SELECTED CAPITAL PRESERVATION TRUST, 485BPOS, 2000-05-01

SELECTED CAPITAL PRESERVATION TRUST
485BPOS, 2000-05-01

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<PAGE>

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. 82 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 2-10699
AND
AMENDMENT NO. 30 UNDER THE INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-51

SELECTED SPECIAL SHARES, INC.
POST-EFFECTIVE AMENDMENT NO. 55 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 2-27514
AND
AMENDMENT NO. 31 UNDER THE INVESTMENT COMPANY ACT OF 194
REGISTRATION NO. 811-1550

SELECTED CAPITAL PRESERVATION TRUST
POST-EFFECTIVE AMENDMENT NO. 24 UNDER THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT NO. 33-15807
AND
AMENDMENT NO. 26 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-

<PAGE>

Sheldon R. Stein, Esq.
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
(1-312-580-2014)

It is proposed that this filing will become effective:

[ ] Immediately upon filing pursuant to paragraph (b)
[X] On May 1, 2000, 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
(2) SELECTED SPECIAL SHARES FUND

Shares of Beneficial Interest of
--------------------------------

(1) SELECTED U.S. GOVERNMENT INCOME FUND
(2) SELECTED DAILY GOVERNMENT FUND

<PAGE>

CROSS REFERENCE SHEET
---------------------

N-1A
ITEM NO. PART A CAPTION OR PLACEMENT: JOINT PROSPECTUS
- - -------- ---------------------------------------------
(Shares of Selected American Shares Fund, Selected Special
Shares Fund, Selected U.S. Government Income Fund, and Selected
Daily Government Fund are offered though a single joint
prospectus)

1. Front and Back Cover pages
2. Overview of Each Selected Fund:
Investment Objective and Strategy
Determining if this Fund is Right for You
Principal Risks
Past Performance
3. Fees and Expenses of the Fund
4. How We Manage Selected Funds
5. Annual Report, incorporated by reference
6. Who is Responsible for Your Selected Account
7. Once You Invest in the Selected Funds
How to Open an Account
How to Buy, Sell and Exchange Shares
8. Once You Invest in the Selected Funds
9. Financial Highlights

N-1A
ITEM NO. PART B CAPTION OR PLACEMENT:
- - -------- ----------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------

10. Cover Page
11. Organization of the Company
12. Portfolio Securities
Other Investment Practices
Investment Restrictions
13. Directors and Officers
Directors Compensation Table
14. Certain Shareholders of the Fund
15. Investment Advisory Services
Distribution of Company Shares
Other Important Service Providers
16. Portfolio Transactions
17. Organization of the Company
18. Contained in the Prospectus

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19. Federal Income Taxes
20. Distribution of Company Shares
21. Performance Data
22. Annual Report Incorporated by Reference

<PAGE>

Draft 04.24.00

SELECTED FUNDS
SELECTED AMERICAN SHARES, INC.
SELECTED SPECIAL SHARES, INC.
SELECTED U.S. GOVERNMENT INCOME FUND
SELECTED DAILY GOVERNMENT FUND

Prospectus and Application Form

May 1, 2000

The Securities and Exchange Commission has not approved or disapproved of these
securities. The Securities and Exchange Commission has not determined whether
this prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.

1
<PAGE>

TABLE OF CONTENTS

Overview of Each Selected Fund
Selected American Shares, Inc.
Selected Special Shares, Inc.
Selected U.S. Government Income Fund
Selected Daily Government Fund
Investment Objective and Strategy
Determining If This Fund Is Right for You
Principal Risks
Past Performance
Fees and Expenses
Financial Highlights

Who Is Responsible for Your Selected Account

How We Manage Selected Funds

Once You Invest in Selected Funds

How to Open an Account

How to Buy, Sell and Exchange Shares

Other Fund Documents

2
<PAGE>

OVERVIEW OF SELECTED AMERICAN SHARES, INC.

INVESTMENT OBJECTIVE AND STRATEGY

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 current income will be low.

The Fund invests primarily in common stock of U.S. companies with market
capitalizations of at least $5 billion.

Davis Selected Advisers, L.P. serves as investment adviser for Selected American
Shares and manages its investment portfolio. The portfolio managers use the
Davis investment philosophy to select common stocks of quality overlooked growth
companies at value prices and to hold them for the long term. We look for
companies with sustainable growth rates that are selling at modest
price-to-earnings multiples, hoping that the multiples will expand as other
investors recognize the companies' true worth. We believe that companies with
sustainable growth rates and gradually expanding price-to-earnings multiples can
generate better returns for investors than large capitalization domestic stocks
generally. We sell a company if the company no longer contributes to the Fund's
investment objective.

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 and some current income.
o You are more comfortable with established, well-known companies.
o You are investing for the long term (five years or more).

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 significant current income.
o You are investing for the short-term (less than five years).

PRINCIPAL RISKS

If you buy shares of Selected American Shares, you may lose some or all of the
money that you invest. This section describes what we think are the two most
significant factors that can cause the Fund's performance to suffer.

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

o COMPANY RISK. The price of a common stock varies with the success and
failure of the company issuing the stock. As a result, the success of the
companies in which the Fund invests largely determines the Fund's
performance.

3
<PAGE>

An investment in Selected American Shares is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

You can find more detailed information about the risks of the Fund's particular
investments in the section called HOW WE MANAGE SELECTED FUNDS.

PAST PERFORMANCE

The bar chart and the table below provide an indication of the risks of
investing in Selected American Shares by showing changes in the Fund's
performance from year-to-year over a 10-year period and by showing how the
Fund's average annual returns for one, five and 10 years compare to those of the
S&P 500(R), a widely recognized unmanaged index of stock performance. How the
Fund has performed in the past is not necessarily an indication of how the Fund
will perform in the future.

SELECTED AMERICAN SHARES
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD
(As of December 31st of Each Year)

1990 (3.90)%
1991 46.37%
1992 5.78%
1993 5.42%
1994 (3.20)%
1995 38.09%
1996 30.74%
1997 37.25%
1998 16.27%
1999 20.32%

During the period shown above, the highest quarterly return was 26.04% for the
first quarter of 1991, and the worst quarterly return was (14.78)% for the third
quarter of 1998. Year-to-date performance as of the first quarter 2000 (not
annualized) was 9.06%.

SELECTED AMERICAN SHARES
AVERAGE ANNUAL TOTAL RETURNS
(For the Periods Ended December 31, 1999)

- - --------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
- - --------------------------------------------------------------------------------
SELECTED AMERICAN SHARES 20.32% 28.21% 18.05%
- - --------------------------------------------------------------------------------
S&P 500(R)INDEX 21.04% 28.51% 18.17%
- - --------------------------------------------------------------------------------

4
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FEES AND EXPENSES

FEES YOU MAY PAY AS A SELECTED AMERICAN SHARES SHAREHOLDER
(Paid Directly From Your Investment)

- - --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a None
percentage of offering price)
- - --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) Imposed on None
Redemptions (as a percentage of the lesser of the net
asset value of the shares redeemed or the total cost
of such shares)
- - --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
- - --------------------------------------------------------------------------------
Exchange Fee None
- - --------------------------------------------------------------------------------

SELECTED AMERICAN SHARES
ANNUAL FUND OPERATING EXPENSES
(For the Year Ended December 31, 1999)
(Deducted From Selected American Shares' Assets)

- - --------------------------------------------------------------------------------
Management Fees 0.57%
- - --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25%
- - --------------------------------------------------------------------------------
Other Expenses 0.11%
- - --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.93%
- - --------------------------------------------------------------------------------

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 and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5.00% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, your costs--based on these assumptions--would be:

----------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------
$95 $296 $515 $1,143
----------------------------------------------------------------

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Selected
American Shares 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.

KPMG LLP has audited the information for the fiscal years 1999 and 1998. KPMG
LLP's report, along with the Fund's financial statements, is included in
Selected Funds' annual report, which is available upon request. Another firm
audited the information for the previous fiscal years.

5
<PAGE>

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

SELECTED AMERICAN SHARES

YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $31.16 $27.18 $21.53 $17.68 $13.09
------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ................. .15 .15 .16 .18 .22
Net Realized and Unrealized Gains ..... 6.08 4.24 7.72 5.15 4.74
------ ------ ------ ------ ------
Total From Investment Operations ... 6.23 4.39 7.88 5.33 4.96

Dividends and Distributions
Dividends from Net Investment Income .. (.15) (.15) (.17) (.17) (.22)
Distributions from Realized Gains ..... (1.44) (.26) (2.05) (1.31) (.15)
Dividends in Excess of Net
Investment Income .................. -- -- (.01) -- --
------ ------ ------ ------ ------
Total Dividends and Distributions .. (1.59) (.41) (2.23) (1.48) (.37)
------ ------ ------ ------ ------

Net Asset Value, End of Period ......... $35.80 $31.16 $27.18 $21.53 $17.68
====== ====== ====== ====== ======
Total Return(1)......................... 20.32% 16.27% 37.25% 30.74% 38.09%

Ratios/Supplemental Data
Net Assets, End of Period
(000,000 omitted) .................. $3,704 $2,906 $2,222 $1,376 $926
Ratio of Expenses to Average Net Assets .93% .94% .96% 1.03% 1.09%
Ratio of Net Investment Income to
Average Net Assets ................. .24% .52% .62% .87% 1.42%
Portfolio Turnover Rate(2)............. 21% 20% 26% 29% 27%

</TABLE>

(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.

6
<PAGE>

OVERVIEW OF SELECTED SPECIAL SHARES, INC.

INVESTMENT OBJECTIVE AND STRATEGY

Selected Special Shares, Inc.'s ("Selected Special Shares") investment objective
is capital growth.

The Fund invests primarily in common stock of U.S. companies with small and
medium market capitalizations, but may invest in companies of any size.

Bramwell Capital Management, Inc. serves as sub-adviser for Selected Special
Shares and manages its investment portfolio. The sub-adviser begins by
establishing broad investment themes and then hunts for solid investment
opportunities in the sectors of the economy where it foresees growth.

The primary strategy is to pick companies growing at rapid rates and to buy
their stock at a discount to their future earnings growth rate or to the overall
market. Frequently these are companies that have strong revenue growth and
companies with unique products and services that have pricing flexibility. The
sub-adviser considers selling a company if it turns out that it made a mistake
in its original appraisal or if the company no longer contributes to the Fund's
investment objective.

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 prefer to invest in small and medium capitalization growth companies.
o You are willing to accept higher risk for the opportunity to pursue higher
returns.
o You are investing for the long term (five years or more).

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 prefer to invest in larger, more established companies.
o You are investing for the short-term (less than five years).

PRINCIPAL RISKS

If you buy shares of Selected Special Shares, you may lose some or all of the
money that you invest. This section describes what we think are the two most
significant factors that can cause the Fund's performance to suffer.

7
<PAGE>

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.

An investment in Selected Special Shares is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

You can find more detailed information about the risks of the Fund's particular
investments in the section called HOW WE MANAGE SELECTED FUNDS.

8
<PAGE>

PAST PERFORMANCE

The bar chart and the table below provide an indication of the risks of
investing in Selected Special Shares by showing changes in the Fund's
performance from year-to-year over a 10-year period and by showing how the
Fund's average annual returns for one year, five years, and 10 years compare to
those of the S&P 500(Registered Trademark), a widely recognized unmanaged
index of stock performance. How the Fund has performed in the past is not
necessarily an indication of how the Fund will perform in the future.

SELECTED SPECIAL SHARES
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD
(As of December 31 of Each Year)

1990 (6.87)%
1991 25.53%
1992 8.43%
1993 10.81%
1994 (2.56)%
1995 34.24%
1996 11.86%
1997 26.91%
1998 24.52%
1999 16.83%

During the period shown above, the highest quarterly return was 22.74% for the
fourth quarter of 1998, and the worst quarterly return was (18.96)% for the
third quarter of 1990. Year-to-date performance as of the first quarter 2000
(not annualized) was 9.15%.

SELECTED SPECIAL SHARES
AVERAGE ANNUAL TOTAL RETURNS
(For the Periods Ended December 31, 1999)

- - --------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
- - --------------------------------------------------------------------------------
SELECTED SPECIAL SHARES 16.83% 22.61% 14.26%
- - --------------------------------------------------------------------------------
S&P 500(R)INDEX 21.04% 28.51% 18.17%
- - --------------------------------------------------------------------------------

9
<PAGE>

FEES AND EXPENSES

FEES YOU MAY PAY AS A SELECTED SPECIAL SHARES SHAREHOLDER
(Paid Directly From Your Investment)

- - --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a None
percentage of offering price)
- - --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) Imposed on None
Redemptions (as a percentage of the lesser of the net
asset value of the shares redeemed or the total cost of
such shares)
- - --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
- - --------------------------------------------------------------------------------
Exchange Fee None
- - --------------------------------------------------------------------------------

SELECTED SPECIAL SHARES
ANNUAL FUND OPERATING EXPENSES
(For the Year Ended December 31, 1999)
(Deducted From Selected Special Shares Fund's Assets)

- - --------------------------------------------------------------------------------
Management Fees 0.69%
- - --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25%
- - --------------------------------------------------------------------------------
Other Expenses 0.23%
- - --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.17%
- - --------------------------------------------------------------------------------

EXAMPLE

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

The example assumes that you invest $10,000 in Selected Special Shares for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5.00% return each
year and that Selected Special Shares' operating expenses remain the same.
Although your actual costs may be higher or lower, your costs--based on these
assumptions--would be:

------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------
$119 $372 $644 $1,420
------------------------------------------------------------

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Selected Special
Shares 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.

KPMG LLP has audited the information for the fiscal years 1999 and 1998. KPMG
LLP's report, along with the Fund's financial statements, is included in
Selected

10
<PAGE>

Funds' annual report, which is available upon request. Another firm audited the
information for the previous fiscal years.

SELECTED SPECIAL SHARES

YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $14.76 $13.03 $10.89 $10.80 $9.02
------ ------ ------ ------ -----
Income (Loss) From Investment Operations
Net Investment Loss .................... (.09) (.08) (.07) -- --
Net Realized and Unrealized Gains ..... 2.47 3.14 2.83 1.27 3.04
------ ------ ------ ------ -----
Total From Investment Operations .... 2.38 3.06 2.76 1.27 3.04

Dividends and Distributions
Distributions from Realized Gains ...... (.97) (1.33) (.62) (1.18) (1.26)
Return of Capital ...................... -- (1) -- -- -- --
------ ------ ------ ------ -----
Total Dividends and Distributions ... (.97) (1.33) (.62) (1.18) (1.26)
------ ------ ------ ------ -----
Net Asset Value, End of Period .......... $16.17 $14.76 $13.03 $10.89 $10.80
====== ====== ====== ====== ======
Total Return(2).......................... 16.83% 24.52% 26.91% 11.86% 34.24%

Ratios/Supplemental Data
Net Assets, End of Period (000s omitted) $107,592 $94,644 $74,930 $62,435 $58,975
Ratio of Expenses to Average Net Assets 1.17% 1.26%(3) 1.28% 1.33% 1.48%
Ratio of Net Investment Loss to Average
Net Assets .......................... (.59)% (.58)% (.60)% (.66)% (.58)%
Portfolio Turnover Rate(4).............. 44% 41% 51% 98% 127%

</TABLE>

(1) Less than $0.005 per share.

(2) 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.

(3) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.25% for the period ended December
31, 1998.

(4) 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.

OVERVIEW OF SELECTED U.S. GOVERNMENT INCOME FUND

INVESTMENT OBJECTIVE AND STRATEGY

Selected U.S. Government Income Fund's investment objective is to obtain current
income consistent with preservation of capital by investing primarily in U.S.
Government Securities.

11
<PAGE>

The Fund does not attempt to generate the highest possible current yield for its
investors. Instead, we try to deliver competitive results with less risk or
volatility than our competitors.

There are two basic types of U.S. Government Securities: direct obligations of
the U.S. Treasury, and obligations issued or guaranteed by an agency or
instrumentality of the U.S. Government. U.S. Government Securities all 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.

Selected U.S. Government Income Fund's portfolio often contains a significant
percentage of mortgage-backed securities and collateralized mortgage
obligations.

o A "mortgage-backed security" represents ownership of a pool of mortgage
loans. As the mortgages are paid off, a portion of the principal and
interest payments are passed through to the owners of the securities.

o A "collateralized mortgage obligation" is a debt security that is secured
by a pool of mortgages, mortgage-backed securities, U.S. Government
Securities, or corporate debt obligations.

Selected U.S. Government Income Fund only buys mortgage-backed securities and
collateralized mortgage obligations that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

Selected U.S. Government Income Fund typically holds many different types of
U.S. Government Securities with varying features. We try to buy securities with
a range of maturity dates, interest rates and call (prepayment) provisions. By
diversifying among these features, the Fund seeks to capture both the higher
yield of long-term securities and the flexibility of short-term securities.

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 Government Securities.
o You want to diversify a common stock portfolio.
o You are investing for at least three years.

YOU SHOULD NOT INVEST IN THIS FUND IF:
o You cannot accept even moderate price swings or market declines.
o You are investing for less than three years.

PRINCIPAL RISKS

Selected U.S. Government Income Fund principally holds high quality debt
securities, which pose very little credit risk. However, an investment in the
Fund is susceptible

12
<PAGE>

to interest rate risk. There are two principal ways that changes in interest
rates affect the U.S. Government Securities:

o PRICE VOLATILITY RISK. Most U.S. Government Securities pay a fixed interest
rate. When market rates increase, the value and price of fixed-rate
securities usually decline. When interest rates are falling, the value and
price of fixed-rate securities usually increase. As a result, an increase
in market rates should reduce the value of the Fund's portfolio and a
decrease in rates should have the opposite effect.

o EXTENSION AND PREPAYMENT RISK. Market prices of mortgage-backed securities
and collateralized mortgage obligations will fluctuate when borrowers
change the pace at which they prepay the underlying mortgages. Changes in
market interest rates influence borrowers' prepayment decisions. Rising
interest rates cause "extension risk"; borrowers are more likely to
maintain their existing mortgages until they come due instead of choosing
to prepay them. Falling interest rates cause "prepayment risk"; borrowers
are more likely to prepay their mortgages so that they can refinance at a
lower rate. A government agency that has the right to "call" (prepay) a
fixed-rate security may respond to interest rate changes in the same way.

The pace at which borrowers prepay their obligations affects the yield and the
cash flow to holders of securities tied to those obligations. These changes in
yield and cash flow affect the market value and price of those securities.

An investment in Selected U.S. Government Income Fund is not a bank deposit and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.

PAST PERFORMANCE

The bar chart and the table below provide an indication of the risks of
investing in Selected U.S. Government Income Fund by showing changes in the
Fund's performance from year-to-year for the past 10 years and by showing how
the Fund's average annual returns for one year, five years, and 10 years compare
to those of the Lehman Brothers Intermediate Term U.S. Treasury Securities
Index, a recognized unmanaged index of Government Securities performance. How
the Fund has performed in the past is not necessarily an indication of how the
Fund will perform in the future.

SELECTED U.S. GOVERNMENT INCOME FUND
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD
(As of December 31st of Each Year)

1990 8.53%
1991 13.46%
1992 5.11%
1993 7.99%
1994 (2.71)%
1995 15.97%
1996 2.85%
1997 7.32%
1998 5.90%

13
<PAGE>

1999 (1.97)%

During the period shown above, the highest quarterly return was 6.14% for the
third quarter of 1991, and the worst quarterly return was (2.49)% for the first
quarter of 1994. Year-to-date performance as of the first quarter 2000 (not
annualized) was 1.04%.

SELECTED U.S. GOVERNMENT INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
(For the Periods Ended December 31, 1999)

- - --------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
- - --------------------------------------------------------------------------------
SELECTED U.S. GOVERNMENT (1.97)% 5.85% 6.11%
INCOME FUND
- - --------------------------------------------------------------------------------
LEHMAN BROTHERS 0.44% 6.93% 7.09%
INTERMEDIATE TERM U.S.
TREASURY SECURITIES INDEX
- - --------------------------------------------------------------------------------

30-DAY SEC YIELD

As of December 31, 1999, the Fund's 30-day SEC yield was 5.60%. You can obtain
Selected U.S. Government Income Fund's most recent 30-day SEC Yield by calling
us toll-free at 1-800-243-1575, Monday through Friday, 7 a.m. to 4 p.m. Mountain
Time.

