Corp.
New York, NY 5.77%

SELECTED SPECIAL Shelby Cullom Davis & Co.
CLASS D SHARES New York, NY 26.09%

Selected Funds Statement of Additional Information 38

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

SELECTED DAILY GOVERNMENT FUND Raymond James & Assoc. Inc.
CLASS S SHARES St. Petersburg, FL 15.47%

David B. & Cynthia K. Weiner
Chico, CA 6.62%

Reliance Trust Co.
Atlanta, GA 5.25%

SELECTED DAILY GOVERNMENT FUND Shelby Cullom Davis & Co.
CLASS D SHARES New York, NY 88.02%

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"), and Clipper Fund, Inc. 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 Chairman
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, Clipper Fund,
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.

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

Annual Rate Net Assets of Fund
----------- ------------------
0.65% of.... First $500 million
0.60% of.... Next $500 million
0.55% of.... Next $2 billion
0.54% of.... Next $1 billion
0.53% of.... Next $1 billion
0.52% of.... Next $1 billion
0.51% of.... Next $1 billion
0.50% of.... Next $3 billion
0.485% of... Over $10 billion

Fee expressed as a percentage of net assets

Selected Funds Statement of Additional Information 39

Selected Special Shares Adviser Fee Schedule

Annual Rate Net Assets of Fund
------------ -------------------
0.700% of... First $50 million
0.675% of... Next $100 million
0.650% of... Next $100 million
0.600% of... Over $250 million

Fee expressed as a percentage of net assets

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

Expense Cap. As of July 17, 2006, Davis Selected Advisers, L.P. agreed to waive
fees and reimburse the expenses of Selected Daily Government Fund's Class S
shares to the extent it is necessary to ensure that the actual expense incurred,
after recognizing the benefits of custody or other credits. Fee waivers and
expense reimbursements, not exceed 0.75% of net assets.

Duration of Agreement. The agreement to cap expenses shall be effective for an
initial period beginning on July 17, 2006 and ending on December 31, 2006. This
agreement automatically renewed for an additional one-year period ending
December 31, 2007.

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

FISCAL YEAR ENDED DECEMBER 31,

NAME 2006 2005 2004
------------------------------ ----------- ----------- -----------
SELECTED AMERICAN SHARES $56,296,368 $44,976,597 $36,126,515
SELECTED SPECIAL SHARES $ 922,419 $ 783,914 $ 690,416
SELECTED DAILY GOVERNMENT FUND $ 341,411 $ 332,288 $ 336,876

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. 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

Selected Funds Statement of Additional Information 40

qualification of its shares under federal and state securities laws. The Funds
pay or reimburse the Adviser for providing certain shareholder services.

Such reimbursements are detailed below:

FISCAL YEAR ENDED DECEMBER 31,

NAME 2006 2005 2004
------------------------------ -------- -------- --------
SELECTED AMERICAN SHARES $179,305 $171,110 $192,876
SELECTED SPECIAL SHARES $ 9,169 $ 9,247 $ 11,435
SELECTED DAILY GOVERNMENT FUND $ 2,311 $ 2,592 $ 3,504

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. A discussion of the Directors considerations is included
in the semi-annual report.

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 SEC. .

CONTINUING REGULATION. The Adviser, like most other asset managers, is subject
to ongoing inquiries from the SEC and/or NASD regarding industry practices.

PROXY VOTING POLICIES AND RECORD. The Board of Directors has directed the
Adviser to vote the Fund's portfolio securities in conformance with the
Adviser's Proxy Voting Procedures and Policies. These procedures are summarized
in Appendix B. The Funds' actual proxy voting record is published on
www.selectedfunds.com and is also available without charge by calling Selected
Funds' Shareholder Services.

INVESTMENT PROFESSIONALS

SELECTED AMERICAN SHARES

The Investment Professionals 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.

SELECTED SPECIAL SHARES

The Investment Professionals of Selected Special Shares are Christopher Davis
(who serves as research adviser), Chip Tucker, CFA, Danton Goei, Tania Poushine,
and Charles Cavanaugh. They are the persons primarily responsible for investing
the Fund's assets on a daily basis.

SELECTED DAILY GOVERNMENT FUND

The Investment Professional of Selected Daily Government Fund is Creston King.
He is the person primarily responsible for investing the Fund's assets on a
daily basis.