FEES AND EXPENSES

FEES YOU MAY PAY AS A SELECTED U.S. GOVERNMENT INCOME FUND SHAREHOLDER
(Paid Directly From Your Investment)

14
<PAGE>

SELECTED U.S. GOVERNMENT INCOME FUND
ANNUAL FUND OPERATING EXPENSES
(For the Year Ended December 31, 1999)
(Deducted From Selected U.S. Government Income Fund's Assets)

- - --------------------------------------------------------------------------------
Management Fees 0.42%
- - --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25%
- - --------------------------------------------------------------------------------
Other Expenses* 0.94%
- - --------------------------------------------------------------------------------
Total Annual Operating Expenses* 1.61%
- - --------------------------------------------------------------------------------

* We voluntarily waived a portion of our fees, which reduced the Fund's Total
Annual Operating Expenses to 1.28%.

EXAMPLE

This example is intended to help you compare the cost of investing in Selected
U.S. Government Income Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in Selected U.S. Government Income
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your investment has a 5.00%
return each year and that Selected U.S. Government Income Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
your costs--based on these assumptions--would be:

---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------
$164 $508 $876 $1,911
---------------------------------------------------------------

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Selected U.S.
Government Income Fund 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.

Another firm audited the information for the previous fiscal years.

SELECTED U.S. GOVERNMENT INCOME FUND

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $9.04 $9.01 $8.90 $9.20 $8.45
----- ----- ----- ----- -----
Income From Investment Operations
Net Investment Income ................. .45 .47 .51 .53 .54
Net Realized and Unrealized
Gains (Losses) ................... (.62) .06 .11 (.28) .78
----- ----- ----- ----- -----
Total From Investment Operations ... (.17) .53 .62 .25 1.32

15
<PAGE>

Dividends and Distributions
Dividends from Net Investment Income .. (.45) (.47) (.51) (.53) (.54)
Distributions from Realized Gains ..... (.05) (.03) -- (.02) (.03)
----- ----- ----- ----- -----
Total Dividends and Distributions .. (.50) (.50) (.51) (.55) (.57)
----- ----- ----- ----- -----

Net Asset Value, End of Period ......... $8.37 $9.04 $9.01 $8.90 $9.20
===== ===== ===== ===== =====
Total Return(1)......................... (1.97)% 5.90% 7.32% 2.85% 15.97%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $4,413 $6,237 $5,962 $6,934 $7,811
Ratio of Expenses to Average Net Assets 1.28%(2) 1.52%(2,3) 1.50%(2) 1.44%(2) 1.44%(2)
Ratio of Net Investment Income to
Average Net Assets ................. 5.15% 5.17% 5.79% 5.96% 6.09%
Portfolio Turnover Rate(4)............. 134% 36% 16% 26% 76%

</TABLE>

(2) Had the Adviser not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1999, 1998, 1997, 1996 and 1995 would have
been 1.61%, 1.62%, 1.60%, 1.67% and 1.58%, respectively.

(3) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.50% for the period ended December
31, 1998.

OVERVIEW OF SELECTED DAILY GOVERNMENT FUND

INVESTMENT OBJECTIVE AND STRATEGY

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.

Selected Daily Government Fund invests exclusively in U.S. Government Securities
and repurchase agreements secured by U.S. Government Securities.

U.S. Government Securities represent debt obligations (unlike equity securities,
which represent ownership of the issuer). There are two basic types of U.S.
Government Securities: direct obligations of the U.S. Treasury, and obligations
issued or guaranteed by an agency or instrumentality of the U.S. Government.
Selected Daily Government Fund favors securities issued or guaranteed by U.S.
Government agencies because those securities typically pay a higher rate than
securities issued or guaranteed directly by the U.S. Treasury.

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

16
<PAGE>

borrower agrees to buy back the securities at a certain time--at a higher price
that incorporates an "interest payment."

We maintain liquidity and preserve capital by carefully monitoring the maturity
of the Fund's investments. Our portfolio has a dollar-weighted average maturity
of 90 days or less.

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.

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

Because Selected Daily Government Fund invests exclusively in short-term U.S.
Government Securities, it incurs a minimum of interest rate or credit risk. U.S.
Government Securities are among the safest investments you can make, and are an
excellent means of preserving principal. However, there is always some risk that
the issuer of a security held by the Fund will fail to make a payment when it is
due. Some of the agency-issued securities in the Fund's portfolio are not fully
guaranteed by the U.S. Government, and in unusual circumstances may present
credit risk.

The primary risk of investing in Selected Daily Government Fund is that the
Fund's dividends to its investors are not stable. When interest rates increase,
the Fund's dividends typically increase. When interest rates decrease, the
Fund's dividends typically decrease.

Although Selected Daily Government Fund seeks to preserve the value of your
investment at $1.00 per share, investors can lose money. An investment in the
Fund is not a bank deposit and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.

You can find more detailed information about the risks of the Fund's particular
investments in the section called HOW WE MANAGE SELECTED FUNDS.

PAST PERFORMANCE

The bar chart and the table below provide an indication of the risks of
investing in Selected Daily Government Fund by showing changes in the Fund's
performance from year-to-year for the past 10 years and by presenting the Fund's
average annual returns for one year, five years, and 10 years. How the Fund has
performed in the past is not necessarily an indication of how the Fund will
perform in the future.

17
<PAGE>

SELECTED DAILY GOVERNMENT FUND
TOTAL RETURN OVER THE LAST 10-YEAR PERIOD
(As of December 31st of Each Year)

1990 7.66%
1991 5.51%
1992 3.07%
1993 2.34%
1994 3.51%
1995 5.23%
1996 4.70%
1997 4.91%
1998 4.85%
1999 4.48%

During the period shown above, the highest quarterly return was 1.90% for the
second quarter of 1990, and the worst quarterly return was 0.55% for the second
quarter of 1993. Year-to-date performance as of the first quarter 2000 (not
annualized) was 1.30%.

18
<PAGE>

SELECTED DAILY GOVERNMENT FUND
AVERAGE ANNUAL TOTAL RETURNS
(For the Periods Ended December 31, 1999)

--------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
--------------------------------------------------------
4.48% 4.85% 4.60%
--------------------------------------------------------

SELECTED DAILY GOVERNMENT FUND
7-DAY SEC YIELD
(As of December 31, 1999)

7-DAY SEC YIELD 5.66%

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, 7 a.m. to 4 p.m.
Mountain Time.

FEES AND EXPENSES

FEES YOU MAY PAY AS A SELECTED DAILY GOVERNMENT FUND SHAREHOLDER
(Paid Directly From Your Investment)

SELECTED DAILY GOVERNMENT FUND
ANNUAL FUND OPERATING EXPENSES
(For the Year Ended December 31, 1999)
(Deducted From Selected Daily Government Fund's Assets)

- - --------------------------------------------------------------------------------
Management Fees 0.30%
- - --------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.25%
- - --------------------------------------------------------------------------------
Other Expenses 0.13%
- - --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.68%
- - --------------------------------------------------------------------------------

EXAMPLE

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

19
<PAGE>

The example assumes that you invest $10,000 in Selected Daily Government Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5.00% return
each year and that Selected Daily Government Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, your costs--based
on these assumptions--would be:

-------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------
$69 $218 $379 $847
-------------------------------------------------------------

FINANCIAL HIGHLIGHTS

This table is designed to show you the financial performance of Selected Daily
Government Fund 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.

SELECTED DAILY GOVERNMENT FUND

YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income ................... .044 .047 .048 .046 .051
Dividends and Distributions
Dividends from Net Investment Income .... (.044) (.047) (.048) (.046) (.051)
------ ------ ------ ------ ------

Net Asset Value, End of Period ........... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return(1) 4.48% 4.85% 4.91% 4.70% 5.23%

Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) . $131,342 $126,203 $117,471 $112,674 $184,603
Ratio of Expenses to Average Net Assets . .68% .71% .70% .75% .75%(2)
Ratio of Net Investment Income
to Average Net Assets ................ 4.44% 4.74% 4.80% 4.62% 5.13%

</TABLE>

(2) Had the Adviser not absorbed certain expenses, the ratio of expenses for
the year ended 1995 would have been 0.78%.

20
<PAGE>

WHO IS RESPONSIBLE FOR YOUR SELECTED ACCOUNT

A number of entities provide services to Selected Funds. This section shows how
each Fund is organized, the entities that perform these services, and how these
entities are compensated. Additional information on the organization of each
Fund is provided in Selected Funds' Statement of Additional Information. For
information on how to receive this document, see the back cover of this
prospectus.

INVESTMENT ADVISER

DAVIS SELECTED ADVISERS, LP

Referred to throughout this prospectus as "Davis Selected Advisers" 2949 East
Elvira Road, Suite 101 Tucson, Arizona 85706

o Provides daily portfolio management for Selected American Shares, Selected
U.S. Government Income Fund, and Selected Daily Government Fund.

o Oversees services provided by the sub-advisers.

o Serves as investment adviser and manages the business affairs of each of
the Selected Funds, other mutual funds, and other institutional clients.

o Annual Adviser Fee for the year ended December 31, 1999 (based on average
net assets): Selected American Shares: 0.57%
Selected Special Shares: 0.69%
Selected U.S. Government Income Fund: 0.42%
Selected Daily Government Fund: 0.30%.

21
<PAGE>

INVESTMENT SUB-ADVISERS

DAVIS SELECTED ADVISERS-NY, INC.

Referred to throughout this prospectus as "Davis Selected Advisers-NY"
609 Fifth Avenue
New York, NY 10017
o Performs investment management and research services for each of the
Selected Funds and other institutional clients.
o Wholly owned subsidiary of Davis Selected Advisers.
o Annual Fee: Davis Selected Advisers pays the fee, not Selected Funds.

BRAMWELL CAPITAL MANAGEMENT, INC.
Referred to throughout this prospectus as "Bramwell Capital Management"
745 Fifth Avenue
New York, NY 10151
o Provides daily portfolio management for Selected Special Shares.
o Serves as investment adviser for the Bramwell Funds, Inc., other investment
companies, and other institutional clients.
o Annual Fee: Davis Selected Advisers pays the fee, not Selected Funds.

CUSTODIAN AND TRANSFER AGENT

STATE STREET BANK AND TRUST COMPANY
Referred to throughout this prospectus as "State Street Bank and Trust"
PO Box 8243
Boston, MA 02266-8243
o Prices each Selected Fund daily.
o Holds share certificates and other assets of Selected Funds.
o Maintains records of shareholders.
o Issues and cancels share certificates.
o Supervises the payment of dividends.

BOARD OF DIRECTORS

Selected Funds' Board of Directors has general supervisory responsibilities of
Selected Funds. The Board monitors and supervises the performance of the
investment adviser, sub-advisers and other service providers, monitors Selected
Funds' business and investment activities, and determines whether or not to
renew agreements with the adviser and sub-advisers.

DISTRIBUTOR

DAVIS DISTRIBUTORS, LLC
Referred to throughout this prospectus as "Davis Distributors" 2949 East Elvira
Road, Suite 101 Tucson, Arizona 85706

o Oversees purchases of shares and promotional activities for Selected Funds
and other mutual funds managed by Davis Selected Advisers.
o Wholly owned subsidiary of Davis Selected Advisers.

22
<PAGE>

SENIOR RESEARCH ADVISER AND FOUNDER

SHELBY M.C. DAVIS
Responsibilities:
o Senior Research Adviser of Davis Selected Advisers.
o Founder of Davis Selected Advisers.

Other Experience:
o A Portfolio Manager of Selected American Shares from May 1993 until
February 1997.
o A Portfolio Manager of another fund managed by Davis Selected Advisers from
its inception in 1969 until February 1997.

PORTFOLIO MANAGERS

FOR SELECTED AMERICAN SHARES
CHRISTOPHER C. DAVIS
Responsibilities:
o A Portfolio Manager of the Fund since December 1994.
o Also manages or co-manages other equity funds advised by Davis Selected
Advisers.

Other Experience:
o Assistant Portfolio Manager and research analyst working with Shelby M.C.
Davis beginning in September 1989.

KENNETH CHARLES FEINBERG
Responsibilities:
o A Portfolio Manager of the Fund since May 1998.
o Also co-manages other equity funds advised by Davis Selected Advisers.

Other Experience:
o Research analyst at Davis Selected Advisers since December 1994.

FOR SELECTED SPECIAL SHARES
ELIZABETH R. BRAMWELL
Responsibilities:
o A Portfolio Manager of the Fund since February 1994.
o Also manages or co-manages other equity funds managed by Bramwell Capital
Management.

Other Experience:
o President, Chief Investment Officer, Portfolio Manager and a Trustee of
Gabelli Growth Fund from its inception in April 1987 until February 1994.

23
<PAGE>

FOR SELECTED U.S. GOVERNMENT INCOME FUND
AND SELECTED DAILY GOVERNMENT FUND
CRESTON KING, CFA
Responsibilities:
o A Portfolio Manager of Selected U.S. Government Income Fund and Selected
Daily Government Fund since August 1, 1999.
o Also manages other bond funds and money market funds advised by Davis
Selected Advisers.

Other Experience:
o Prior to joining Selected Funds, Mr. King was a portfolio manager for U.S.
Global Investors, Inc., where he managed various money market funds and
bond funds.

OUR CODE OF ETHICS

We allow the officers and employees of Selected Funds and their affiliates to
buy and sell securities for their own personal accounts. However, in order to do
so, they must agree to a number of restrictions listed in our company Code of
Ethics.

HOW WE MANAGE SELECTED FUNDS

EQUITY FUNDS: INVESTMENT PHILOSOPHY

Selected Funds are managed using the Davis investment philosophy. The Davis
investment philosophy stresses a back-to-basics approach: We use extensive
research to buy growing companies at value prices and hold on to them for the
long term. Over the years, Davis Selected Advisers has developed a list of 10
characteristics that we believe foster sustainable long-term growth, minimize
risk and enhance the potential for superior long-term returns. While very few
companies have all 10, we search for those possessing several of the
characteristics that are listed in the following chart.

WHAT WE LOOK FOR IN A COMPANY

1. FIRST-CLASS MANAGEMENT. We believe that great companies are created by
great managers. In visiting companies, we look for managers with a record
of doing what they say they are going to do.

2. MANAGEMENT OWNERSHIP. Just as we invest heavily in our own funds, we look
for companies where individual managers own a significant stake.

3. STRONG RETURNS ON CAPITAL. We want companies that invest their capital
wisely and reap superior returns on those investments.

4. LEAN EXPENSE STRUCTURE. Companies that can keep costs low are able to
compete better, especially in difficult times. A low cost structure sharply
reduces the risk of owning a company's shares.

5. DOMINANT OR GROWING MARKET SHARE IN A GROWING MARKET. A company that is
increasing its share of a growing market has the best of both worlds.

24
<PAGE>

6. PROVEN RECORD AS AN ACQUIRER. When an industry or market downturn occurs,
it is a good idea to own companies that can take advantage of attractive
prices to expand operations through inexpensive acquisitions.

7. STRONG BALANCE SHEET. Strong finances give a company staying power to
weather difficult economic cycles.

8. COMPETITIVE PRODUCTS OR SERVICES. We invest in companies with products that
are not vulnerable to obsolescence.

9. SUCCESSFUL INTERNATIONAL OPERATIONS. A proven ability to expand
internationally reduces the risk of being tied too closely to the U.S.
economic cycle.

10. INNOVATION. The savvy use of technology in any business, from a food
company to an investment bank, can help reduce costs and increase sales.

SELECTED SPECIAL SHARES, managed by Bramwell Capital Management, invests
primarily in common stock of U.S. companies with small and medium market
capitalizations, but it may invest in companies of any size.

Bramwell Capital Management begins by establishing broad investment themes and
then hunts for solid investment opportunities in the sectors of the economy
where it foresees growth.

GOVERNMENT FUNDS: CONSERVATIVE INVESTING

The two Selected Funds that invest in U.S. Government Securities (Selected U.S.
Government Income Fund and Selected Daily Government Fund) do not attempt to
generate the highest possible current yield for their investors. Instead, the
portfolio manager tries to deliver competitive results with less risk or
volatility than our competitors.

U.S. Government Securities may include bonds and notes issued by the U.S.
Government Treasury and also government agencies such as the Federal Home Loan
Bank, Government National Mortgage Association (GNMA or "Ginnie Mae"), Federal
National Mortgage Association (FNMA or "Fannie Mae") and Student Loan Marketing
Association (SLMA or "Sallie Mae"). Treasury issues and Ginnie Maes are backed
by the full faith and credit of the U.S. Government while securities issued by
the other government agencies are not fully guaranteed by the U.S. Government,
and in unusual circumstances may present credit risk.

25
<PAGE>

OTHER SECURITIES AND INVESTMENT STRATEGIES

There are other securities in which Selected Funds may invest, and investment
strategies which the Funds may employ, but they are not principal investment
strategies. For example, the equity funds invest primarily in U.S. companies,
but may invest portions of their assets in the common stock of foreign
companies. Investing in foreign companies provides additional opportunities to
own quality overlooked growth companies. Foreign securities can also offer
diversification; a fund with foreign investments will not be entirely dependent
upon the U.S. economy. However, investing in foreign markets involves additional
risks. The Statement of Additional Information discusses these securities and
investment strategies.

Each Selected Fund (other than Selected Daily Government Fund) uses short-term
investments to earn interest and maintain flexibility while we evaluate
long-term opportunities. We also may use short-term investments for temporary
defensive purposes. In the event our portfolio managers anticipate a market
decline, we may reduce our risk by investing in short-term securities until
market conditions improve. Unlike common stocks or longer-term Government
Securities, these investments will not appreciate in value when the market
advances and the short-term investments will not contribute to the capital
growth component of a Fund's investment objective.

ONCE YOU INVEST IN SELECTED FUNDS

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

HOW YOUR SHARES ARE VALUED

Once you open an account in any Selected Fund, you are entitled to buy and sell
shares on any business day. The share price of your investment changes depending
on the total value of the Fund's investments.

Each business day, we determine the value of fund shares by adding up the total
value of investments plus other assets (such as cash), subtracting liabilities,
and dividing the result by the total number of shares outstanding. This share
figure is known as the net asset value.

Net asset values for all Selected Funds are determined each business day. A
business day is any day the New York Stock Exchange is open for trading. We
calculate net asset value either at the close of the Exchange or at 4 p.m.
Eastern Time, whichever comes first.

The net asset values of all Selected Funds shares are published daily in the
business section of most major newspapers. If you have access to the Internet,
you can also check net asset value on our web site (WWW.SELECTEDFUNDS.COM).

HOW SECURITIES IN THE PORTFOLIO ARE VALUED

We use current market valuations to price the securities in each Selected Fund:

26
<PAGE>

o Securities that trade on an organized exchange are valued at the last
published sales price on the exchange. If no sales are recorded, the
securities are valued at the average of the closing bid and asked prices on
the exchange.

o Over-the-counter securities are valued at the average of closing bid and
asked prices.

o Debt securities may be valued by an independent pricing service. In
particular, the Fund relies on a professional pricing service that has
experience in valuing securities with limited resale markets so as to
obtain prices that reflect the market as accurately as possible.

o Discount securities purchased with a maturity of one year or less are
usually valued at amortized cost.

o Securities with unavailable market quotations and other assets are valued
at "fair value"--which is determined by the Board of Directors.

If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time that their
prices are determined and the time the Fund's shares are priced will generally
not be reflected in the Fund's share price. The net asset value of the Fund's
shares may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.

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

Normally, the share price of Selected Daily Government Fund does not fluctuate.
However, if there are unusually rapid changes in interest rates that the Funds'
Board of Directors believes will cause a material deviation between the
amortized cost of the Funds' 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.

DISTRIBUTION FEES. Each Selected Fund has adopted a plan under Rule 12b-1 that
allows the Fund to pay distribution and other fees for the distribution of its
shares and for services provided to shareholders. Each Selected Fund pays 0.25%
of average annual net assets. Because these fees are paid out of a Fund's assets
on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

HOW WE PAY EARNINGS

There are two ways you can receive payments from a Selected Fund:

27
<PAGE>

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

o CAPITAL GAINS. 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, if any, please call 1-800-243-1575.

Unless you choose otherwise, each Selected Fund automatically reinvests 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 the IRS Form W-9 that your Tax
Identification Number is correct and you are not subject to backup withholding.
Backup withholding is required for taxpayers who are subject to back taxes for
failure to report all interest and dividends.

If you fail to report a correct Taxpayer I.D. Number, under-reported dividend or
interest income, or are already subject to backup withholding, Selected Funds
are required by law to withhold a portion of any distributions you may receive
and send it to the U.S. Treasury.

HOW TO PUT YOUR DIVIDENDS AND CAPITAL GAINS TO WORK

You can have all dividends and capital gains from any Selected Fund
automatically invested in any other Selected Fund. To be eligible for this
DIVIDEND DIVERSIFICATION PROGRAM, all accounts involved must be registered under
the same name, the same class of shares, and have a minimum initial value of
$250. Shares are purchased at the chosen Fund's net asset value on the dividend
payment date. You can make changes to your selection or withdraw from the
program with 10 days' notice. To participate in this program, fill out the
cross-reinvest information in the appropriate section of the Application Form.
Once your account has been opened and you wish to establish this program, call
for more information.

28
<PAGE>

HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED

o If you invest in a fund that pays dividends, the dividends are taxable to
shareholders as ordinary income. Dividends include both net investment
income and short-term capital gains.

o If you invest in a fund that pays net capital gains, they generally will be
taxed as a long-term capital gain distribution.

o Selected Daily Government Fund, as a money market fund, intends to pay only
ordinary income dividends and no capital gain distributions.

Investment earnings (dividends and capital gains), whether received in cash or
reinvested in shares, are taxable in the year in which they were declared, not
the year they are paid.

Also, keep in mind that when you sell or exchange shares of any mutual fund, it
may result in a taxable gain or loss.

We recommend that you consult with a tax adviser about dividends and capital
gains you receive from any Selected Fund.

HOW TO OPEN AN ACCOUNT

You can open an account if you invest at least:

o $1,000 for a non-retirement plan account.

o $250 for a retirement plan account.

THREE WAYS YOU CAN OPEN AN ACCOUNT

1. BY MAIL. Fill out the Application Form included in this prospectus and mail
it to our service provider, State Street Bank and Trust. Include a check
made payable to SELECTED FUNDS or, in the case of a retirement account, to
the custodian or trustee. All purchases by check should be in U.S. dollars.
SELECTED FUNDS WILL NOT ACCEPT THIRD-PARTY CHECKS.

2. 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, Davis Distributors. Please note that your
dealer may charge a service fee or commission for buying these shares.

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

29
<PAGE>

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

Generally, Selected Funds do not issue share certificates for purchases. You can
receive certificates for any Selected Fund other than Selected Daily Government
Fund if you are not participating in the Automatic Withdrawal Plan. If you are
eligible and wish to receive certificates, please submit a letter of instruction
with your Application Form. Once your account has been established, the
shareholder(s) may request that certificates be sent to the address of record by
calling our customer service department.

RETIREMENT PLAN ACCOUNTS

You can invest in any Selected Fund using any of these types of retirement plan
accounts:
o Deductible IRAs
o Non-deductible IRAs
o Roth IRAs
o Educational IRAs
o Simple IRAs
o Simplified Employee Pension (SEP) IRAs
o 403(b) Plans

State Street Bank and Trust acts as custodian (service provider) for the
retirement plans and charges the participant a $10 maintenance fee each year
regardless of the number of plans established per Social Security number. These
fees are automatically deducted from each account, unless you elect to pay the
fee directly. To open a retirement plan account, you must fill out a special
Application Form. You can request this form by calling Davis Distributors.

HOW TO BUY, SELL AND EXCHANGE SHARES

Once you have opened an account with Selected Funds, you can add to--or withdraw
from--your investment. This section provides an overview of the types of
transactions you can perform as a shareholder of a Selected Fund. This includes
how to initiate these transactions, and the charges that you may incur (if any)
when buying, selling and exchanging shares.

An exchange occurs when you sell shares in one Selected Fund to buy shares in
another Selected Fund in response to changes in your goals or in market
conditions.

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THREE WAYS TO BUY, SELL AND EXCHANGE SHARES

1. BY TELEPHONE. Call 1-800-243-1575. You can speak directly with a Selected
Funds representative during our business hours (7:00 a.m. to 4:00 p.m. Mountain
Time) or use our automated telephone system any time, day or night.

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

Regular Mail
State Street Bank and Trust Company
c/o Selected Funds
PO Box 8243
Boston, MA 02266-8243

Overnight Mail
State Street Bank and Trust Company
c/o Selected Funds
66 Brooks Drive
Braintree, MA 02184

3. BY DEALER. Contact a dealer, who will then make the transaction through our
distributor, Davis Distributors. Please note that your dealer may charge a
service fee or commission for each transaction.

Generally, Selected Funds do not issue share certificates for purchases. Each
time you add to or withdraw from your account, you will receive a statement
showing the details of the transaction--along with any other transactions you
made during the current year.

WHEN YOUR TRANSACTIONS ARE PROCESSED

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

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

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

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

BUYING MORE SHARES

You can buy more shares at any time, by mail or through a dealer. The minimum
purchase amount is $25.

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

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check. If you do not have a purchase form, include a letter with your check
stating the name of the Fund and your account number.

When you buy shares through a dealer, you may be charged a service fee or
commission for performing the transaction.

MAKING AUTOMATIC INVESTMENTS

An easy way to increase your investment in any Selected Fund is to sign up for
the AUTOMATIC INVESTMENT PLAN. Under this plan, you arrange for a set amount of
money to be taken from your bank account and invested in shares of a Selected
Fund. The minimum amount you can invest each month is $25. The account minimums
of $1,000 for non-retirement accounts and $250 for retirement accounts will be
waived if you meet the minimum requirement within a year.

Purchases can be processed electronically on any day of the month between the
5th and 28th if the institution that services your bank account is a member of
the Automated Clearing House system. After each automatic investment, you will
receive a transaction confirmation, and the debit should show up on your next
bank statement.

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

You can also use our Dividend Diversification Program to buy more shares in any
Selected Fund. See ONCE YOU INVEST IN SELECTED FUNDS.

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

SELLING SHARES

You may sell back all or part of your shares in any Selected Fund in which you
invest (known as a redemption) at any time at net asset value. You can sell the
shares by telephone, by mail, or through a dealer.

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

When you sell shares through a dealer, you may be charged a service fee or
commission for performing the transaction.

Redemption proceeds are usually paid to you in cash within seven days after
State Street Bank and Trust receives your proper sale request. If any of the
shares redeemed were recently purchased, payment to you will be delayed until
your purchase check has cleared, up to a maximum of 15 days from the date of
purchase.

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CHECK WRITING PRIVILEGE FOR SELECTED DAILY GOVERNMENT FUND. You can request the
ability to use your Selected Daily Government Fund account as a checking account
if you are not investing through a retirement plan or an IRA.

Selected Daily Government Fund investors with check writing privileges can write
checks for $100 or more from their accounts, subject to some rules prescribed by
State Street Bank and Trust.

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 recently exchanged
shares in any Selected Fund for shares in Selected Daily Government Fund, the
full amount of your Selected Daily Government Fund account may not be available
to cover your checks until the exchange is complete.

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

You can find more information about check writing privileges in Selected Funds'
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
1.00% of the Fund's net asset value during any 90-day period. Any sales
above the cash limit may be paid in securities and would mean you would
have to pay brokerage fees.

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. In
addition, if your address of record has changed in the last 30 days, or if
you wish to send redemption proceeds to a third party, you will need a
medallion signature guarantee for all sales.

o 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
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.

MEDALLION SIGNATURE GUARANTEE. A written endorsement from an eligible guarantor
institution that the signature(s) on the written request is(are) valid. Eligible
guarantors include federally insured financial institutions, registered
broker-dealers, or participants in a recognized medallion signature guarantee
program. Selected Funds cannot accept guarantees from institutions that do not
provide reimbursement in cases of fraud. No other form of signature verification
can be accepted.

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<PAGE>

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

SPECIAL SALE SITUATIONS

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

o Any Selected Fund may make sales payments in securities if the Fund's Board
of Directors decides that making cash payments would harm the Fund.

IF YOUR ACCOUNT FALLS BELOW $250

If your account balance falls below $250 (as a result of a redemption or
exchange), we may sell your remaining shares in the Fund at net asset value. We
will first notify you by mail, giving you at least 60 days' notice that an
INVOLUNTARY REDEMPTION may take place. If you can increase your account balance
to above $250 during the notice period, the Involuntary Redemption will be
canceled.

MAKING AUTOMATIC WITHDRAWALS

If your account balance is more than $10,000, you can sell a set dollar or
percentage amount each month or quarter. When you participate in this plan,
known as the AUTOMATIC WITHDRAWAL PLAN, shares are sold so that you will receive
payment by one of three methods:

o You may receive funds at the address of record provided that this address
has been unchanged for a period of not less than 30 days. These funds are
sent by check on or after the 25th day of the month.

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

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
Selected Funds' Application Form. Once your account has been established,
you must submit a letter of instruction with a medallion signature
guarantee to designate a third party payee.

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

34
<PAGE>

WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT

You may be eligible to have your sale proceeds electronically transferred to a
commercial bank account. This is known as an ELECTRONIC WIRE PRIVILEGE. There is
a $5 charge by State Street Bank and Trust for wire service, and receiving banks
may also charge for this service. Payment through Automated Clearing House will
usually arrive at your bank two banking days after the sale. Payment by wire is
usually credited to your bank account on the next business day after the sale.

While State Street Bank and Trust will accept electronic wire sales by telephone
or dealer, you still need to fill out and submit the information under the
Electronic Wire Privilege section of the Application Form. Once your account has
been opened and you have not previously established the Electronic Wire
Privilege, you must submit a letter of instruction with a medallion signature
guarantee signed by all registered owners at the time of the wire sale. If you
are currently an investor with a non-retirement account and have already
established this privilege, you may call our customer service department to
execute a wire sale by telephone.

EXCHANGING SHARES

You can sell shares of any Selected Fund to buy shares of any other Selected
Fund without having to pay a sales charge. This is known as an exchange. You can
exchange shares by telephone, by mail or through a dealer. The initial exchange
must be for at least $1,000 for a non-retirement account (unless you are
participating in the Automatic Exchange Program). Exchanges are normally
performed on the same day of the request if received in good order 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. 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). A transaction in which shares are sold
for cash is known as a redemption. Please see the section WHAT YOU NEED TO KNOW
BEFORE YOU SELL YOUR SHARES for restrictions that might apply to this type of
transaction.

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

Before you decide to make an exchange, you must obtain the current prospectus of
the desired Fund. For federal income tax purposes, exchanges between Funds are
treated as a sale and a purchase. Therefore, there will usually be a
recognizable capital gain or loss due to an exchange.

There are limits to the number of exchanges you can make each year. Currently,
four exchanges between Funds are allowed during a 12-month period. You may make
an unlimited amount of exchanges out of Selected Daily Government Fund.
Automatic exchanges are excluded from this provision. Davis Distributors must
approve any exchanges above the limit in writing.

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<PAGE>

MAKING AUTOMATIC EXCHANGES

You can elect to make automatic monthly exchanges if all accounts involved are
registered under the same name and have a minimum initial value of $250. You
must exchange at least $25 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. Once your account has been opened,
you may contact our customer service department to establish 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 Davis Distributors at 1-800-243-1575 you can perform a transaction
with Selected Funds in two ways:

o Speak directly with a representative during business hours (7:00 a.m. to
4:00 p.m. Mountain Time).

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

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

o The maximum amount that can be issued is $25,000.

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

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

o Your current address must be on file for 30 days.

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

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

INTERNET TRANSACTIONS

You can use our web site: 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 through the Internet. You may also request
confirmation statements and tax summary information be mailed to the address on
file. Please

36
<PAGE>

review our web site for more complete information. If you do not wish to have
this option activated for your account, please contact our customer service
department.

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

When you transact over the Internet, you agree that Selected Funds are not
liable for processing instructions believed to be genuine.

YOU CAN USE SELECTED DIRECT ACCESS TO:

o GET THE PRICE, TOTAL RETURN, AND FUND DESCRIPTION FOR ANY SELECTED FUND.

o CHECK YOUR ACCOUNT BALANCE AND OTHER ACCOUNT INFORMATION.

o BUY, SELL AND EXCHANGE SHARES.

o GET THE MAILING ADDRESS AND WIRE INSTRUCTIONS FOR ANY SELECTED FUND.

o REQUEST LITERATURE ABOUT ANY SELECTED FUND.

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<PAGE>

[INSIDE BACK COVER]

SELECTED FUNDS:
WE SELECT QUALITY COMPANIES FOR THE LONG TERM

Davis Selected Advisers, investment adviser of Selected Funds, has a history of
investing for the long term. Since our founding in 1969, we have been dedicated
to delivering superior investment performance and service to our clients.

WE ARE LONG-TERM INVESTORS. We analyze high-quality growth companies that have
been overlooked, buy their stock at value prices, and hold the shares for the
long term. This strategy was first developed by legendary Wall Street investor
Shelby Cullom Davis, a leading financial adviser to governors and presidents.

Our investment approach has been refined for more than 25 years by his son,
Shelby M.C. Davis, Senior Research Adviser and Founder of Davis Selected
Advisers. The Davis strategy is still followed today by the third generation of
family members: Christopher C. Davis and Andrew A. Davis serve as Portfolio
Managers for many funds and institutional accounts managed by Davis Selected
Advisers.

WE ARE FELLOW SHAREHOLDERS. The Davis family, directors and employees not only
manage the company's mutual funds but also invest in them. Together, we have
invested over $1 billion of our own money side-by-side with our shareholders.

Please take the time to read this prospectus carefully, and if you decide to
invest with us, keep it as a reference guide. If you need more information about
Selected Funds, please call us or visit our web site.

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<PAGE>

ADDRESS AND PHONE GUIDE

OUR TELEPHONE NUMBER: OUR SERVICE PROVIDER'S REGULAR
1-800-243-1575 MAILING ADDRESS:
State Street Bank and Trust Company
c/o Selected Funds
PO Box 8243
Boston, MA 02266-8243

OUR MAILING ADDRESS:
Selected Funds
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706

OUR INTERNET ADDRESS: OUR SERVICE PROVIDER'S OVERNIGHT
http://www.selectedfunds.com MAILING ADDRESS:
State Street Bank and Trust Company
c/o Selected Funds
66 Brooks Drive
Braintree, MA 02184

39
<PAGE>

[BACK COVER]

OTHER FUND DOCUMENTS

For more information about any Selected Fund, request a free copy of the
Statement of Additional Information or the Annual and Semi-Annual Reports.

The STATEMENT OF ADDITIONAL INFORMATION provides more detailed information about
Selected Funds and their management and operations. An ANNUAL REPORT discusses
the market conditions and investment strategies that significantly affected Fund
performance during the last year. A SEMI-ANNUAL REPORT updates information
provided in the Annual Report for the next six months.

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

WHERE YOU CAN GET THESE DOCUMENTS:

o BY TELEPHONE. Call Selected Funds toll-free at 1-800-243-1575, Monday
through Friday, 7 a.m. to 4 p.m. Mountain Time. You may also call this
number for account inquiries.

o VIA THE INTERNET. Visit the SEC web site (WWW.SEC.GOV).

o FROM THE SEC. The SEC's Public Reference Room in Washington DC. For more
information call 1-202-942-8090. Additional copies of this information can
be obtained, for a duplicating fee, by electronic request at
[email protected] or by writing the Public Reference Section of the SEC,
Washington DC 20549-6009.

o BY MAIL. Specify the document you are requesting when writing to us.

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

Investment Company Act File No.:

Selected American Shares--811-51
Selected Special Shares--811-1550
Selected U.S. Government Income Fund--811-5240
Selected Daily Government Fund--811-5240

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000

SELECTED AMERICAN SHARES
SELECTED SPECIAL SHARES
SELECTED U.S. GOVERNMENT INCOME FUND*
SELECTED DAILY GOVERNMENT FUND*

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

* SELECTED U.S. GOVERNMENT INCOME FUND AND SELECTED DAILY GOVERNMENT FUND ARE
BOTH SEPARATE 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, 2000. THE PROSPECTUS MAY BE
OBTAINED FROM THE SELECTED FUNDS.

THE FUNDS' MOST RECENT ANNUAL REPORT AND SEMI-ANNUAL REPORT TO SHAREHOLDERS ARE
SEPARATE DOCUMENTS SUPPLIED WITH THIS STATEMENT OF ADDITIONAL INFORMATION. THE
ANNUAL REPORT, ACCOMPANYING NOTES, AND REPORT OF INDEPENDENT AUDITORS APPEARING
IN THE ANNUAL REPORT ARE INCORPORATED BY REFERENCE IN THIS STATEMENT OF
ADDITIONAL INFORMATION.

<PAGE>
TABLE OF CONTENTS

PAGE

Section I: Investment Strategies and Restrictions ..........................4

Investment Objectives and Policies...................................4
Portfolio Securities.................................................5

Equity Securities
Small and Medium Capitalization Companies
Banking and Financial Services Industries
Real Estate Securities and REITs
Foreign Securities
Bonds and Other Debt Securities
Government Securities
High Yield, High-Risk Debt Securities

Other Investment Policies...........................................14
Portfolio Transactions .............................................19
Investment Restrictions.............................................21

Section II: Key Persons....................................................27

Organization of the Companies
Directors and Officers
Directors' Compensation Schedule
Certain Shareholders of the Fund
Investment Advisory Services
Distribution of Company Shares
Other Important Service Providers

Section III: Purchase, Exchange and Redemption of Shares...................37

Purchase of Shares..................................................37
Special Services
Prototype Retirement Plans
Automatic Investment Plan
Dividend Diversification Program
Telephone Privilege

2
<PAGE>

Exchange of Shares..................................................39
General
By Telephone
Automatic Exchange Program

Redemption of Shares................................................40
General
Selected Daily Government Fund
Selected Daily Government Fund Check Writing Privilege
Expedited Redemption Privilege
By Telephone
Automatic Withdrawals Plan
Involuntary Redemptions

Section IV: General Information............................................44

Determining the Price of Shares
Net Asset Value
Valuation of Portfolio Securities
Dividends and Distributions
Selected American Share
Selected Special Shares
Selected U.S. Government Income Fund
Selected Daily Government Fund
All Funds
Federal Income Taxes
Performance Data

Appendix: Quality Ratings of Debt Securities................................50

3
<PAGE>

Section I: Investment Strategies and Restrictions

INVESTMENT OBJECTIVES AND POLICIES

Each of the Selected Funds is managed by Davis Selected Advisers, L.P.
("Adviser") and sub-advised by Davis Selected Advisers-NY, Inc. ("DSA-NY"). In
addition, Selected Special Shares is sub-advised by Bramwell Capital Management,
Inc. ("Sub-Adviser"). The Adviser pays all of the sub-advisory fees.

SELECTED AMERICAN SHARES. The investment objective of Selected American
Shares is both capital growth and income. In the current market environment
current income is expected to be low. The Fund's investment strategy is to
select quality companies for the long-term. The Fund invests primarily in common
stock of U.S. companies with market capitalizations of at least $5 billion. The
Fund's principal risks are the risk of price fluctuations reflecting both market
evaluations of the businesses involved and general changes in the equity
markets. The Fund may invest in foreign securities and attempt to reduce
currency fluctuation risks by engaging in related hedging transactions. These
investments involve special risk factors.

SELECTED SPECIAL SHARES. The investment objective of Selected Special
Shares is capital growth. The Fund invests primarily in common stock of U.S.
companies with small and medium market capitalizations of less than $5 billion.
However, the Fund can, and at times does, investment in larger companies. The
Fund's principal risks are the risk of price fluctuations reflecting both market
evaluations of the businesses involved and general changes in the equity
markets. Investing in small and medium capitalization companies may be more
risky than investing in large capitalization companies and their share prices
may be more volatile. The Fund may invest in foreign securities and attempt to
reduce currency fluctuation risks by engaging in related hedging transactions.
These investments involve special risk factors.

SELECTED U.S. GOVERNMENT INCOME FUND. The investment objective of Selected
U.S. Government Income Fund is to obtain current income consistent with
preservation of capital by investing primarily in U.S. Government Securities.
The Fund invests in debt securities which are obligations of or guaranteed by
the U.S. Government, its agencies and instrumentalities ("U.S. Government
Securities"). It also may invest in repurchase agreements involving such
securities. Selected U.S. Government Income Fund's principal risk is changes in
interest rates. Investments held by Selected U.S. Government Income Fund
generally reflect market fluctuations. In particular, the value of the Fund's
investments usually declines which interest rate rise and the value usually
increases when interest rates rise. Mortgage-related securities (including
collateralized mortgage obligations) usually constitute a large or the largest
portion of the Fund's investments. Changes in the level of interest rates may
affect extension risk and prepayment risk of mortgage-related securities.