Selected Funds Statement of Additional Information 41

ACCOUNTS MANAGED AS OF DECEMBER 31, 2006

NUMBER NUMBER NUMBER ASSETS(1)
INVESTMENT OF ASSETS(1) IN OF ASSETS(1) IN OF IN
PROFESSIONAL RICS(2) RICS(2) OPIV(3) OPIV(3) OA(4) OA(4)
------------ ------- ------------- ------- ------------ ----------- -------------

C. DAVIS 32 $76.9 Billion 12 $1.5 Billion 47 Thousand $15.2 Billion
K. FEINBERG 29 $76.9 Billion 12 $1.5 Billion 47 Thousand $15.2 Billion
C. TUCKER 3 $1.3 Billion 1 $30 Million 5864 $1.2 Billion
D. GOEI 4 $1.3 Billion 1 $30 Million 5864 $1.2 Billion
T. POUSHINE 4 $1.3 Billion 1 $30 Million 5864 $1.2 Billion
C. CAVANAUGH 0 $0 0 $0 0 $0
C. KING 2 $563 Million 0 $0 0 $0

(1) "Asset" means total assets in the accounts managed. The Investment
Professional may be responsible for all or only a portion of the assets in
the account.

(2) "RIC" means Registered Investment Company.

(3) "OPIV" means Other Pooled Investment Vehicles.

(4) "OA" means Other Accounts. These accounts are primarily managed money/wrap
accounts.

OWNERSHIP OF FUND SHARES

As of December 31, 2006, the Investment professionals of had invested the
following amounts in the Fund.

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

SELECTED AMERICAN SHARES
C. Davis X
K. Feinberg X
SELECTED SPECIAL SHARES
C. Davis X
C. Tucker X
D. Goei X
T. Poushine X
C. Cavanaugh X
SELECTED DAILY GOVERNMENT FUND
C. King X

STRUCTURE OF COMPENSATION

CHRISTOPHER DAVIS' compensation for services provided to the Adviser consists of
a base salary. The Adviser's investment professionals are provided benefits
packages including life insurance, health insurance, and participation in
company 401(k) plan comparable to that received by other company employees.

KENNETH FEINBERG'S compensation for services 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

Selected Funds Statement of Additional Information 42

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 investment professionals are
provided benefits packages including life insurance, health insurance, and
participation in company 401(k) plan comparable to that received by other
company employees.

CHIP TUCKER'S, CFA, DANTON GOEI'S, TANIA POUSHINE'S, AND CHARLES CAVANAUGH'S
Compensation for services provided to the Adviser consists of (i) a base salary;
(ii) an annual discretionary bonus; (iii) awards of equity ("Units") in Davis
Selected Advisers, L.P. 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 investment professionals are
provided benefits packages including life insurance, health insurance, and
participation in company 401(k) plan comparable to that received by other
company employees.

CRESTON KING'S compensation for services 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.

POTENTIAL CONFLICTS OF INTEREST

Actual or apparent conflicts of interest may arise when an investment
professional has day-to-day management responsibilities with respect to more
than one portfolio or other account. More specifically, investment professionals
who advise 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 an
investment professional 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 investment professionals by having its
investment professionals focus on a particular investment discipline. Most other
accounts advised by an investment professional are managed using the same
investment weightings that are used in connection with the management of the
portfolios.

If an investment professional 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 over time. The Adviser does not
receive an incentive based fee on any account.

Selected Funds Statement of Additional Information 43

DISCLOSURE OF PORTFOLIO HOLDINGS

PORTFOLIO HOLDINGS INFORMATION IS PROTECTED. 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. Neither the Funds nor the Adviser
receive compensation with respect to the disclosure of portfolio holdings.

STATISTICAL INFORMATION. The portfolio holdings procedures do not prevent the
release of aggregate, composite or descriptive information that, in the opinion
of the Chief Compliance Officer or his designee, does not present material risks
of dilution, arbitrage, market timing, insider trading or other inappropriate
trading for the mutual fund advised or sub-advised by the Adviser. Information
excluded from the definition of portfolio holdings information generally
includes, without limitation: (1) descriptions of allocations among asset
classes, regions, countries or industries/sectors; (2) aggregated data such as
average or median ratios, market capitalization, credit quality or duration; (3)
performance attributions by industry, sector or country; or (4) aggregated risk
statistics.