SELECTED DAILY GOVERNMENT FUND. Selected Daily Government Fund is a money
market fund. The investment objective of Selected Daily Government Fund is to
seek 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

4
<PAGE>

liquidity. Selected Daily Government Fund invests in U.S. Government Securities
and repurchase agreements involving such securities. The Fund's principal risk
is changes in interest rates. The Fund minimizes this risk by maintaining an
average maturity of 90 days or less. Selected Daily Government Fund normally has
a stable net asset value with yield fluctuating with short-term interest rates.
There is no assurance that the Fund will be able to maintain a stable net asset
value of $1.00 per share.

An investment in the Funds may not be appropriate for all investors and
short-term investing is discouraged.

PORTFOLIO SECURITIES

The principal securities in which the Funds invest are described below.

EQUITY SECURITIES. Selected American Shares and Selected Special Shares
("Selected Equity Funds") invest primarily in 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. Selected Equity Funds usually
purchase common stock. The prices of equity securities fluctuate based on
changes in the financial condition of their issuers and on market and economic
conditions. The Funds' results will be related to the overall market for these
securities. There is no limit on the percentage of its assets which the Funds
may invest in equity securities.

Primary Risks. Events which have a negative impact on a business will
probably be reflected in a decline in their equity securities. Furthermore, when
the stock market declines most equity securities, even those issued by strong
companies, are likely to decline in value.

SMALL AND MEDIUM CAPITALIZATION COMPANIES. Selected Special Shares invests
principally in equity securities issued by small and medium capitalization
companies (companies with a total market capitalization of under $5 billion).

Primary Risks. The equity of smaller companies is subject to additional
risks. Smaller companies are usually less established and less diversified than
larger companies, and have fewer resources available to take advantage of
opportunities or overcome challenges.

BANKING AND FINANCIAL SERVICES INDUSTRIES. The Adviser has developed a
special expertise in the banking and financial services industries. Banking
and/or financial services companies may represent a larger proportion of
Selected American Shares' portfolio than they represent in the general U.S.
economy. Selected American Shares will maintain a diversified portfolio.

Primary Risks of the Banking Industry. 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 upon the availability and

5
<PAGE>

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.

Broadening bank powers, including the ability to engage in multi-state
operations while permitting diversification of operations, also could expose
banks to well-established competitors in new areas of operations. The broadening
of regional and national interstate powers and the aggressive expansion of
larger publicly held foreign banks may result in increased competition and a
decline in the number of publicly traded regional banks.

Primary Risks of the Financial Services Industry. Many of the investment
considerations discussed in connection with banks and savings associations also
apply to financial services companies. These companies are all subject to
extensive regulation, rapid business changes, volatile performance dependent
upon 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, securities brokerage and investment
advisory companies are particularly subject to government regulation and the
risks inherent in securities trading and underwriting activities. 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 may also be
affected by weather 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.

REAL ESTATE SECURITIES AND REITS. The Adviser has developed a special
expertise in real estate companies, including real estate investment trusts
("REITs"). Selected American Shares may invest in real estate securities and
REITs if the Adviser believes that such investments will contribute to the
Fund's investment objectives.

Real estate securities are issued by companies which 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. None of the Funds 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) for each taxable year. REITs can
generally

6
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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 can also 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.

Primary Risks. Real estate securities and REITs are subject to risks
associated with the direct ownership of real estate. The Fund could also 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, over-building
and increased competition, increases in property taxes and operating expenses,
changes in zoning laws, casualty 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 upon
management skill, may not be diversified, and are subject to project financing
risks. Such trusts are also 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.
Changes in interest rates may also affect the value of the debt securities in
the Fund's portfolio. By investing in REITs indirectly through Selected American
Shares, a shareholder will bear not only his 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.

FOREIGN SECURITIES. Both of Selected Equity Funds may invest in foreign
securities. Foreign securities are: (1) issued by companies organized under the
laws of a foreign country; (2) principally traded in securities markets outside
of the U.S.; (3) issued by companies earning at least 50% of their revenues or
profits outside of the U.S.; or (4) issued by companies having at least 50% of
their assets outside of the U.S. ("foreign securities"). Foreign securities
include 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. When the Funds
invest 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.

Primary Risks. 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 is generally less information publicly available about

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foreign securities and securities markets, and there may be less government
regulation and supervision of foreign issuers and securities markets. Foreign
securities and markets may also 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 relevant indicators. The Funds 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.

BONDS AND OTHER DEBT SECURITIES. Selected U.S. Government Income Fund
invests primarily in Government Securities (a type of bond). Although Selected
Equity Funds usually do not purchase bonds, these Funds may at times purchase
bonds and other debt securities to increase current income or to diversify their
investment portfolios. 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.

Primary Risks. Bonds and other debt securities are generally considered to
be interest rate sensitive. The market value of the Funds' investments will
change in response to changes in interest rates. During periods of falling
interest rates, the value of debt securities held by the Funds 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 will also affect the value of these
investments.

GOVERNMENT SECURITIES. Selected U.S. Government Income Fund and Selected
Daily Government Fund both invest principally in debt securities which are
obligations of or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). Each of the other Funds may
also invest a portion of their assets in U.S. Government bonds if the Adviser
believes that such investments will contribute to the Funds' investment
objectives.

Selected Daily Government Fund limits the average maturity of its
investment portfolio to 90 days or less. Selected U.S. Government Income Fund is
not limited as to the maturities of its portfolio investments and may take full
advantage of the entire range of maturities available in U.S. Government
Securities. The Adviser may adjust the average maturity of Selected Daily
Government Fund's portfolio and Selected U.S. Government Income Fund's portfolio
from time to time, depending on the Adviser's assessment of the relative yields
available on securities of different maturities, and its assessment of future
interest rate patterns and market risk. Thus, at various times, the average
maturity of the portfolio may be relatively short (as short as one day for
Selected Daily Government Fund and from one year to five years, for example, for
Selected U.S. Government Income Fund), and at other times may be relatively long
(up to 90 days for

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Selected Daily Government Fund and over 10 years for Selected U.S. Government
Income Fund). Selected Daily Government Fund strives to maintain a constant net
asset value per share of $1.00. There is no guarantee that the Fund will be
successful. Selected U.S. Government Income Fund does not attempt to maintain a
fixed net asset value per share. Fluctuations in portfolio values and therefore
fluctuations in the net asset value of its shares are more likely to be greater
when Selected U.S. Government Income Fund's average portfolio maturity is
longer. The portfolio is likely to be primarily invested in securities with
short-term maturities in periods when the Adviser deems a more defensive
position is advisable. For temporary periods, for defensive purposes, or to
accommodate inflows of cash awaiting more permanent investment, it may also
invest in short-term money market instruments, including repurchase agreements.

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 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.

When the Adviser deems that higher yields are obtainable through
investments in mortgage-related securities and that the yield advantage offsets
the uncertainties of the timing of principal payments, Selected U.S. Government
Income Fund may be significantly invested in mortgage-related securities. 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. Upon receipt, principal payments will be used by
Selected U.S. Government Income Fund to purchase additional GNMA Certificates or
other U.S. Government Securities.

Selected U.S. Government Income Fund may also invest in pools of mortgages,
which are issued or guaranteed by other agencies of the U.S. Government. The
average life of pass-through pools varies with the maturities of the underlying
mortgage instruments. In addition, a pool's term may be shortened or lengthened
by unscheduled or early payment, or by slower than expected prepayment of
principal and interest on the underlying mortgages. The occurrence of mortgage
prepayments is affected by the level of interest rates, general economic
conditions, the

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<PAGE>

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.

It may also invest in a collateralized mortgage obligation ("CMO"). A 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.
Selected U.S. Government Income Fund invests only in CMOs which are obligations
of, or guaranteed by the U.S. Government, its agencies, or instrumentalities
such as the FNMA or the FHLMC.

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 are typically 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 lower yield while those with longer maturities
typically have higher volatility and higher 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.

Investment by the Funds in mortgage-related U.S. Government Securities,
such as GNMA Certificates, and CMOs also involves other risks. The yield on a
pass-through security is typically 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 Funds reinvest the prepaid amounts in
securities, the yields of which reflect interest rates prevailing at that time.
Therefore, the Funds' 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, which have lower
yields than the prepaid mortgages. Moreover, prepayments of mortgages which
underlie securities purchased at a premium could result in capital losses.
Investment in such securities could also subject the Funds to "maturity
extension risk" which is the possibility that rising interest rates may cause
prepayments to occur at a slower than expected rate. This particular risk may
effectively change a security, which was considered a short or intermediate-term
security at the time of purchase into a long-term security. Long-term securities
generally fluctuate more widely in response to changes in interest rates than
short or intermediate-term securities.

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<PAGE>

In selecting CMOs, the Adviser seeks a favorable yield relative to risk and
considers purchase price, interest rates, total rates of return, prepayment
rates, average life, duration and volatility, and compares these with other
mortgage-backed investments and U.S. Government 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 Funds are not
guaranteed and will fluctuate with the value of the Funds' portfolios. Generally
when the level of interest rates rise, the value of a Fund's portfolio is likely
to decline and when the level of interest rates decline, the value of a Fund's
portfolio is likely to rise.

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

HIGH YIELD, HIGH-RISK DEBT SECURITIES. The bonds and other debt securities
which Selected Equity Funds may invest in may include high yield, high-risk debt
securities rated BB or lower by Standard & Poor's Corporation ("S&P") or Ba or
lower by Moody's Investors Service ("Moody's") or unrated securities. Securities
rated BB or lower by S&P and Ba or lower by Moody's are referred to in the
financial community as "junk bonds" and may include D-rated securities of
issuers in default. See Appendix A for a more detailed description of the rating
system. Ratings assigned by credit agencies do not evaluate market risks. The
Adviser considers the ratings assigned by S&P or Moody's as one of several
factors in its independent credit analysis of issuers. A brief description of
the quality ratings of these two services is contained in the section entitled
"Quality Ratings of Debt Securities." Selected American Shares will not purchase
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 30% or more of the Fund's net
assets to be invested in such lower-rated securities. Selected Special Shares
will not purchase 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
5% of the Fund's net assets to be invested in such lower-rated securities.

Primary Risks. 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

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<PAGE>

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 Funds to dispose
of particular issues and may cause the Funds to incur special securities
registration responsibilities, liabilities and costs, and liquidity and
valuation difficulties. Unexpected net redemptions may force the Funds to sell
high yield, high-risk debt securities without regard to investment merit,
thereby possibly reducing return rates. Such securities may be subject to
redemptions or call provisions which, if exercised when investment rates are
declining, could result in the replacement of such securities with lower
yielding securities, resulting in a decreased return. To the extent that the
Funds invest in bonds that are original issue discount, zero coupon, pay-in-kind
or deferred interest bonds, the Funds may have taxable interest income in excess
of the cash actually received on these issues. In order to avoid taxation to the
Funds, the Funds may have to sell portfolio securities to meet taxable
distribution requirements.

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 high yield, high-risk bond market comprised a small piece of the
general bond market until the middle 1980's when issuance increased
dramatically. Since that time, the high yield, high-risk bond market has
experienced rarely been tested in recessionary environments. During economic
downturns prices of high yield, high-risk bonds have declined and defaults rose.
Future economic downturns and/or significant increases in interest rates are
likely to have a negative effect on the high yield, high-risk bond market, and
consequently on the value of these bonds, as well as increase the incidence of
defaults on such bonds.

High yield, high-risk bonds may be issued in a variety of circumstances.
Some of the more common circumstances are issuance by corporations in the growth
stage of their development, in connection with a corporate reorganization or as
part of a corporate takeover. Companies that issue such high yielding, high-risk
bonds often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the bonds of such issuers generally is greater than is the case with
higher-rated bonds. For example, during an economic downturn or recession,
highly leveraged issuers of high yield, high-risk bonds may experience financial
stress. During such periods, such issuers may not have sufficient revenues to
meet their principal and interest payment obligations. The issuer's ability to
service its debt obligations may also be adversely affected by specific
corporate developments,

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<PAGE>

or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of high yielding bonds because
such bonds are generally unsecured and are often subordinated to other creditors
of the issuer. The costs associated with recovering principal and interest once
a security has defaulted may impact the return to holders of the security. If
the Funds experience unexpectedly large net redemptions, it may be forced to
sell high yield, high-risk bonds out of the portfolio without regard to the
investment merits of such sales. This could decrease the Funds' net assets.
Since some of the Fund's expenses are fixed, this could also reduce the Funds'
rate of return.

The Funds 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 Funds
anticipate that such bonds could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market may have an
adverse impact on market price and the ability to dispose of particular issues
and may also make it more difficult to obtain accurate market quotations or
valuations for purposes of valuing the Funds' 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 Funds purchase 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 Funds 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 are generally more volatile than the market prices of securities that
pay interest periodically, and are likely to respond to changes in interest
rates to a greater degree than do securities paying interest currently, having
similar maturities, and credit quality. Pay-in-kind bonds pay interest in the
form of other securities rather than cash. Deferred interest bonds defer the
payment of interest to a later date. Zero coupon, pay-in-kind or deferred
interest bonds carry additional risk in that, unlike bonds which pay interest in
cash throughout the period to maturity, the Funds 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 Funds may obtain no return at all on its
investment. To the extent that the Funds invest in bonds that are original issue
discount, zero coupon, pay-in-kind or deferred interest bonds, the Funds may
have taxable interest income in excess of the cash actually received on these
issues. In order to distribute such income to avoid taxation to the Funds, the
Funds may have to sell portfolio securities to meet its taxable distribution
requirements under circumstances that could be adverse.

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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.

Portfolio Composition. As of December 31, 1999, both Selected Equity Funds
had less than 5% of their total assets invested in high yield, high risk
securities and do not presently intend to have over 5% of their assets invested
in such securities in the near future.

OTHER INVESTMENT POLICIES

The Funds have adopted the following investment policies.

TEMPORARY DEFENSIVE INVESTMENTS. For defensive purposes or to accommodate
inflows of cash awaiting more permanent investment, each Selected Fund may
temporarily and without limitation hold high-grade short-term money market
instruments, cash and cash equivalents, including repurchase agreements. The
Funds may also invest in other investment companies which themselves invest in
temporary defensive investments. Investments in other investment companies are
limited by the Investment Company Act of 1940.

Selected Daily Government Fund continuously invests exclusively in
short-term U.S. Government Securities and repurchase agreements.

REPURCHASE AGREEMENTS. The Funds may enter into repurchase agreements, but
normally will not enter into repurchase agreements maturing in more than seven
days. A repurchase agreement, as referred to herein, involves a sale of
securities to a Fund, with the concurrent agreement of the seller (a bank or
securities dealer which the Adviser or Sub-Adviser determines to be financially
sound at the time of the transaction) to repurchase the securities at the same
price plus an amount equal to accrued interest at an agreed-upon interest rate,
within a specified time, usually less than one week, but, on occasion, at a
later time. The repurchase obligation of the seller is, in effect, secured by
the underlying securities. In the event of a bankruptcy or other default of a
seller of a repurchase agreement, the Funds could experience both delays in
liquidating the underlying securities and losses, including (a) possible decline
in the value of the collateral during the period while the Funds seek to enforce
their rights thereto; (b) possible loss of all or a part of the income during
this period; and (c) expenses of enforcing its rights.

The Funds 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 Funds may enter into tri-party repurchase agreements in which a
third party custodian bank issues the cash upon purchase of the securities used
as collateral, and also holds the securities. The Funds will not enter into a
repurchase agreement maturing in more than seven days if it would cause more
than 15% of the value of their net assets (10% for Selected Daily Government
Fund) to be invested in such transactions. Repurchase agreements maturing in
less than seven days are not deemed illiquid securities for the purpose of the
Funds' limitation on illiquid securities.

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<PAGE>

HEDGING FOREIGN CURRENCY RISKS. Selected Equity Funds may invest a portion
of their assets in foreign securities. To attempt to reduce exposure to currency
fluctuations due to investments in foreign securities, Selected Equity Funds 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 Funds to other risks, such as liquidity and counterparty risk. The Adviser
or Sub-Adviser exercises its professional judgement as to whether the reduction
in currency risk justifies the expense and exposure to liquidity and
counterparty risk. In past years, the Adviser and Sub-Adviser have typically not
used these techniques to any significant extent. 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 Selected Equity Funds and to hedge a currency risk
involved in an anticipated purchase of foreign securities. Cross-hedging may
also be utilized, that is, entering into a hedge transaction in respect to a
different foreign currency than 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, no Selected
Equity Fund will engage in a futures transaction if it would cause the aggregate
of initial margin deposits and premiums paid on outstanding options on futures
contracts to exceed 5% of the value of its total assets (excluding in
calculating such 5% any in-the-money amount of any option). 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 or the
Sub-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 Selected Equity Funds 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 could therefore 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 price 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 Selected
Equity Funds than if they had not entered into such contracts. When taking a
position in an anticipatory hedge (when Selected Equity Funds purchase a futures
contract or other similar instrument to gain market exposure in anticipation of
purchasing the underlying securities at a later date), Selected Equity Funds are
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, which is individually negotiated and
privately traded by currency traders and their customers. Such a contract gives
Selected Equity Funds a position in a negotiated, currently non-regulated
market. A Selected Equity Fund may enter into a forward contract, for example,
when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar price of
the security ("transaction hedge"). Additionally, when the Adviser or
Sub-Adviser believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, either 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

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<PAGE>

portfolio securities denominated in such foreign currency. When the Adviser or
Sub-Adviser believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, either 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 Selected Equity Funds may, in the alternative, enter into a forward contract
in respect to a different foreign currency for a fixed U.S. dollar amount
("cross hedge"). This may be done, for example, where the Adviser or Sub-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.

Selected Equity Funds 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 Selected Equity Funds 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 a 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 Selected Equity Funds 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, Selected Equity
Funds would utilize options traded on exchanges where the options are
standardized.

Selected Equity Funds 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
Selected Equity Funds will be traded on U.S. or foreign exchanges or
over-the-counter.

Selected Equity Funds may also purchase securities (debt securities or
deposits) which 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. Selected Equity Funds will hold securities or
other options or futures positions whose values are expected to offset its
obligations under the hedge strategies. Neither Fund will enter into a currency
hedging position that exposes the Fund to an obligation to another party unless
it owns either (i) an offsetting position in securities, options or futures
positions, or (ii) cash, receivables, and short-term debt securities with a
value sufficient to cover its potential obligations. Selected Equity Funds will
comply with requirements established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and, if so required, will set
aside liquid securities in a

16
<PAGE>

segregated account with its custodian bank in the amount prescribed. Selected
Equity Funds' custodian 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 futures or
option strategy is outstanding, unless they are replaced with similar
securities.

Selected Equity Funds' 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 Selected Equity Funds 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
Selected Equity Funds would have to be exercised in order for the Selected
Equity Funds to realize any profit, and (ii) the Selected Equity Funds may not
be able to sell currencies covering an option written by the Selected Equity
Funds until the option expires, or it delivers the underlying futures currency
upon exercise. Therefore, no assurance can be given that the Selected Equity
Funds will be able to utilize these instruments effectively for the purposes set
forth above. The Selected Equity Funds' ability to engage in currency hedging
transactions may be limited by tax considerations.

Selected Equity Funds' transactions in forward contracts, options on
foreign currencies and currency futures contracts will be subject to special tax
rules under the Internal Revenue Code that, among other things, may affect the
character of any gains or losses of Selected Equity Funds as ordinary or
capital, and the timing and amount of any income or loss to Selected Equity
Funds. This, in turn, could affect the character, timing and amount of
distributions by Selected Equity Funds to shareholders. Selected Equity Funds
may be limited in its foreign currency transactions by tax considerations.

In 1999 Selected Equity Funds did not enter into any foreign security
hedging transactions.

RESTRICTED AND ILLIQUID SECURITIES. The Funds may invest in restricted
securities, which are subject to contractual restrictions on resale. The Funds'
policy is to not purchase or hold illiquid securities (which may include
restricted securities) if more than 15% of the Funds' net assets (10% of
Selected Daily Government Fund) would then be illiquid.

The restricted securities which the Funds may purchase include securities
which have not been registered under the 1933 Act, but are eligible for purchase
and sale pursuant to Rule 144A ("Rule 144A Securities"). This Rule permits
certain qualified institutional buyers, such as the Funds, to trade in privately
placed securities even though such securities are not registered under the 1933
Act. The Adviser or Sub-Adviser, under criteria established by the Funds' Board
of Directors, will consider whether Rule 144A Securities being purchased or held
by the Funds are illiquid, and, thus subject to the Funds' policy limiting
investments in illiquid securities. In making this determination, the Adviser or
Sub-Adviser will consider the frequency of trades and quotes, the number of
dealers and potential purchasers, dealer undertakings to make a market,

17
<PAGE>

and the nature of the security and the market place trades (for example, the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A Securities will also be
monitored by the Adviser and Sub-Adviser and, if as a result of changed
conditions, it is determined that a Rule 144A Security is no longer liquid, the
Funds' 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.