HOW PORTFOLIO HOLDINGS INFORMATION IS RELEASED. Selected Funds may disclose
portfolio holdings to outside persons in a number of situations, including the
following: (1) disclosure of specific securities (not a material portion of the
entire portfolio) to a broker-dealer in connection with the purchase or sale by
a Fund of such securities; (2) requests for price quotations on specific
securities (not a material portion of the entire portfolio) from a broker-dealer
for the purpose of enabling the Fund's service providers to calculate 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' investment
professionals 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; and (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' 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, currently the Funds' Chief Compliance Officer, 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.

PUBLIC DISCLOSURE OF PORTFOLIO HOLDINGS. 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 at the end of each
fiscal quarter with a 60-day lag. Selected Funds' Executive Vice President, or
his designee, currently the Funds' Chief Compliance Officer, may authorize
publication of portfolio holdings on a more frequent basis. Portfolio holdings
will then be published on the Selected Funds' website.

Selected Funds Statement of Additional Information 44

THIRD PARTIES RECEIVING PORTFOLIO HOLDINGS INFORMATION. As of December 1, 2006,
each of the below listed third party service providers have been approved to
receive information concerning Selected Funds' portfolio holdings: (1) KPMG LLP
(serves the as the Fund's Independent Registered Public Accounting Firm); (2)
ISS and Glass Lewis & Co. (provide proxy voting services); (3) UBS (provides
securities lending services); (4) Wilshire Associates (provides investment
performance attribution reports); (5) State Street Bank and Trust (serves as the
Funds' custodian bank); (6) Seyfarth Shaw LLP (counsel for Selected Funds); (7)
counsel for the Adviser; and (8) Gcom2 Solutions Inc. (Software Development).

ADMINISTRATION. The Fund's Chief Compliance Officer oversees the release of
portfolio holdings information, including authorizing the release of portfolio
holdings.

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

RECORDKEEPING FEES. Certain dealers 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 Selected Funds participate in various "Fund Supermarkets"
in which a supermarket sponsor (usually a registered broker-dealer) offers many
mutual funds to the supermarket sponsor's clients. The Selected Funds pay the
supermarket sponsor a negotiated fee for distributing the 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 45

A portion of the supermarket sponsor's fee (that portion related to shareholder
services such as new account setup, shareholder accounting, shareholder
inquiries, transaction processing, and shareholder confirmations and reporting)
is paid as a shareholder servicing fee of each Selected Fund. Each Selected Fund
typically would be paying these shareholder servicing fees directly, were it not
that the supermarket sponsor holds all customer accounts in a single omnibus
account with each Selected Fund. 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.

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 marketed Class S shares through financial intermediaries,
primarily fee-only financial planners and mutual fund supermarkets. Both
financial planners and mutual fund supermarkets require 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, until June 30, 2007 Class S shares paid 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 require
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 2006 2005 2004
------------------------------------------------------------------------
SELECTED AMERICAN SHARES $18,445,236 $18,264,920 $15,768,451
SELECTED SPECIAL SHARES $ 145,308 $ 217,393 $ 229,881
SELECTED DAILY GOVERNMENT FUND $ 92,329 $ 261,812 $ 274,547

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

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.

Selected Funds Statement of Additional Information 46

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. KPMG LLP ( KPMG ), 707 17 Street,
Suite 2700, Denver, CO 80202, serves as independent registered public
accountants for each of the Davis Funds. KPMG audits the Fund's financial
statements and performs other related audit services and meets with the Audit
Committee of the Board of Directors. In addition, KPMG reviews federal and state
income tax returns and related forms. Audit and non-audit services provided by
KPMG to the Fund must be pre-approved by the Audit Committee.

COUNSEL. Seyfarth Shaw LLP, 131 S. Dearborn St., Suite 2400, Chicago, IL 60603,
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.

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"),
Coverdel 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:

Selected Funds Statement of Additional Information 47

(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 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
are still 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

Selected Funds Statement of Additional Information 48

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 of Directors 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, 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 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,

Selected Funds Statement of Additional Information 49

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.

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.

Selected Funds Statement of Additional Information 50

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 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, a Fund may advertise information regarding its 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

Average Annual Total Return Before Taxes

The Fund may advertise its investment performance without reflecting the
potential effects of income taxes.