LENDING PORTFOLIO SECURITIES. Selected American Shares, Selected Special
Shares, and Selected U.S. Government Income Fund may lend securities to
broker-dealers or institutional investors for their use in connection with short
sales, arbitrages and other securities transactions. The Selected Funds will not
lend portfolio securities unless the loan is secured by collateral. Selected
American Shares and Selected Special Shares will not lend securities if such a
loan would cause more than 10% of the total value of their respective assets to
then be subject to such loans. Selected U.S. Government Income Fund will not
lend securities if such a loan would cause more than 30% of the total value of
its assets to then be subject to such loans. Currently only Selected American
Shares is actively lending portfolio securities.

CALL OPTIONS. For income or hedging purposes, Selected Equity Funds may
write covered call options on their portfolio securities and purchase call
options in closing transactions. The Funds may suffer an opportunity loss if the
value of the underlying security should rise above the strike price of the call
option before the option expires. Selected American Shares will not engage in
any such transaction if thereafter the market value of all securities subject to
options would exceed 20% of the value of the Fund' net assets. Selected Special
Shares will not engage in any such transaction if thereafter the market value of
all securities subject to options would exceed 10% of the value of the Funds'
net assets.

A covered call option gives the purchaser of the option the right to buy
the underlying security at the price specified in the option (the "exercise
price") at any time until the option expires, generally within three to nine
months, in return for the payment to the writer upon the issuance of the option
of an amount called the "premium." A commission may be charged in connection
with the writing of the option. The premium received for writing a call option
is determined by the option markets. The premium paid, plus the exercise price,
will always be greater than the market price of the underlying securities at the
time the option is written. By writing a covered call option, a Fund foregoes,
in exchange for the premium, the opportunity to profit from an increase in the
market value of the underlying security above the exercise price, if the option
is exercised. The call obligation is terminated upon exercise of the call
option, expiration of the call, or when the Fund effects a closing purchase
transaction. A closing purchase transaction is one in which the writer purchases
another call option in the same underlying security (identical as to exercise
price, expiration date and number of shares). The writer thereby terminates its
obligation and substitutes the second writer as the obligor to the original
option purchaser. A closing purchase transaction would normally involve payment
of a brokerage commission. During the remaining term of the option, if a Fund
cannot enter into a closing purchase transaction, that Fund would lose the
opportunity for realizing any gain over

18
<PAGE>

and above the premium through sale of the underlying security, and if the
security is declining in price that Fund would continue to experience such
decline.

In 1999 Selected Special Shares wrote one covered call. None of the other
Selected Funds wrote any covered calls.

WHEN-ISSUED SECURITIES. Fixed-income securities may at times be purchased
or sold on a delayed delivery basis or on a when-issued basis. These
transactions arise when securities are purchased or sold by a Fund with payment
and delivery taking place in the future. No payment is made until delivery is
made which may be up to 60 days after purchase. If delivery of the obligation
does not take place, no purchase will result and the transaction will be
terminated. Such transactions are considered to involve more risk than immediate
cash transactions. As a matter of non-fundamental policy, any investment on a
when-issued or delayed delivery basis will not be made if such investment would
cause more than 5% of the value of a Fund's total assets to be invested in this
type of investment.

When purchasing when-issued securities a Fund will segregate liquid
high-grade assets with its custodian to the extent that the Fund's obligations
are not otherwise "covered" as that term is understood under the Investment
Company Act of 1940. In general, an amount of cash or liquid high grade
securities at least equal to the current amount of the obligation must either be
identified as being restricted in the Fund's accounting records or physically
segregated in a separate account at the Fund's custodian. The segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate them. For the purpose of
determining the adequacy of the liquid securities, which have been restricted,
the securities will be valued at market or fair value. If the market or fair
value of such securities declines, additional cash or liquid securities will be
restricted on a daily basis so that the value of the restricted cash or liquid
securities, when added to the amount deposited with the broker as margin, equals
the amount of such commitments by the Fund.

PORTFOLIO TRANSACTIONS

The Adviser and Sub-Adviser are responsible for the placement of portfolio
transactions, subject to the supervision of the Board of Directors. The Funds
have adopted a policy of seeking to place portfolio transactions with brokers or
dealers who will execute transactions as efficiently as possible and at the most
favorable price. Subject to this policy, research services and placement of
orders by securities firms for Fund shares may be taken into account as a factor
in placement of portfolio transactions. In seeking the Funds' investment
objectives, the Funds may trade to some degree in securities for the short term
if the Adviser or Sub-Adviser believes that such trading is advisable.

In placing executions and paying brokerage commissions or dealer markups,
the Adviser or Sub-Adviser considers the financial responsibility and reputation
of the broker or dealer, the range and quality of the services made available to
the Funds and the professional services rendered, including execution, clearance
procedures, payment of bona fide expenses of the Funds (such as sub-transfer
agency or sub-accounting fees) which they would otherwise have to pay in

19
<PAGE>

cash, wire service quotations and ability to provide supplemental performance,
statistical and other research information for consideration, analysis and
evaluation by the Adviser's or Sub-Adviser's staff.

The Funds have approved a policy, which allows them to use commissions to
purchase research. The Funds will not use markups to purchase research. In
accordance with this policy, brokerage transactions may not be executed solely
on the basis of the lowest commission rate available for a particular
transaction. Research services provided to the Adviser or Sub-Adviser by or
through brokers who effect portfolio transactions for the Funds may be used in
servicing other accounts managed by the Adviser and likewise research services
provided by brokers used for transactions of other accounts may be utilized by
the Adviser or Sub-Adviser in performing services for the Funds. Subject to the
requirements of best execution, the placement of orders by securities firms for
shares of the Funds may be taken into account as a factor in the placement of
portfolio transactions.

On occasions when the Adviser or Sub-Adviser deems the purchase or sale of
a security to be in the best interests of a Fund as well as other fiduciary
accounts, the Adviser or Sub-Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for other accounts in
order to obtain the best net price and most favorable execution. In such event,
the allocation will be made by the Adviser or Sub-Adviser in the manner
considered to be most equitable and consistent with its fiduciary obligations to
all such fiduciary accounts, including the Fund involved. In some instances,
this procedure could adversely affect a Fund but the Adviser and Sub-Adviser
deem that any disadvantage in the procedure would be outweighed by the increased
selection available and the increased opportunity to engage in volume
transactions.

The Adviser and Sub-Adviser believe that research from brokers and dealers
is desirable, although not essential, in carrying out their functions, in that
such outside research supplements the efforts of the Adviser and Sub-Adviser by
corroborating data and enabling the Adviser and Sub-Adviser to consider the
views, information and analyses of other research staffs. Such views,
information and analyses include such matters as communicating with persons
having special expertise on certain companies, industries, areas of the economy
and/or securities prices, obtaining written materials on these or other areas
which might affect the economy and/or securities prices, obtaining quotations on
securities prices and obtaining information on the activities of other
institutional investors. The Adviser and Sub-Adviser research, at their own
expense, each security included in, or being considered for inclusion in, the
Funds' portfolios. As any particular research obtained by the Adviser or
Sub-Adviser may be useful to the Funds, the Board of Directors, in considering
the reasonableness of the commissions paid by the Funds, will not attempt to
allocate, or require the Adviser or Sub-Adviser to allocate, the relative costs
or benefits of research.

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<PAGE>

The Funds paid the following brokerage commissions:

Fiscal year ended
December 31,
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Selected American Shares
Brokerage Commissions Paid $2,249,864 $1,418,329 $1,061,947
Amount Paid to Brokers Providing Research 70% 79% 93%
Brokerage Commissions Paid
to Shelby Cullom Davis & Co.(1) $ 140,159 $ 155,832 $ 64,872

Selected Special Shares
Brokerage Commissions Paid $ 109,273 $ 65,886 $ 54,724
Amount Paid to Brokers Providing Research 98% 85% 72%

</TABLE>

(1) Shelby Cullom Davis & Co. is a broker-dealer who may be considered an
affiliated person of the Adviser. During the fiscal year ended December 31,
1999, commissions received represented 6.23% of total commissions paid and 8.73%
of the aggregate dollar amount of transactions involving the payment of
commissions by Selected American Shares.

Because of the Funds' investment policies, portfolio turnover rate will
vary. At times it could be high, which could require the payment of larger
amounts in brokerage commissions. The Adviser and Sub-Adviser are authorized to
place portfolio transactions with Shelby Cullom Davis & Co., a member of the New
York Stock Exchange, which may be deemed to be an affiliate of the Adviser, if
the commissions are fair and reasonable and comparable to commissions charged by
non-affiliated qualified brokerage firms for similar services. The Funds
anticipate that, during normal market conditions, their annual portfolio
turnover rate will be less than 100%.

INVESTMENT RESTRICTIONS

Each Fund's investment objective and 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. All percentage limitations set forth in these restrictions apply
as of the time of an investment without regard to later increases or decreases
in the value of securities or total or net assets.

Each of the Selected Funds has different fundamental investment
restrictions which are listed below.

SELECTED AMERICAN SHARES FUNDAMENTAL INVESTMENT RESTRICTIONS

The Fund may not:

1. Diversification. Purchase securities of any one issuer (excluding U.S.
Government Securities) if, as a result of such purchase, the Fund would own
more than 10% of the total outstanding securities or voting stock of the
issuer or more than 5% of the value of the Fund's total assets would be
invested in the securities of the issuer.

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<PAGE>

2. Concentration. Concentrate more than 25% of its assets in securities of any
one industry.

3. Real Estate, Commodities, Minerals. Purchase or sell real estate or
interests in real estate, commodities or commodity contracts or interests
in oil, gas or other mineral exploration or development programs. It may,
however, purchase marketable securities of companies which may make such
investments.

4. Borrowing. Borrow money, except for temporary or emergency purposes, and
then only from banks, in an amount not exceeding 10% of the value of the
Fund's total assets. The Fund will not borrow money for the purpose of
investing in securities, and the Fund will not purchase any portfolio
securities for so long as any borrowed amounts remain outstanding.

5. Underwriting. Underwrite securities of other issuers (although the Fund may
technically be considered an underwriter if it sells restricted
securities).

6. Loans. Make loans, except it may acquire debt securities from the issuer or
others which are publicly distributed or are of a type normally acquired by
institutional investors and except that it may make loans of portfolio
securities if any such loans are secured continuously by collateral at
least equal to the market value of the securities loaned in the form of
cash and/or securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and provided that no such loan will be made
if upon the making of that loan more than 10% of the value of the Fund's
total assets would be the subject of such loans.

7. Senior Securities. Issue senior securities nor sell short more than 5% of
its total assets, except as provided by the Investment Company Act of 1940
and any rules, regulations or orders issued thereunder. This limitation
does not apply to selling short against the box.

8. Selling Short, Margin, Options. Sell short, buy on margin, or deal in
options, except that the Fund may write call options against its portfolio
securities which are traded on a national securities exchange and purchase
call options in closing transactions. (When permitted by applicable federal
and state authorities and when there exists an established market for call
options written on securities traded otherwise than on a national
securities exchange, the Fund may also issue call options on such portfolio
securities and purchase such call options on such securities in closing
transactions.) The Fund will not write a covered option if following
issuance of the option the market value of the Fund's portfolio securities
underlying such options would be in excess of 20% of the value of the
Fund's net assets.

9. Pledging or Hypothecation. Pledge or hypothecate its assets, except in an
amount not exceeding 15% of its total assets, and then only to secure
borrowings for temporary or emergency purposes.

22
<PAGE>

10. Other Investment Companies. Invest in other investment companies (as
defined in the Investment Company Act of 1940), except as part of a merger,
consolidation, reorganization or acquisition of assets.

11. Illiquid Securities. Purchase illiquid securities (including restricted
securities that are illiquid) if such purchase would cause more than 15% of
the value of the Fund's net assets to be invested in such securities. This
one investment restriction must be observed on an ongoing basis, not just
at the time of purchase.

12. Associated Persons. Allow any person associated with the Fund or its
investment manager who is an officer or director of another issuer to
participate in any decision to purchase or sell any securities of such
other issuer.

SELECTED SPECIAL SHARES FUNDAMENTAL INVESTMENT RESTRICTIONS

The Fund may not:

2. Concentrations. Concentrate more than 25% of its assets in securities of
any one industry.

3. Real Estate, Commodities. Purchase or sell real estate, commodities or
commodity contracts, or oil, gas or other mineral exploration or
development programs, or any direct interests therein. It may, however,
purchase marketable securities of companies, which may make such
investments.

5. Underwriting. Underwrite securities of other issuers (although the Fund may
technically be considered an underwriter if it sells restricted
securities).

23
<PAGE>

loan more than 10% of the value of the Fund's total assets would be the
subject of such loans.

9. Pledging or Hypothecation. Pledge or hypothecate its assets, except in an
amount not exceeding 15% of its total assets, and then only to secure
borrowings for temporary or emergency purposes.

10. Other Investment Companies. Purchase securities of any other investment
company (as defined in the Investment Company Act of 1940) except: (i)
shares of investment companies investing primarily in foreign securities
provided that such purchase does not cause the Fund to (a) have more than
5% of its total assets invested in any one such company, (b) have more than
10% of its total assets invested in the aggregate of all such companies, or
(c) own more than 3% of the total outstanding voting stock of any such
company; and (ii) as a part of a merger, consolidation, reorganization or
acquisition of assets.

SELECTED U.S. GOVERNMENT INCOME FUND FUNDAMENTAL INVESTMENT RESTRICTIONS

The Fund may not:

1. Diversification. Buy the securities of any company if more than 5% of the
value of the Fund's total assets would be invested in that company.
Securities issued by the U.S. Government, or its agencies or
instrumentalities and repurchase agreements involving such securities
("U.S. Government Securities") are excluded from this restriction.

2. Concentration. Invest 25% or more of its total assets in any one industry,
except that this restriction shall not apply to U.S. Government Securities.

24
<PAGE>

3. Real Estate, Commodities. Purchase or sell real estate, real estate
mortgage loans, commodities or commodity futures contracts, or oil, gas, or
mineral exploration or development interests except that the Fund may
invest in futures contracts and related options as described in the
prospectus and Statement of Additional Information.

4. Borrowing. Borrow money except for temporary or emergency non-investment
purposes, such as to accommodate abnormally heavy redemption requests, and
then only in an amount not exceeding 10% of the value of the Fund's total
assets at the time of borrowing.

5. Underwriting. Underwrite any securities issued by others except to the
extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under certain Federal
securities laws.

6. Loans. Make loans, other than (a) by entering into repurchase agreements,
(b) through the purchase of other permitted investments in accordance with
its investment objective and policies, and (c) through the lending of
portfolio securities with respect to not more than 30% of its assets.

7. Senior Securities. Issue senior securities as defined in the 1940 Act,
except insofar as the Fund may be deemed to have issued a senior security
by reason of (a) entering into any repurchase agreements; (b) permitted
borrowings of money; (c) purchasing securities on a "when-issued" or
delayed delivery basis; or (d) purchasing options, futures contracts and
related options.

8. Short Sales. Make short sales of securities.

9. Margin. Purchase securities on margin except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities and further excepting that the deposit or payment by
the Fund of initial or variation margin in connection with futures
contracts or related options transactions is not to be considered the
purchase of a security on margin.

10. Futures Contracts, Options. Purchase or sell futures contracts or options
on futures contracts if, as a result, the sum of the initial margin
deposits on the Fund's existing futures contracts and related options
positions and the premiums paid for options on futures contracts would
exceed 5% of the fair market value of the Fund's assets after taking into
account unrealized profits and unrealized losses on any such contracts it
has entered into; provided, however, that in the case of an option that is
"in-the-money" at the time of the purchase, the "in-the-money" amount may
be excluded in computing such 5%.

25
<PAGE>

11. Pledging, Mortgaging, Hypothecation. Pledge, mortgage or hypothecate its
assets, except that to secure borrowings permitted by (4) above, it may
pledge securities having a market value at the time of pledge not exceeding
15% of the Fund's total assets; provided, however, that the deposit of
underlying securities and other assets in escrow in connection with the
writing of put or call options and collateral arrangements with respect to
margin for futures contracts and options thereon are not to be considered
pledges or other encumbrances.

12. Other Investment Companies. Invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.

13. Repurchase Agreements. Illiquid Securities. Enter into a repurchase
agreement maturing in more than seven days, or knowingly purchase
securities that are subject to restrictions on resale or for which there
are no readily available market quotations if, as a result, more than 10%
of the value of the Fund's total assets (taken at current value) at the
time would be invested in such securities.

14. Illiquid Securities. Invest more than 10% of its total assets (determined
at the time of investment) in illiquid securities, securities which are not
readily marketable and repurchase agreements which have a maturity of
longer than seven days. In addition, the Fund will not invest more than 5%
of its total assets in securities the disposition of which is restricted
under federal securities laws.

SELECTED DAILY GOVERNMENT FUND FUNDAMENTAL INVESTMENT RESTRICTIONS

The Fund may not:

1. Diversification. Purchase securities, if immediately after such purchase
more than 5% of its total assets would be invested in the securities of any
one issuer excluding U.S. Government Securities, and repurchase agreements
with respect to such securities.

2. Concentration. Invest 25% or more of its total assets in any one industry,
except that this restriction shall not apply to U.S. Government Securities.

3. Real Estate, Commodities. Purchase or sell real estate, real estate
mortgage loans, commodities, commodity contracts (including futures
contracts) or oil and gas interests.

4. Borrowing. Borrow money, except for temporary or emergency non-investment
purposes such as to accommodate abnormally heavy redemption requests, and
then only in an amount not exceeding 10% of the value of its total assets
at the time of borrowing.

5. Underwriting. Underwrite any securities issued by others (except that it
may technically be considered an underwriter if it sells restricted
securities).

26
<PAGE>

6. Loans. Make loans, other than by entering into repurchase agreements and
through the purchase of other permitted investments in accordance with its
investment objective and policies.

7. Senior Securities. Issue any class of securities senior to any other class
of securities.

8. Selling Short, Margin. Sell securities short or purchase any securities on
margin, except for such short-term credits as are necessary for clearance
or portfolio transactions.

9. Options. Write, purchase or sell put or call options.

10. Pledging, Mortgaging, Hypothecation. Pledge, mortgage or hypothecate its
assets, except that to secure borrowings permitted by (3) above, it may
pledge securities having a market value at the time of pledge not exceeding
15% of its total assets.

11. Other Investment Companies. Invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.

12. Repurchase Agreements, Illiquid Securities. Enter into a repurchase
agreement maturing in more than seven days or knowingly purchase securities
that are subject to restrictions on resale or for which there are no
readily available market quotations if, as a result of such purchase more
than 10% of a Fund's assets would be invested in such securities.

PLEASE NOTE: 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.

Section II: Key Persons

ORGANIZATION OF THE COMPANIES

THE COMPANIES. Each of the Selected Funds (the "Companies") is an open-end,
diversified, management investment company registered under the Investment
Company Act of 1940.

Selected American Shares, Inc., organized in 1933, and Selected Special
Shares, Inc., organized in 1939, are Maryland corporations. Selected American
Shares, Inc. and Selected Special Shares, Inc. each currently issue one series
of common stock.

Selected U.S. Government Income Fund and Selected Daily Government Fund are
each separate series of Selected Capital Preservation Trust. The Trust was
organized as a business trust under the laws of Ohio in 1987 and currently
issues two separate series of shares of beneficial interest

FUND SHARES. The Board of Directors may offer additional series in the
future and may at any time discontinue the offering of any series of shares.
Each share, when issued and paid for

27
<PAGE>

in accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive or subscription rights. Each of the Companies' shares
represent an interest in the assets of the Company 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 series,
such as those related to the distribution of each series and the transfer agency
expenses of each series are borne solely by each such series, and (ii) each
series of shares votes separately with respect to provisions of the Rule 12b-1
Distribution Plan, which pertains to a particular series, and other matters for
which separate series voting is appropriate under applicable law. Each
fractional share has the same rights, in proportion, as a full share. Shares do
not have cumulative voting rights; therefore, the holders of more than 50% of
the voting power of a Company can elect all of the directors of that Company.

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, such as a Company, will not be deemed to have been
effectively acted upon 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 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' By-laws, the Companies do not hold regular annual
shareholder meetings. Shareholder meetings are held when they are required under
the Investment Company Act of 1940 or when otherwise called for special
purposes. Special shareholder meetings may be called for Selected American
Shares or Selected Special Shares upon the written request of shareholders of at
least 25% of the voting power that could be cast at the meeting. Special
shareholder meetings may be called for Selected Capital Preservation Trust upon
the written request of shareholders of at least 10% of the voting power that
could be cast at the meeting.

DIRECTORS AND OFFICERS

The Selected Funds' Board of Directors is responsible for the management
and supervision of the Companies and the Funds. Each of the Directors serves as
a director of Selected American Shares, Inc., Selected Special Shares, Inc. and
as a trustee of Selected Capital Preservation Trust. The Board approves all
significant agreements between the Companies, on behalf of the Funds, and those
companies that furnish services to the Funds. The names and addresses of the
directors and officers of the Companies are set forth below, together with their
principal business affiliations and occupations for the last five years. As
indicated below, certain directors and officers of the Selected Funds hold
similar positions with the Davis Funds that are also managed by the Adviser.

WILLIAM P. BARR (5/23/50), - Director. Executive Vice President and General
Counsel, GTE Corporation since July 1994; Attorney General of the United States
from August 1991 to January 1993; Deputy Attorney General from May 1990 to
August 1991; Assistant Attorney General from April 1989 to May 1990; Partner
with the law firm of Shaw, Pittman, Potts & Trowbridge from 1984 to April 1989
and January 1993 to August 1994. His address is One Stamford Forum, Stamford CT
06904.

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<PAGE>

FLOYD A. BROWN (11/5/30), - Director. Staff announcer and program host for WGN
Radio and Television, Chicago, Illinois; sole proprietor of The Floyd Brown Co.,
Elgin, Illinois (advertising, media production and mass media marketing). His
address is 51 Douglas Avenue, Elgin IL 60120.

ANDREW A. DAVIS (6/25/63),* - Director. Director and President or Vice President
of each of the Davis Funds (except Davis International Series, Inc.); Director
and President, Venture Advisers, Inc.; Director and Vice President, Davis
Selected Advisers-NY, Inc.; His address is 124 East Marcy Street, Santa Fe NM
87501.

CHRISTOPHER C. DAVIS (7/13/65),* - Director. Director and President or Vice
President of each of the Davis Funds; Director, Vice Chairman, Venture Advisers,
Inc.; Director, Chairman, Chief Executive Officer, Davis Selected Advisers-NY,
Inc.; Chairman and Director, Shelby Cullom Davis Financial Consultants, Inc.;
Employee of Shelby Cullom Davis & Co., a registered broker/dealer; Director,
Kings Bay Ltd., an offshore investment management company. His address is 609
Fifth Avenue, New York NY 10017.

JEROME E. HASS (6/1/40), - Director. Professor of Finance and Business Strategy,
Johnson Graduate School of Management, Cornell University; Consultant, National
Economic Research Associates; formerly Chief of Division of Economic Research of
the Federal Power Commission and Special Assistant to James R. Schlesinger at
the Executive Office of the President of the United States. His address is 363
Sage Hall, Ithaca NY 14853.

KATHERINE L. MACWILLIAMS (1/19/56), - Director. Vice President, Treasurer Coors
Brewing Company and Adolph Coors Company; formerly Vice President of Capital
Markets for UBS Securities in New York; former member of the Board of
International Swaps and Derivatives Association, Inc. Her address is 12th & Ford
St., Golden CO 80401.

JAMES J. MCMONAGLE (10/1/44), - Chairman and Director. Senior Vice President and
General Counsel of University Health System, Inc. and University Hospitals of
Cleveland; from 1976 to 1990, Judge of the Court of Common Pleas, Cuyahoga
County, Ohio. His address is 11100 Euclid Avenue, Cleveland OH 44106.

RICHARD O'BRIEN (9/12/45), - Director. Corporate Economist for Hewlett-Packard
Company; Director, National Association of Business Economists; former President
of the Northern California High Technology Council and former Chairman of the
Economic Advisory Council of the California Chamber of Commerce. His address is
3000 Hanover Street, Palo Alto CA 94304.

DR. LARRY J. B. ROBINSON (10/28/28), - Director. General Partner, Robinson
Investment Company; Private Investor and Venture Capitalist; as owner, expanded
J. B. Robinson Jewelers from one to 90 stores; also owned radio stations;
Adjunct Professor, Case Western Reserve University; many non-profit boards
including Cleveland Orchestra; occasionally foreign correspondent in Mid East
and Balkans. Management Consultant. Corporate Liaison for Mayor Michael R. White
of Cleveland, Ohio. His address is 906 Terminal Tower, 50 Public Square,
Cleveland, OH 44113.

MARSHA WILLIAMS (3/28/51), - Director. Director of each of the Davis Funds
(except Davis International Series, Inc.). Chief Administrative Officer of Crate
& Barrel; Director, Modine Manufacturing Inc., Director, Chicago Bridge & Iron
Company, M.V.; former Treasurer, Amoco Corporation. Her address is 725 Landwehr
Road, Northbrook IL 60062.

KENNETH C. EICH (8/14/53), - Vice President. Vice President of each of the Davis
Funds; Chief Operating Officer, Venture Advisers, Inc.; Vice President, Davis
Selected Advisers-NY, Inc.; President, Davis Distributors, LLC; former President
and Chief Executive Officer of First of Michigan Corporation; former Executive
Vice President and Chief Financial Officer of Oppenheimer Management
Corporation. His address is 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.

SHARRA L. REED (9/25/66), - Vice President Treasurer and Assistant Secretary.
Vice President, Treasurer and Assistant Secretary of each of the Davis Funds;
Vice President of Venture Advisers, Inc.. Her address is 2949 East Elvira Road,
Suite 101, Tucson, AZ 85706.

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<PAGE>

THOMAS D. TAYS (3/7/57), - Vice President and Secretary. Vice President and
Secretary of each of the Davis Funds; Vice President and Secretary, Venture
Advisers, Inc., Davis Selected Advisers-NY, Inc., and Davis Distributors, LLC;
former Vice President and Special Counsel of U.S. Global Investors, Inc. His
address is 2949 East Elvira Road, Suite 101, Tucson, AZ 85706.

ARTHUR DON (9/24/53), - Assistant Secretary. Assistant Secretary of each of the
Davis Funds; Member, D'Ancona & Pflaum LLC, the Company's counsel. His address
is 111 East Wacker Drive, Suite 2800, Chicago IL 60601.

SHELDON R. STEIN (11/29/28), - Assistant Secretary. Assistant Secretary of each
of the Davis Funds; Member, D'Ancona & Pflaum LLC, the Company's counsel. His
address is 111 East Wacker Drive, Suite 2800, Chicago IL 60601.

* Andrew A. Davis and Christopher C. Davis are considered to be "interested
persons" of the Companies, as defined in the Investment Company Act.

The Companies do not pay salaries to any of its officers. The Adviser
performs certain services on behalf of the Companies and is reimbursed by the
Companies for the costs of providing these services.

DIRECTORS' COMPENSATION SCHEDULE

During the fiscal year ended December 31, 1999 the compensation paid to the
Directors who are not considered to be interested persons of the Companies was
as follows:

AGGREGATE COMPENSATION TOTAL
NAME FROM SELECTED FUNDS COMPLEX COMPENSATION*
---- ------------------- ---------------------
William P. Barr $29,500 $29,500
Floyd A Brown $32,000 $32,000
Jerome E. Hass $28,000 $28,000
Katherine L. MacWilliams $32,000 $32,000
James J. McMonagle $56,000 $56,000
Richard C. O'Brien $32,000 $32,000
Larry Robinson $25,500 $25,500
Marsha Williams $23,500 $77,150

* Complex compensation is the aggregate compensation paid, for services as a
Director, by all mutual funds with the same investment adviser. There are seven
registered investment companies in the complex.

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<PAGE>

CERTAIN SHAREHOLDERS OF THE FUND

As of April 12, 2000, officers and directors owned the following
percentages of each of the Companies:

Percentage of
Outstanding Shares Owned
------------------------
Selected American Shares *
Selected Special Shares *
Selected U.S. Government Income Fund 5.184%
Selected Daily Government Fund *

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

The following table sets forth, as of April 12, 2000, the name and
holdings of each person known by the Companies to be a record owner of more than
5% of the outstanding shares any of the Selected Funds.

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

SELECTED AMERICAN SHARES

Charles Schwab & Co., Inc. 25.88%
101 Montgomery Street
San Francisco, CA 94104-4122

Shelby Cullom Davis & Co. 20.78%
Investment #3
609 5th Avenue, 11th Floor
New York, NY 10017-1021

FBSICO 14.41%
National Financial Service
200 Liberty Street, 5th Floor
New York, NY 10281-5500

The Bank of New York TRS for 5.77%
Shelby Cullom Davis
FBO The Bank of New York as Pledgee
Attn: John Carbaugh
1 Wall Street
New York, NY 10005-2500
Selected Special Shares

31
<PAGE>

Charles Schwab & Co., Inc. 8.92%
101 Montgomery Street
San Francisco, CA 94104-4122

Shelby Cullom Davis & Co. 8.24%
Investment #3
609 5th Avenue, 11th Floor
New York, NY 10017-1021

SELECTED U.S. GOVERNMENT INCOME FUND

Everen Securities, Inc. 5.45%
A/C 5493-4653
Michi Kawai Christian
111 East Kilbourn Avenue
Milwaukee, WI 53202-6611

Larry J.B. Robinson 5.12%
Attn: Mrs. Laura Allie
905 Terminal Tower
Cleveland, OH 44113-2207

SELECTED DAILY GOVERNMENT FUND

Shelby Cullom Davis & Co. 84.04%
Investment #3
609 5th Avenue, 11th Floor
New York, NY 10017-1021

INVESTMENT ADVISORY SERVICES

Davis Selected Advisers, L.P. (the "Adviser") whose principal office is at
2949 East Elvira Road, Suite 101, Tucson, AZ 85706, serves as the investment
adviser of each of the Selected Funds. Venture Advisers, Inc. is the Adviser's
sole general partner. Shelby M.C. Davis is Chief Investment Officer of the
Adviser and the controlling shareholder of the general partner. Subject to the
direction and supervision of the Board of Directors, the Adviser manages the
investment and business operations of the Funds. Davis Distributors, LLC ("the
Distributor"), a subsidiary of the Adviser, serves as the distributor or
principal underwriter of the Funds' shares. Davis Selected Advisers-NY, Inc.,
("DSA-NY") a wholly owned subsidiary of the Adviser, performs investment
management, research and other services for the Funds on behalf of the Adviser
under a Sub-Advisory Agreement with the Adviser. The Adviser also acts as
investment adviser for Davis New York Venture Fund, Inc., Davis Series, Inc.,
Davis International Series, Inc., Davis Variable Account, Inc. (collectively,
the "Davis Funds"). The Distributor also acts as the principal underwriter for
the Davis Funds and the Selected Funds.

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<PAGE>

ADVISORY AGREEMENT. Pursuant to Advisory Agreements, each Selected Fund
pays the Adviser a fee according to a separate negotiated fee schedule.

Selected American Shares pays the Adviser a fee at the annual rate based on
average net assets, as follows: 0.65% on the first $500 million; 0.60% on the
next $500 million; 0.55% on the next $2 billion; 0.54% on the next $1 billion;
0.53% on the next $1 billion; 0.52% on the next $1 billion; 0.51% on the next $1
billion; and 0.50% of average net assets in excess of $7 billion.

Selected Special Shares pays the Adviser a fee at the annual rate based on
average net assets, as follows: 0.70% on the first $50 million; 0.675% on the
next $100 million; 0.65% of the next $100 million, and 0.60% on amounts over
$250 million.

Selected U.S. Government Income Fund pays the Adviser a flat fee at the
annual rate of 0.30% of average net assets.

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

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

Fiscal year ended
December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Selected American Shares $18,609,966 $14,793,828 $10,823,019
Selected Special Shares $ 664,862 $ 575,453 $ 466,352
Selected U.S. Government Income Fund $ 22,738 $ 30,211 $ 29,928
Selected Daily Government Fund $ 386,543 $ 364,848 $ 345,976
</TABLE>

These fees may be higher than that of most other mutual funds but are not
necessarily higher than those paid by funds with similar objectives.

Bramwell Capital Management, Inc., 745 Fifth Avenue, New York, New York,
10151 serves as Sub-Adviser to Selected Special Shares under a Sub-Advisory
Agreement with the Adviser. The Sub-Adviser manages the day to day investment
operations of Selected Special Shares, subject to the Adviser's overall
supervision. All of the fees paid to the Sub-Adviser are paid by the Adviser and
not the Fund.

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

The Advisory Agreements also make provisions for portfolio transactions and
brokerage policies of the Selected Funds which are discussed above under
"Portfolio Transactions."

33
<PAGE>

In accordance with the provisions of the Investment Company Act of 1940,
each Advisory Agreement and Sub-Advisory Agreement will terminate automatically
upon assignment and is subject to cancellation upon 60 days' written notice by a
Company's Board of Directors, the vote of the holders of a majority of the
Funds' outstanding shares, or the Adviser. The continuance of the Advisory
Agreements and Sub-Advisory Agreements 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 Fund. 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.

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

Fiscal year ended
December 31,
1999 1998 1997*
---- ---- -----
Selected American Shares $128,133 $162,634 $ 42,672
Selected Special Shares $ 13,951 $ 18,845 $ 5,363
Selected U.S. Government Income Fund $ 857 $ 1,165 $ 356
Selected Daily Income Fund $ 4,822 $ 6,560 $ 1,975

* The Adviser began collecting these fees in November 1997.

CODE OF ETHICS. The Adviser and the Funds have adopted a Code of Ethics which
regulates the personal securities transactions of the Adviser's investment
personnel, other employees, and affiliates with access to information regarding
securities transactions of the Funds. Such employees may invest in securities,
including securities which may be purchased or held by the Funds. A copy of the
Code of Ethics is on public file with, and available from, the Securities and
Exchange Commission.

DISTRIBUTION OF COMPANY SHARES

DISTRIBUTION PLANS. Each of the Selected Funds have each adopted
Distribution Plans under which each Fund pays the Distributor a fee of 0.25% of
average daily net assets. The Distribution Plans were approved by the Funds'
Board of Directors in accordance with Rule 12b-1 under the Investment Company
Act of 1940. 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 Funds.

34
<PAGE>

To the extent that any investment advisory fees paid by a Company may be
deemed to be indirectly financing any activity which is primarily intended to
result in the sale of Company 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 Funds' outstanding
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
Companies must commit the selection and nomination of candidates for new
Independent Directors to the sole discretion of the existing Independent
Directors.

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

The Distributor has agreements with securities dealers and other persons
(such as financial planners) for distributing shares of the Funds and/or
providing services to shareholders. The Distributor may pay such firms service
fees of up to 0.25% of the average net asset value of the shares of any Selected
Fund for accounts for which representatives of the dealers are responsible and
provide services. For accounts established prior to May 1, 1999, the Distributor
may pay up to an additional 0.30% of the average net asset value from its own
resources.

Shares of the Selected Funds may be sold through banks or bank-affiliated
dealers. If it is determined that the Glass-Steagall Act (which limits the
ability of a bank to be an underwriter of securities) prohibits banks or bank
affiliates from selling shares of the Funds, there would be no material adverse
effects on the Funds. State securities laws may require such firms to be
licensed as securities dealers in order to sell shares of the Selected Funds.

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.

35
<PAGE>

Fiscal year ended
December 31,
1999 1998 1997
---- ---- ----
Selected American Shares $8,130,115 $6,383,558 $4,578,645
Selected Special Shares $ 241,616 $ 208,501 $ 168,093
Selected U.S. Government Income Fund $ 13,441 $ 15,101 $ 14,964
Selected Daily Income Fund $ 322,120 $ 304,040 $ 288,313

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

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

A portion of the supermarket sponsor's fee (that portion related to
shareholder services such as new account set-up, shareholder accounting,
shareholder inquires, transaction processing, and shareholder confirmations and
reporting) is paid as a shareholder servicing fee of the Funds. The Funds would
typically be paying these shareholder servicing fees directly, were it not that
the supermarket sponsor holds all customer accounts in a single omnibus account
with the Funds. The amount of shareholder servicing fees which the Funds may pay
to supermarket sponsors may not exceed the lesser of (a) 1/10 of 1 percent of
net assets held by such supermarket sponsors per year, or (b) the shareholder
servicing costs saved by the Funds with the omnibus account (determined in the
reasonable judgement of the Adviser).

If the supermarket sponsor's fees exceed the sum available from the
Distribution Plans and shareholder servicing fees, then the Adviser pays the
remainder out of its profits.

OTHER IMPORTANT SERVICE PROVIDERS

CUSTODIAN. State Street Bank and Trust Company ("State Street" or
"Custodian"), One Heritage Drive, North Quincy, Massachusetts 02171, serves as
custodian of the Companies' assets. The Custodian maintains all of the
instruments representing the Companies' investments and all cash. The Custodian
delivers securities against payment upon sale and pays for securities against
delivery upon purchase. The Custodian also remits the Companies' assets in
payment of the Funds' expenses, pursuant to instructions of officers or
resolutions of the Board of Directors. The Custodian also provides certain Fund
accounting and transfer agent services.

AUDITORS. KPMG LLP ("KPMG"), 707 17th Street, Suite 2300, Denver, Colorado
80202, serves as independent auditors for each of the Funds. The auditors
consult on financial accounting and reporting matters, and meet with the Audit
Committee of the Board of Directors. In addition, KPMG reviews federal and state
income tax returns and related forms.

COUNSEL. D'Ancona & Pflaum LLC, 111 East Wacker Drive, Suite 2800, Chicago,
Illinois 60601, serves as counsel to the Companies and also serves as counsel
for those members of the Board of Directors who are not affiliated with the
Adviser.

36
<PAGE>

Section III: Purchase, Exchange and Redemption of Shares

PURCHASE OF SHARES

Shares of the Funds may be purchased though a securities dealer having a
sales agreement with the Distributor (a "Qualified Dealer") or directly from the
Funds. No matter how you purchase your shares, you pay no sales load. You can
open an account if you invest at least: $1,000 for a non-retirement plan
account, or $250 for a retirement plan account.

There are three ways that you may open an account:

1. BY MAIL. Fill out the Application Form included in this prospectus and
mail it to our service provider, State Street Bank and Trust. Include a check
made payable to SELECTED FUNDS or, in the case of a retirement account, to the
custodian or trustee. All purchases by check should be in U.S. dollars. SELECTED
FUNDS WILL NOT ACCEPT THIRD-PARTY CHECKS. When purchases are made by check,
redemptions will not be allowed until the investment being redeemed has been in
the account for 15 calendar days.

2. 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, Davis Distributors. Please note that your dealer
may charge a service fee or commission for buying these shares.

3. BY WIRE. You may wire federal funds directly to our service provider,
State Street Bank and Trust. Before you wire an initial investment, you must
call Davis Distributors to let them know the Fund you will be buying. After the
initial wire purchase is made, you will need to fill out a Plan Adoption
Agreement or Application Form and return it to 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 that you are Buying]
Shareholder Name
Shareholder Account Number
Federal Routing Number 011000028
DDA Number 9905-325-8

SUBSEQUENT INVESTMENTS. After your initial investment, you can make
additional investments of at least $25. Simply mail a check payable to "The
Selected Funds" to State Street Bank and Trust Company, c/o The Selected Funds,
P.O. Box 8243, Boston, MA 02266-8243. For overnight delivery, please send your
check to State Street Bank and Trust Company, c/o the Selected Funds, 66 Brooks
Drive, Braintree, MA. 02184. Third party checks will not be accepted. The check
should be accompanied by a form which State Street will provide after each
purchase. If you do not have a form, you should tell State Street that you want
to invest the

37
<PAGE>

check in shares of the applicable Fund. If you know your account number, you
should also provide it to State Street.

CERTIFICATES. The Companies do not issue certificates for shares unless you
request a certificate each time you make a purchase. Certificates are not issued
for accounts using the Automatic Withdrawal Plan. In no event, however, will
Selected Daily Government Fund issue a certificate, since all shares must be
uncertificated to use the check writing or pre-designated account payment
privileges. Instead, shares purchased are automatically credited to an account
maintained for you on the books of the Companies by State Street. You will
receive a statement showing the details of the transaction and any other
transactions you had during the current year each time you add to or withdraw
from your account. If you are eligible and wish to receive certificates, please
submit a letter of instruction with your Application Form. Once your account has
been established, the shareholder(s) may request that certificates be sent to
the address of record by calling our customer service department.