Average annual total return before taxes 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 class
in accordance with the standardized method prescribed by the SEC by determining
the average annual compounded rates of return over the periods indicated, which
would equate the initial amount invested to the ending redeemable value,
according to the following formula:

Selected Funds Statement of Additional Information 51

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

This calculation: (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates; and (ii) deducts: (a) the
maximum front-end or applicable contingent deferred sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory fees, charged as expenses to all shareholder accounts.

Average Annual Total Return After Taxes on Distributions.

The Fund may advertise its investment performance on an after-tax basis.

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. The Fund offers Class S & D
shares. 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.

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 class 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

The Fund may advertise its investment performance for Class A and/or Y shares
after taxes on distribution and sale of fund shares.

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 class 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:

Selected Funds Statement of Additional Information 52

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

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, deducting a maximum front-end or applicable contingent deferred
sales charge, 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" is computed in accordance with a standardized method
prescribed by the rules of the SEC and is calculated separately for each class.
30-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.

A Fund's 30-Day SEC Yield fluctuates 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.

Selected Funds Statement of Additional Information 53

CURRENT AND EFFECTIVE YIELDS. The current and effective yields for Selected
Daily Government Fund's Class S and D shares for the seven-day period 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

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.

Selected Funds Statement of Additional Information 54

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.

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 55

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

Selected Funds Statement of Additional Information 56

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.

Selected Funds Statement of Additional Information 57

APPENDIX B
SUMMARY OF THE ADVISER'
PROXY VOTING PROCEDURES AND POLICIES
JUNE 2006

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

The Adviser votes proxies with a focus on the investment implications of each
issue. For each proxy vote, The Adviser takes into consideration its duty to
clients and all other relevant facts known to The Adviser 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.

The Adviser has adopted written Proxy Voting Policies and Procedures 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 investment
professionals for each client account, management of a company presenting a
proposal, shareholder groups, and independent proxy research services.

Clients may obtain a copy of The Adviser' Proxy Voting Policies and Procedures,
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

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 The Adviser
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. The Adviser' 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. The Adviser 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, The Adviser opposes
proposals that limit management's

Selected Funds Statement of Additional Information 58

ability to do this. The Adviser 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. The Adviser 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 and incentive
plans that are contingent on delivering value to shareholders. The Adviser
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.

(d) Support compensation policies that reward management teams appropriately for
performance. We believe that well thought out incentives are critical to driving
long-term shareholder value creation. Management incentives ought to be aligned
with the goals of long-term owners. In our view, the basic problem of
skyrocketing executive compensation is not high pay for high performance, but
high pay for mediocrity or worse. In situations where we feel that the
compensation practices at companies we own are not acceptable, we will exercise
our discretion to vote against compensation committee members and specific
compensation proposals.

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

CONFLICTS OF INTEREST

A potential conflict of interest arises when The Adviser has business interests
that may not be consistent with the best interests of its client. The Adviser'
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) The Adviser may disclose the conflict to the client and obtain the
client's consent prior to voting the proxy;

(3) The Adviser 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.

Selected Funds Statement of Additional Information 59



                                    FORM N-1A

                                      JOINT
                               PART C 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. 92 UNDER THE SECURITIES ACT OF 1933
                       REGISTRATION STATEMENT NO. 2-10699
                                       AND
            AMENDMENT NO. 40 UNDER THE INVESTMENT COMPANY ACT OF 1940
                             REGISTRATION NO. 811-51

                          SELECTED SPECIAL SHARES, INC.
        POST-EFFECTIVE AMENDMENT NO. 65 UNDER THE SECURITIES ACT OF 1933
                       REGISTRATION STATEMENT NO. 2-27514
                                       AND
            AMENDMENT NO. 41 UNDER THE INVESTMENT COMPANY ACT OF 1940
                           REGISTRATION NO. 811-01533

                       SELECTED CAPITAL PRESERVATION TRUST
        POST-EFFECTIVE AMENDMENT NO. 34 UNDER THE SECURITIES ACT OF 1933
                       REGISTRATION STATEMENT NO. 33-15807
                                       AND
            AMENDMENT NO. 36 UNDER THE INVESTMENT COMPANY ACT OF 1940
                            REGISTRATION NO. 811-5240


                                        1



                                     PART C

                                OTHER INFORMATION

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

     Item 23. 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.


                                        2



          (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.

          (a)(11)* Articles of Amendment of Articles of Incorporation (SAS);
                   increasing authorized shares.

          (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

          (c)      Instruments Defining Rights of Security Holders. Not
                   applicable.

          (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. Incorporated by
                   reference to Exhibit 22(d)(7) of Registrant's registration
                   statements 33-15807, filed on Edgar February 24, 2005.

          (e)(1)   Underwriting Contracts (SAS). Distribution Services Agreement
                   and Plan of Distribution dated January 1, 2001. Incorporated
                   by reference to Exhibit


                                        3



                 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 Agreement. Agreement with State Street Bank & Trust
                 dated January 1, 2006. Incorporated by reference to Exhibit
                 23(g) of Registrants' registration statements (SAS: 2-10699,
                 SSS: 2-27514, and SCPT:33-15807), filed on Edgar April 27,
                 2006.

          (h)(1) Other Material Contracts (SAS, SSS, SCPT). Transfer Agent
                 Agreement with Boston Financial Data Services dated January 1,
                 2006. Incorporated by reference to Exhibit 23(h)(1) of
                 Registrants' registration statements (SAS: 2-10699, SSS:
                 2-27514, and SCPT:33-15807), filed on Edgar April 27, 2006.

          (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. Incorporated by reference to Exhibit 22(n)
                 of Registrant's registration statements 33-15807, filed on
                 Edgar February 24, 2005.

          (o)    Reserved.


                                        4



          (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. Incorporated by
                  reference to Exhibit 22(q)(3) of Registrant's registration
                  statements 33-15807, filed on Edgar February 24, 2005.

          (q)(4)* Other Exhibits. (SAS, SSS, SCPT) Powers of Attorney of
                  Francisco L. Borges dated April 23, 2007 appointing Arthur Don
                  and Thomas Tays as attorneys-in-fact.

                *    filed herein

Item 24. 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 25. 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


                                        5



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 26. 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,
President, and/or Vice President of each of the Davis Funds and the Selected
Funds; President of Clipper Fund, Inc.; Director, Chairman 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, Selected Funds, and Clipper Fund; 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, the Selected Funds, and
Clipper Fund; Vice President of Davis Investments, LLC.

SHARRA L. HAYNES (9/25/66) 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.
Vice President and Chief Compliance Officer of each of the Davis Funds, the
Selected Funds, and Clipper Fund; 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 (03/07/57), 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.
Vice President and Secretary of each of the Davis Funds, Selected Funds, and
Clipper Fund, Inc.; 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.


                                        6



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 27. Principal Underwriter

(a) Davis Distributors, LLC, a wholly owned subsidiary of the Adviser, located
at 2949 East Elvira Road, Suite 101, Tucson, AZ 85706. Davis Distributors, LLC
is the principal underwriter for each of the Davis Funds, Selected Funds,
Clipper Fund, and Davis Funds SICAV.

(b) Management of the Principal Underwriter:



       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


(c) Not applicable.

Item 28. 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,
Seventh Floor, North Quincy, Massachusetts 02107.

Item 29. Management Services

Not applicable

Item 30. Undertakings


                                        7



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 24th day of April, 2007.

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        April 24, 2007
------------------
Kenneth Eich


Douglas Haines*      Principal Financial Officer; and   April 24, 2007
------------------   Principal Accounting Officer
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


                                        8



                         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 April 25, 2005 by the following persons in the
capacities indicated.

           Signature                Title
-------------------------------   --------


William P. Barr*                  Director
-------------------------------
William P. Barr


Francisco L. Borges *             Director
-------------------------------
Francisco L. Borges


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 Exhibits 23(q)(1) and 23(q)(4) of Part C of this registration statement.


                                        /s/ Thomas Tays
                                        ----------------------------------------
                                        Thomas Tays
                                        Attorney-in-Fact


                                        9



                                  EXHIBIT LIST

23(a)(11)   Articles increasing SAS Authorized Shares
23(i)       Opinion and Consent of Counsel, Seyfarth Shaw, LLP.
23(j)       Consent of Independent Accountants, KPMG, LLP.
23(q)(4)    POA of Francisco L. Borges


                                       10