SPECIAL SERVICES

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 Companies
for corporations and self-employed individuals. The Distributor and certain
qualified dealers also have prototype Individual Retirement Account ("IRA")
plans (deductible IRAs, non-deductible IRAs, including "Roth IRAs", and
educational IRAs) and SIMPLE IRA plans for both individuals and employers. These
plans utilize the shares of the Companies as their investment vehicle. State
Street acts as custodian or trustee for certain retirement plans, and charges
the participant an annual maintenance fee of $10 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.

AUTOMATIC INVESTMENT PROGRAM. You may arrange for automatic monthly
investing whereby State Street will be authorized to initiate a debit to your
bank account of a specific amount (minimum $25) each month which will be used to
purchase the Funds' shares. The account minimums of $1,000 for non-retirement
accounts and $250 for retirement accounts will be waived, if pursuant to the
automatic investment program the account balance will meet the minimum
investment requirements within twelve months of the initial investment. For
banking institutions that are members of the Automated Clearing House system
(ACH), such purchases can be processed electronically on any day of the month
between the 5th and the 28th. After each automatic investment, you will receive
a transaction confirmation from State Street and the debit should be reflected
on your next bank statement. You may terminate the Automatic Investment Program
at any time. If you desire to utilize this program, you may complete the
appropriate section of the Application Form. Once you have established your
account, you may use the Account Service Form to establish this program or
submit a letter of instruction signed by the account owner(s).

38
<PAGE>

DIVIDEND DIVERSIFICATION PROGRAM. You may also establish a dividend
diversification program which allows you to have all dividends and any other
distributions automatically invested in shares of one or more of the Selected
Funds, subject to state securities law requirements and the minimum investment
requirements. You must receive a current prospectus for the other fund or funds
prior to investment. Shares will be purchased at the chosen Fund's net asset
value on the dividend payment date. A dividend diversification account must be
in the same registration as the distributing fund account. All accounts
established or utilized under this program must have a minimum initial value,
and all subsequent investments must be at least $25. This program can be amended
or terminated at any time, upon at least 60 days' notice. If you would like to
participate in this program, you may complete the appropriate section of the
Application Form. Once you have established your account, you may use the
Account Service Form to establish this program or submit a letter of instruction
signed by the account owner(s).

TELEPHONE PRIVILEGE. Unless you have provided in your application that the
telephone privilege is not to be available, the telephone privilege is
automatically available under certain circumstances for exchanging shares and
for redeeming shares. BY EXERCISING THE TELEPHONE PRIVILEGE TO SELL OR EXCHANGE
SHARES, YOU AGREE THAT THE DISTRIBUTOR SHALL NOT BE LIABLE FOR FOLLOWING
TELEPHONE INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE. Reasonable procedures
will be employed to confirm that such instructions are genuine and if not
employed, the Companies may be liable for unauthorized instructions. Such
procedures will include a request for personal identification (account or social
security number) and tape recording of the instructions. You should be aware
that during unusual market conditions we might have difficulty in accepting
telephone requests, in which case you should contact us by mail.

EXCHANGE OF SHARES

GENERAL. The exchange privilege is a convenient way to buy shares in other
Selected Funds in order to respond to changes in your goals or in market
conditions. If such goals or market conditions change, the Selected Funds offer
a variety of investment objectives that includes common stock funds, a
government bond fund, and a government money market fund. However, the Funds are
intended as long-term investments and (other than Selected Daily Government
Fund) are not intended for short-term trades. The shares to be received upon
exchange must be legally available for sale in your state. The net asset value
of the initial shares being acquired must meet the required minimum of $1,000
unless such exchange is under the Automatic Exchange Program described below.

Shares may be exchanged at relative net asset value without any additional
charge.

Before you decide to make an exchange, you must obtain a current Selected
Funds prospectus. Read the prospectus carefully. If you decide to exchange your
shares, contact your broker/dealer, the Distributor, or send State Street a
written unconditional request for the exchange and follow the instructions
regarding delivery of share certificates contained in the section on "Redemption
of Shares." A medallion signature guarantee is not required for such an
exchange. However, if shares are also redeemed for cash in connection with the
exchange transaction, a medallion signature guarantee may be required. A
medallion signature guarantee

39
<PAGE>

is a written confirmation from an eligible guarantor institution, such as a
securities broker-dealer or a commercial bank, that the signature(s) on the
account is (are) valid. Unfortunately, no other form of signature verification
can be accepted. Your dealer may charge an additional fee for handling an
exercise of the exchange privilege.

An exchange involves both a redemption and a purchase, and normally both
are done on the same day. However, in certain instances such as where a large
redemption is involved, the investment of redemption proceeds into shares of
other Selected Funds may take up to seven days. For federal income tax purposes,
exchanges between funds are treated as a sale and purchase. Therefore, there
will usually be a recognizable capital gain or loss due to an exchange.

The number of times you may exchange shares among the Selected Funds within
a specified period of time may be limited at the discretion of the Distributor.
Currently, more than four exchanges out of a fund during a twelve-month period
are not permitted without the prior written approval of the Distributor. The
Selected Funds reserve the right to terminate or amend the exchange privilege at
any time upon 60 days' notice.

BY TELEPHONE. You may exchange shares by telephone into accounts with
identical registrations. Please see the discussion of procedures in respect to
telephone instructions in the section entitled "Telephone Privilege," as such
procedures are also applicable to exchanges.

AUTOMATIC EXCHANGE PROGRAM. The Selected Funds also offer an automatic
monthly exchange program. All accounts established or utilized under this
program must have the same registration and a minimum initial value of at least
$250. All subsequent exchanges must have a value of at least $25. Each month,
shares will be simultaneously redeemed and purchased at the chosen fund's
applicable price. If you would like to participate in this program, you may use
the appropriate designation on the Application Form.

REDEMPTION OF SHARES

GENERAL. You can redeem, or sell back to the Companies, all or part of your
shares at any time at net asset value. You can do this by sending a written
request to State Street Bank and Trust Company, c/o The Selected Funds, P.O. Box
8243, Boston MA 02266-8243, indicating how many of your shares or what dollar
amount you want to redeem. If more than one person owns the shares to be
redeemed, all owners must sign the request. The signatures on the request must
correspond to the account from which the shares are being redeemed.

Sometimes State Street needs more documents to verify authority to make a
redemption. This usually happens when the owner is a corporation, partnership or
fiduciary (such as a trustee or the executor of an estate) or if the person
making the request is not the registered owner of the shares.

If shares to be redeemed are represented by a certificate, the certificate
must be sent to State Street Bank and Trust with the a letter of instruction
signed by all account owner(s).

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<PAGE>

For the protection of all shareholders, the Companies also requires that
signatures appearing on a letter of instruction, stock power or redemption
request where the proceeds would be more than $100,000 mailed to the address of
record, must be medallion signature-guaranteed by an eligible guarantor
institution, such as a securities broker-dealer, or a commercial bank. In some
situations where corporations, trusts, or estates are involved, additional
documents such as a certified copy of the corporate resolution, may be necessary
to effect the redemption. The transfer agent may reject a request from any of
the foregoing eligible guarantors, if such guarantor does not satisfy the
transfer agent's written standards or procedures, or if such guarantor is not a
member or participant of a medallion signature guarantee program or does not
reimburse in the case of fraud. This provision also applies to exchanges when
there is also a redemption for cash. A medallion signature guarantee on
redemption requests where the proceeds would be $100,000 or less is not
required, provided that such proceeds are being sent to the address of record
and, in order to ensure authenticity of an address change, such address of
record has not been changed within the last 30 days.

Redemption proceeds are normally paid to you within seven days after State
Street receives your proper redemption request. Payment for redemptions can be
suspended under certain emergency conditions determined by the Securities and
Exchange Commission, or if the New York Stock Exchange is closed for other than
customary or holiday closings. If any of the shares redeemed were just bought by
you, payment to you may be delayed until your purchase check has cleared (which
usually takes up to 15 days from the purchase date). 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 Companies'
Board of Directors is authorized to decide if conditions exist making cash
payments undesirable (although the Board has never reached such a decision). If
the Board of Directors should decide to make payments other than in cash,
redemptions could be paid in securities, valued at the value used in computing a
Fund's net asset value. There would be brokerage costs incurred by the
shareholder in selling such redemption proceeds. We must, however, redeem shares
solely in cash up to the lesser of $250,000 or 1% of the Fund's net asset value,
whichever is smaller, during any 90-day period for any one shareholder.

Your shares may also be redeemed through participating dealers. Under this
method, the Distributor repurchases the shares from your dealer, if your dealer
is a member of the Distributor's selling group. Your dealer may, but is not
required to, use this method in selling back your shares and may place a
repurchase request by telephone or wire. Your dealer may charge you a service
fee or commission. No such charge is incurred if you redeem your own shares
through State Street Bank and Trust rather than having a dealer arrange for a
repurchase.

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<PAGE>

SELECTED DAILY GOVERNMENT FUND. You may request redemption of part or all
of your in Selected Daily Government Fund by mail by sending your request to
State Street Bank and Trust Company, c/o Selected Funds, P.O. Box 8243, Boston
MA 02266-8243. You may also redeem shares through the Check Writing Privilege or
by Expedited Redemption Privilege to a pre-designated bank account. Normally,
except for payment to a pre-designated bank account, State Street will send
payment for Selected Daily Government Fund shares redeemed within three business
days, but in no event, later than seven days, after receipt of a redemption
request in proper form.

SELECTED DAILY GOVERNMENT FUND CHECK WRITING PRIVILEGE. For Selected Daily
Government Fund accounts other than retirement plans and IRAs, State Street will
provide, upon request, forms of drafts to be drawn on your regular account that
will clear through State Street. These drafts may be made payable to the order
of any person in any amount not less than $100. When a draft is presented to
State Street for payment, State Street will redeem a sufficient number of full
and fractional shares in your account to cover the amount of the draft. This
enables you to continue earning daily income dividends until the draft has
cleared.

If you elect to use this method of redemption, please so signify on the
Check Writing Privilege Form. You will be subject to State Street's rules and
regulations governing such drafts, including the right of State Street not to
honor drafts in amounts exceeding the value of the regular account at the time
they are presented for payment. Drafts in excess of the value of Selected Daily
Government Fund regular account cannot be honored by redemption of any other
Fund account. The Companies and State Street reserve the right to modify or
terminate this service at any time.

A shareholder may issue a "Stop Payment" on any draft by calling State
Street at (800) 243-1575. 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 with respect to their regular checking accounts.

ELECTRONIC WIRE PRIVILEGE. You may be eligible to have your sale proceeds
electronically transferred to a commercial bank account. This is known as an
ELECTRONIC WIRE PRIVILEGE. There is a $5 charge by State Street for wire
service, and receiving banks may also charge for this service. Payment through
Automated Clearing House will usually arrive at your bank two banking days after
the sale. Payment by wire is usually credited to your bank account on the next
business day after the sale.

While State Street Bank and Trust will accept electronic wire sales by
telephone or dealer, you still need to fill out and submit the information under
the Electronic Wire Privilege section of the Application Form. Once your account
has been opened and you have not previously established the Electronic Wire
Privilege, you must submit a letter of instruction with a medallion signature
guarantee signed by all registered owners at the time of the wire sale. If you
are currently an investor with a non-retirement account and have already
established this privilege, you may call our customer service department to
execute a wire sale by telephone.

42
<PAGE>

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.

MAINTENANCE FEES. To help relieve the Selected Daily Government Fund's high
cost of maintaining small accounts, there is a $10 charge imposed on all
accounts whose net asset value has been reduced to less than $1,000. This charge
is collected by redemption in December of each year and is paid to Selected
Daily Government Fund.

BY TELEPHONE. You can redeem shares by telephone and receive a check by
mail, but please keep in mind:

The check can only be issued for up to $25,000;
The check can only be issued to the registered owners;
The check can only be sent to the address of record; and
Your current address of record must have been on file for 30 days.

AUTOMATIC WITHDRAWAL PLAN. Under the Automatic Withdrawal Plan, you can
instruct State Street to sell a set dollar or percentage amount each month or
each quarter. Your account must have a value of at least $10,000 to start a
plan.

When you participate in this plan, shares are sold so that you will receive
payment by one of three methods:

First, you may receive funds at the address of record provided that
this address has been unchanged for a period of not less than 30 days. These
funds are sent by check on or after the 25th day of the month.

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

Third, 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. Once your account has been established, you must submit a
letter of instruction with a medallion signature guarantee to designate a third
party payee.

Withdrawals involve redemption of shares and may produce gain or loss for
income tax purposes. Purchase of additional shares concurrent with withdrawals
may be disadvantageous to you because of tax consequences. If the amount you
withdraw exceeds the dividends on your

43
<PAGE>

shares, your account will suffer depletion. You may terminate your Automatic
Withdrawal Plan at any time without charge or penalty. The Company reserves the
right to terminate or modify the Automatic Withdrawal Plan at any time.

INVOLUNTARY REDEMPTIONS. To relieve the Companies of the cost of
maintaining uneconomical accounts, the Companies may effect the redemption of
shares at net asset value in any account if the account, due to shareholder
redemptions, has a value of less than $250. At least 60 days prior to such
involuntary redemption, the Companies will mail a notice to the shareholder so
that an additional purchase may be effected to avoid such redemption.

Section IV: General Information

DETERMINING THE PRICE OF SHARES

NET ASSET VALUE. The Funds' net asset value per share is determined daily
by dividing the total value of investments and other assets, less any
liabilities, by the total outstanding shares. The net asset value of each Fund
is determined daily as of the earlier of the close of the New York Stock
Exchange (the "Exchange") or 4:00 p.m., Eastern Time, on each day that the
Exchange is open for trading.

The price per share for purchases or redemptions made directly through
State Street is generally the value next computed after State Street receives
the purchase order or redemption request. In order for your purchase order or
redemption request to be effective on the day you place your order with your
broker-dealer or other financial institution, such broker-dealer or financial
institution must (i) receive your order before 4:00 p.m. Eastern time, and (ii)
promptly transmit the order to State Street. The broker-dealer or financial
institution is responsible for promptly transmitting purchase orders or
redemption requests to State Street so that you may receive the same day's net
asset value. Note that in the case of redemptions and repurchases of shares
owned by corporations, trusts, or estates, or of shares represented by
outstanding certificates, State Street 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 Companies 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 Fund or its agents several
hours after the time of the acceptance and pricing.

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<PAGE>

VALUATION OF PORTFOLIO SECURITIES. Portfolio securities are normally valued
using current market valuations. Securities traded on a national securities
exchange are valued at the last published sales price on the exchange, or in the
absence of recorded sales, at the average of closing bid and asked prices on
such exchange. Over-the-counter securities are valued at the average of closing
bid and asked prices. Fixed-income securities may be valued on the basis of
prices provided by a pricing service. Investments in short-term securities
(purchased with a maturity of one year or less) are valued at amortized cost
unless the Board of Directors determines that such cost is not a fair value.
Assets for which there are no quotations available will be valued at a fair
value as determined by or at the direction of the Board of Directors.

To the extent that the Funds' securities are traded in markets that close
at different times, events affecting portfolio values that occur between the
time that their prices are determined and the time the Funds' shares are priced
will generally not be reflected in the Funds' share price. The value of
securities denominated in foreign currencies and traded in foreign markets will
have their value converted into the U.S. dollar equivalents at the prevailing
market rate as computed by State Street Bank & Trust Company. Fluctuation in the
value of foreign currencies in relation to the U.S. dollar may affect the net
asset value of the Funds' shares even if there has not been any change in the
foreign currency price of the Funds' investments.

Normally, the share price of Selected Daily Government Fund does not
fluctuate. However, if there are unusually rapid changes in interest rates which
in the Board's view cause a material deviation between amortized cost and market
value, the Board will consider whether such conditions require taking any
temporary action to maintain the normal fixed price or to prevent material
dilution or other unfavorable results to shareholders. Such action could include
withholding dividends, paying dividends out of surplus, realizing gains or
losses or using market valuation.

DIVIDENDS AND DISTRIBUTIONS

There are two sources of income, net income and realized capital gains paid
to you by the Funds. You will receive confirmation statements for dividends
declared and shares purchased through reinvestment of dividends. You will also
receive confirmations after each purchase and after each redemption. 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 Withdrawals Plan. The reinvestment of dividends and
distributions is made at net asset value on the payment date.

For the protection of the shareholder, upon receipt of the second dividend
check which has been returned to State Street 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.

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<PAGE>

SELECTED AMERICAN SHARES. Income dividends are normally paid quarterly.
Distributions from any net realized capital gains are made annually.

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

SELECTED U.S. GOVERNMENT INCOME FUND. Income dividends are paid monthly.
You will receive confirmation statements for dividends declared and shares
purchased through reinvestment of dividends. Distributions from any net realized
capital gain not offset by capital loss carryovers are distributed annually.
Selected U.S. Government Income Fund declares distributions based on the
Adviser's projections of estimated net investment income and net realized
short-term gains. The amount of each distribution may differ from actual net
investment income and gains determined in accordance with generally accepted
accounting principles. Selected U.S. Government Income Fund at times may
continue to pay distributions based on expectations of future investment results
to provide stable distributions for its shareholders even though, as a result of
temporary market conditions or other factors (including losses realized later in
a fiscal year which have the effect of affecting previously realized gains),
Selected U.S. Government Income Fund may have failed to achieve projected
investment results for a given period. In such cases, Selected U.S. Government
Income Fund's distributions may include a return of capital to shareholders.
Shareholders who reinvest their distributions are largely unaffected by such
returns of capital. In the case of shareholders who do not reinvest, a return of
capital is equivalent to a partial redemption of the shareholder's investment.

SELECTED DAILY GOVERNMENT FUND. Dividends from net income are 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.

FEDERAL INCOME TAXES

This section 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 Funds.

The 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. The Funds intend to make distributions during
each calendar year sufficient to prevent imposition of the excise tax.

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<PAGE>

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.

PERFORMANCE DATA

From time to time, the Funds may advertise information regarding their
performance. These performance figures are based upon historical results and are
not intended to indicate future performance.

CUMULATIVE TOTAL RETURN AND AVERAGE ANNUAL TOTAL RETURN

The cumulative total return and the average annual total return (each is
defined below) with respect to each Fund for the periods indicated below is as
follows:

Cumulative Average Annual
For the Period ended December 31, 1999 Total Return(1) Total Return (2)
- - -------------------------------------- ------------- -------------
<S> <C> <C>
Selected American Shares
One year .............................................. 20.32% 20.32%
Five years .............................................. 246.60% 28.21%
Ten years .............................................. 425.95% 18.05%
Period from 05/01/93 (when the Adviser assumed management)...... 263.28% 21.33%

Selected Special Shares
One year .............................................. 16.83% 16.83%
Five years .............................................. 177.22% 22.61%
Ten year .............................................. 279.61% 14.26%
Period from 05/01/93 (when the Adviser assumed management)...... 207.29% 18.33%

Selected U.S. Government Income Fund
One year .............................................. (1.97)% (1.97)%
Five years .............................................. 32.92% 5.85%
Ten years .............................................. 80.94% 6.11%
Period from 05/01/93 (when the Adviser assumed management)...... 33.45% 4.42%

Selected Daily Government Fund
One year .............................................. 4.48% 4.48%
Five years .............................................. 26.71% 4.85%
Ten years .............................................. 56.73% 4.60%
Period from 05/01/93 (when the Adviser assumed management)...... 33.23% 4.40%

</TABLE>

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<PAGE>

(1) "Cumulative Total Return" is a measure of a fund's performance encompassing
all elements of return. Total return reflects the change in share price
over a given period and assumes all distributions are taken in additional
fund shares. Total return is determined by assuming a hypothetical
investment at the beginning of the period, adding in the reinvestment of
all income dividends and capital gains, calculating the ending value of the
investment at the net asset value as of the end of the specified time
period and subtracting the amount of the original investment, and by
dividing 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.

(2) "Average Annual Total Return" represents the average annual compounded rate
of return for the periods presented. Periods of less than one year are not
annualized. Average annual total return measures both the net investment
income generated by, and the effect of any realized or unrealized
appreciation or depreciation of, the underlying investments in the fund's
portfolio. Average annual total return is calculated separately for each
Fund in accordance with the standardized method prescribed by the
Securities and Exchange Commission by determining the average annual
compounded rates of return over the periods indicated, that would equate
the initial amount invested to the ending redeemable value, according to
the following formula:

P(1+T)n = ERV

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

T = average annual total return.

n = number of years.

ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period.

This calculation (i) assumes all dividends and distributions are reinvested
at net asset value on the appropriate reinvestment dates, and (ii) deducts all
recurring fees, such as advisory fees, charged as expenses to all shareholder
accounts.

30-DAY SEC YIELD

The 30-Day SEC Yield (defined below) for shares of shares of Selected U.S.
Government Income Fund for the period ended December 31, 1999, was 5.60%.

"30-Day SEC Yield" is computed in accordance with a standardized method
prescribed by the rules of the Securities and Exchange Commission. 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.

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<PAGE>

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

CURRENT AND EFFECTIVE YIELDS. The current and effective yields for Selected
Daily Government Fund for the seven day period ended December 31, 1999, was
5.66% and 5.82%, respectively.

Yield quotations are calculated in accordance with the following formulas:

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

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

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

OTHER FUND STATISTICS

In reports or other communications to shareholders and in advertising
material, the performance of the Funds may be compared to recognized unmanaged
indices or averages of the performance of similar securities. Also, the
performance of the Funds 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 Funds may use evaluations published by nationally recognized
independent ranking services and publications. Any given performance comparison
should not be considered representative of the Funds' performance for any future
period.

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

The Funds' Annual Report and Semi-Annual report contain additional
performance information and will be made available upon request and without
charge by calling Selected Funds toll-free at 1-800-243-1575, Monday through
Friday, 7 a.m. to 4 p.m. Mountain Time.

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<PAGE>

APPENDIX

QUALITY RATINGS OF DEBT SECURITIES

MOODY'S CORPORATE BOND RATINGS

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

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade-obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations, i.e.
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements 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 which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments, or of maintenance of
other terms of the contract over any longer period of time, may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

STANDARD & POOR'S CORPORATE BOND RATINGS

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

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

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

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

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<PAGE>

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

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

CCC - Debt rated 'CCC' has a currently identifiable vulnerability to default,
and is dependent upon 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' is typically 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
which 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 upon 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 which 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 into 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.

<PAGE>
Draft 04/26/00

FORM N-1A

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

1
<PAGE>

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). Articles of
Incorporation, incorporated by reference to Exhibit (1) to
Post-Effective Amendment No. 68 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.

(a)(2) Articles of Incorporation (SSS). Articles of
Incorporation, incorporated by reference to Exhibit (1)
(a) to Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A, File No. 2-27514.

(a)(3) Amended Declaration of Trust (SCPT). Amended Declaration
of Trust, incorporated by reference to Exhibit (1) to
Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A, File No. 33-15807.

(b)(1) By-laws (SAS, SSS). Joint Amended and Restated Bylaws as
of October 30, 1998, filed herein.

(b)(2) By-laws (SCPT). Amended and Restated Bylaws as of October
30, 1998, filed herein.

(d)(1) Investment Advisory Contracts (SAS). Management Agreement
dated May 1, 1993, incorporated by reference to Exhibit
(5) to Post-Effective Amendment No. 71 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.

(d)(2) Sub-Advisory Agreement (SAS) Sub-Advisory Agreement dated
December 1, 1996, incorporated by reference to Exhibit
(5)(b) to Post-Effective Amendment No. 78 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.

2
<PAGE>

(d)(3) Investment Advisory Contracts (SSS). Management Agreement
dated May 1, 1993, incorporated by reference to Exhibit
(5) to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A, File No. 2-27514.

(d)(4) Sub-Advisory Agreement (SSS). Davis Selected Advisers -NY,
Inc. Sub-Advisory Agreement dated December 1, 1996,
incorporated by reference to Exhibit 5(b) to
Post-Effective Amendment No. 50 to Registrant's
Registration Statement on Form N-1A, File No. 2-27514.

(d)(5) Sub-Advisory Agreement (SSS) Bramwell Capital Management,
Inc. Sub-Advisory Agreement dated November 1, 1994,
incorporated by reference to Exhibit 5(b) to
Post-Effective Amendment No. 47 to Registrant's
Registration Statement on Form N-1A, File No. 2-27514.

(d)(6) Investment Advisory Contracts (SCPT) Management Agreement
dated May 1, 1993, incorporated by reference to Exhibit
(5) to Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-1A, File No. 33-15807.

(d)(7) Sub-Advisory Agreement (SCPT) Sub-Advisory Agreement Dated
December 1, 1996, incorporated by reference to Exhibit
(5)(b) to Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A, File No. 33-15807.

(e)(1) Underwriting Contracts (SAS). Distribution Services
Agreement and Plan of Distribution dated May 1, 1993,
incorporated by reference to Exhibit (6)/(15) to
Post-Effective Amendment No. 71 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.

(e)(2) Underwriting Contracts (SSS). Distribution Services
Agreement and Plan of Distribution dated May 1, 1993,
incorporated by reference to Exhibit (6)/(15) to
Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A, File No. 2-27514.

(e)(3) Underwriting Contracts (SCPT). Distribution Services
Agreement and Plan of Distribution dated May 1, 1993,
incorporated by reference to Exhibit (6)/(15) to
Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-1A, File No. 33-15807.

(f) Bonus or Profit Sharing Contracts. Not applicable.

3
<PAGE>

(g)(1) Custodian Agreements (SAS). Custody Agreement dated
November 25, 1991, incorporated by reference to Exhibit
(8) (a) to Post-Effective Amendment No. 69 to Registrant's
Registration Statement on Form N-1A, File No. 2-10699.

(g)(2) Custodian Agreements (SSS). Custody Agreement dated
November 25, 1991, incorporated by reference to Exhibit
(8) (a) to Post-Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A, File No. 2-27514.

(g)(3) Custodian Agreements (SCPT). Custody Agreement dated
November 25, 1991, incorporated by reference to Exhibit
(8) (a) to Post-Effective Amendment No. 11 to Registrant's
Registration Statement on Form N-1A, File No. 33-15807.

(h)(1) Other Material Contracts (SAS). Transfer Agency and
Service Agreement dated November 25, 1991, incorporated by
reference to Exhibit (8) (b) to Post-Effective Amendment
No. 69 to Registrant's Registration Statement on Form
N-1A, File No. 2-10699.

(h)(2) Other Material Contracts (SSS). Transfer Agency and
Service Agreement dated November 25, 1991, incorporated by
reference to Exhibit (8) (b) to Post-Effective Amendment
No. 41 to Registrant's Registration Statement on Form
N-1A, File No. 2-27514.

(h)(3) Other Material Contracts (SCPT). Transfer Agency and
Service Agreement dated November 25, 1991, incorporated by
reference to Exhibit (8) (b) to Post-Effective Amendment
No. 11 to Registrant's Registration Statement on Form
N-1A, File No. 33-15807.

(i)* Legal Opinion. Opinion and Consent of Counsel, (D'Ancona &
Pflaum).

(j)* Other Opinions. Consent of Current Auditors. KPMG Peat
Marwick 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 May 1, 1993, incorporated by

4
<PAGE>

reference to Exhibit (6)/(15) to Post-Effective Amendment
No. 71 to Registrant's Registration Statement on Form
N-1A, File No. 2-10699.

(m)(2) Rule 12b-1 Plan (SSS). Distribution Services Agreement and
Plan of Distribution dated May 1, 1993, incorporated by
reference to Exhibit (6)/(15) to Post-Effective Amendment
No. 43 to Registrant's Registration Statement on Form
N-1A, File No. 2-27514.

(m)(3) Rule 12b-1 Plan (SCPT). Distribution Services Agreement
and Plan of Distribution dated May 1, 1993, incorporated
by reference to Exhibit (6)/(15) to Post-Effective
Amendment No. 13 to Registrant's Registration Statement on
Form N-1A, File No. 33-15807.

(n) Financial Data Schedule. Not applicable

(o) Rule 18f-3 Plan. Not applicable

(p)(1) Other Exhibits (SAS, SSS, SCPT). Powers of Attorney of the
Registrant, Officers and Board of Directors of Selected
American Shares, Inc., appointing Sheldon Stein and Arthur
Don as attorneys-in-fact, incorporated by reference to
Exhibit (p)(1) to SAS PEA No 81 File No. .2-10699; Exhibit
(p)(2) to SSS PEA No 54 File No 2-27514; and Exhibit
(p)(3) to SCPT PEA No 23 File No 33-15807.

(p)(2)* Other Exhibits (SAS) Powers of Attorney of the Registrant,
Christopher Davis and Creston King, appointing Sheldon
Stein and Arthur Don as attorneys-in-fact, filed herein.

(p)(3)* Other Exhibits (SSS) Powers of Attorney of the Registrant,
Christopher Davis and Creston King, appointing Sheldon
Stein and Arthur Don as attorneys-in-fact, filed herein.

(p)(4)* Other Exhibits (SCPT) Powers of Attorney of the
Registrant, Christopher Davis and Creston King, appointing
Sheldon Stein and Arthur Don as attorneys-in-fact, filed
herein.

* Filed Herein

Item 24. Persons Controlled by or Under Common Control With Registrant

5
<PAGE>

Davis Distributors, LLC (the Fund's principal underwriter) and Davis
Selected Advisers-NY, Inc. (the Fund's sub-adviser) are wholly owned
subsidiaries of Davis Selected Advisers, L.P, (the Fund's Investment Adviser).

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 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 subsidiary 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 off-shore investment companies, and as an investment adviser to
institutional and individual accounts. DSA also serves as sub-investment adviser
to other investment companies. Davis Distributors, L.L.C., a wholly owned
subsidiary of DSA, is a registered broker-dealer. Davis Selected Advisers - NY,
Inc., another wholly owned subsidiary, provides investment management services
to various registered and unregistered investment companies, pension plans,
institutions and individuals.

6
<PAGE>

Other business of a substantial nature that directors or officers of DSA
are or have been engaged in the last two years:

SHELBY M.C. DAVIS (3/20/37), 4135 North Steers Head Road, Jackson Hole WY 83001.
Senior Research Advisor and Founder of Davis Selected Advisers, L.P.

ANDREW A. DAVIS (6/25/63), 124 East Marcy Street, Santa Fe NM 87501. Director
and either a President or Vice President of each of the Davis Funds (except
Davis International Series, Inc.) and the Selected Funds; Director and
President, Venture Advisers, Inc.; Director and Vice President, Davis Selected
Advisers-NY, Inc.;

CHRISTOPHER C. DAVIS (7/13/65), 609 Fifth Avenue, New York NY 10017. Director
and President, Vice President or Chief Executive Officer of each of the Davis
Funds and the Selected Funds; Director, Vice Chairman, Venture Advisers, Inc.;
Director, Chairman, Chief Executive Officer, Davis Selected Advisers-NY, Inc.;
Chairman and Director, Shelby Cullom Davis Financial Consultants, Inc.; Employee
of Shelby Cullom Davis & Co., a registered broker/dealer; Director, Kings Bay
Ltd., an offshore investment management company.

KENNETH C. EICH (8/14/53), 2949 East Elvira Road, Suite 101, Tucson AZ 85706.
Vice President of each of the Davis Funds and Selected Funds; Chief Operating
Officer, Venture Advisers, Inc.; Vice President, Davis Selected Advisers-NY,
Inc.; President, Davis Distributors LLC;

GARY TYC (05/27/56), 2949 East Elvira Road, Suite 101, Tucson AZ 85706. Vice
President, Chief Financial Officer Treasurer, and Assistant Secretary of Venture
Advisers, Inc.; Vice President, Treasurer, & Assistant Secretary of Davis
Selected Advisers - NY, Inc.; Vice President, Treasurer, & Assistant Secretary
of Davis Distributors LLC; former Vice President of Oppenheimer Management
Corporation.

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 and Selected Funds; Vice
President and Secretary, Venture Advisers, Inc., Davis Selected Advisers-NY,
Inc., and Davis Distributors LLC.

Item 27. Principal Underwriter

(a) Davis Distributors, LLC, a wholly owned subsidiary of the Adviser,
located at 2949 East Elvira Road, Tucson AZ 85706, is the principal underwriter
for the Registrant and also acts as principal underwriter for Davis New York
Venture Fund, Inc., Davis Series, Inc., Davis International Series, Inc.,
Selected American Shares, Inc., Selected Special Shares, Inc. and Selected
Capital Preservation Trust.

(b) Management of the Principal Underwriters:

7
<PAGE>

NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
- - ---------------- ----------- ---------------
<S> <C> <C>
Kenneth C. Eich President Vice President
2949 East Elvira Road
Suite 101
Tucson AZ 85706

Gary P. Tyc Vice President, Treasurer and None
2949 East Elvira Road Assistant Secretary
Suite 101
Tucson AZ 85706

Thomas D. Tays Vice President and Secretary Vice President and Secretary
2949 East Elvira Road
Suite 101
Tucson AZ 85706
</TABLE>

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, 7th Floor, North Quincy, Massachusetts 02107.

Item 29. Management Services

Not applicable

Item 30. Undertakings

Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders upon
request and without charge.

8
<PAGE>

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 Chicago and State of Illinois on the 26th day of April, 2000.

The Registrants hereby certify 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 PRESERVATON TRUST

*By: /s/ Sheldon Stein
-------------------------------------
Sheldon Stein
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
--------- ----- ----
<S> <C> <C>
Christopher C. Davis* President, Selected American Shares, Inc. April 26, 2000
- - --------------------- President, Selected Special Shares, Inc.
Christopher C. Davis

Creston King, III* President, Selected Capital April 26, 2000
- - ------------------ Preservation Trust
Creston King, III

Sharra L. Reed* Principal Financial Officer
- - --------------- and Treasurer April 26, 1999
Sharra L. Reed

</TABLE>

*By: /s/ Sheldon Stein
---------------------------
Sheldon Stein
Attorney-in-Fact

*Sheldon Stein signs this document on behalf of each of the Registrants and each
of the foregoing officers pursuant to the powers of attorney filed as Exhibits
(p)(2), (p)(3), and (p)(4) to Registrants' current Post-Effective Amendment
number (SAS: 81; SSS: 54; SCPT: 24) to Registrants' Registration Statements.

9
<PAGE>

/s/ Sheldon Stein
-------------------------------
Sheldon Stein
Attorney-in-Fact

10
<PAGE>

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 26, 2000 by the following persons in the
capacities indicated.

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

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

Floyd A. Brown* Director
-----------------------------------
Floyd A. Brown

Andrew A. Davis* Director
-----------------------------------
Andrew A. Davis

Christopher .C. Davis* Director
-----------------------------------
Christopher C. Davis

Jerome E. Hass* Director
-----------------------------------
Jerome E. Hass

Katherine L. MacWilliams* Director
-----------------------------------
Katherine L. MacWilliams

James J. McMonagle* Director
-----------------------------------
James J. McMonagle

Richard C. O'Brien* Director
-----------------------------------
Richard C. O'Brien

Larry J.B. Robinson* Director
-----------------------------------
Larry J.B. Robinson

Marsha Williams* Director
-----------------------------------
Marsha Williams

*Sheldon Stein signs this document on behalf of each of the foregoing persons
pursuant to the powers of attorney filed as Exhibit (p)(1) to SAS PEA No 81 File
No. .2-10699; Exhibit (p)(2) to SSS PEA No 54 File No 2-27514; and Exhibit
(p)(3) to SCPT PEA No 23 File No 33-15807.

11
<PAGE>
/s/Sheldon Stein
------------------------------
Sheldon Stein
Attorney-in-Fact

EXHIBIT LIST

Exhibit 23(i) Legal Opinion. Opinion and Consent of Counsel, (D'Ancona &
Pflaum).
Exhibit 23(j) Other Opinions. Consent of Current Auditors, KPMG LLP.
Exhibit 23(p)(2) Other Exhibits (SAS) Powers of Attorney of the Registrant,
Christopher Davis and Creston King,
Exhibit 23(p)(3) Other Exhibits (SSS) Powers of Attorney of the Registrant,
Christopher Davis and Creston King,
Exhibit 23(p)(4) Other Exhibits (SCPT) Powers of Attorney of the Registrant,
Christopher Davis and Creston King,

<PAGE>

EXHIBIT
ITEM 23 (I)

[LETTERHEAD OF D'ANCONA & PFLAUM]

April 26, 2000

Selected American Shares, Inc.
Selected Special Shares, Inc.
Selected Capital Preservation Trust
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706

Dear Ladies and Gentlemen:

We are counsel for:

Selected American Shares, Inc. (a "Joint Registrant") in connection with
the registration under the Securities Act of 1933 (the "Act") of an indefinite
number of shares of beneficial interest in the series designated Selected
American Shares (" SAS Shares") in registration statement No. 2-10699 on Form
N-1A ("Joint Registration Statement");

Selected Special Shares, Inc. (a "Joint Registrant") in connection with the
registration under the Act of an indefinite number of shares of beneficial
interest in the series designated Selected Special Shares ("SSS Shares") in
registration statement No. 2-27514 on Form N-1A ("Joint Registration
Statement"); and

Selected Capital Preservation Trust. (a "Joint Registrant") in connection
with the registration under the Act of an indefinite number of shares of
beneficial interest in the series designated as Selected Government Income Fund
and Selected Daily Government Fund ("SGIF Shares" and "SDGF Shares",
respectively) in registration statement No. 2-27514 on Form N-1A ("Joint
Registration Statement").

In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and other
records, certificates and other papers as we deemed it necessary to examine for
the purpose of this opinion, including the Articles of Incorporation (or
Declaration of Trust) and bylaws of each Joint Registrant, actions of the Board
of Directors of the Joint Registrants authorizing the issuance of SAS Shares,
SSS Shares, SGIF Shares, and SDGF Shares and the Registration Statements of each
Joint Registrant.

Based on the foregoing examination, we are of the opinion that upon the
issuance and delivery of SAS Shares, SSS Shares, SGIF Shares, and SDGF Shares in
accordance with their Articles of Incorporation (or Declaration of Trust) and
the actions of the Board of Directors authorizing the issuance of the shares,
and the receipt by each Joint Registrant of the authorized consideration
therefor, the shares so issued will be validly issued, fully paid and
nonassessable.
<PAGE>

We consent to the filing of this opinion as an exhibit to the Registration
Statement of each Joint Registrant. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under section 7 of
the Act.

Very truly yours,

D'Ancona & Pflaum

By: /s/ Sheldon R. Stein
--------------------------------
Sheldon R. Stein, Member

<PAGE>

EXHIBIT
ITEM 23 (J)

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Selected American Shares, Inc., Selected Special Shares, Inc., and Selected
Capital Preservation Trust;

We consent to the use of our report dated February 4, 2000 incorporated by
reference in the separate Registration Statements of Selected American Shares,
Inc., Selected Special Shares, Inc., and Selected Capital Preservation Trust and
to the references to our firm under the headings "Financial Highlights" in the
Prospectus and "Auditors" in the Statement of Additional Information.

/s/ KPMG LLP
-----------------------
/s/ KPMG LLP

Denver, Colorado
April 27, 2000

<PAGE>

Exhibit 23(p)(2)

SELECTED AMERICAN SHARES, INC.

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes
and appoints Sheldon R. Stein and Arthur Don, and each of them, as the
undersigned's attorneys-in-fact, each with the power of substitution, for him or
her in any and all capacities, to sign any post-effective amendments to the
registration statement under the Securities Act of 1933 (Registration No.
2-10699) and/or the Investment Company Act of 1940 (Registration No. 811-51),
whether on Form N-1A or any successor forms thereof, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and all other applicable state or federal
regulatory authorities. Each of the undersigned hereby ratifies and confirms all
that each of the aforenamed attorneys-in-fact, or his substitute or substitutes,
may do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney as
of the date listed below.

OFFICERS:

Christopher C. Davis Date: April 19, 2000
- - ------------------------------- ----------------------
Christopher C. Davis
President

Sharra L. Reed Date: April 19, 2000
- - ------------------------------- ----------------------
Sharra L. Reed
Treasurer, Chief Financial Officer and Chief Accounting Officer

<PAGE>

Exhibit (p)(3)

SELECTED SPECIAL SHARES, INC.

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes
and appoints Sheldon R. Stein and Arthur Don, and each of them, as the
undersigned's attorneys-in-fact, each with the power of substitution, for him or
her in any and all capacities, to sign any post-effective amendments to the
registration statement under the Securities Act of 1933 (Registration No.
2-27514) and/or the Investment Company Act of 1940 (Registration No. 811-1550),
whether on Form N-1A or any successor forms thereof, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and all other applicable state or federal
regulatory authorities. Each of the undersigned hereby ratifies and confirms all
that each of the aforenamed attorneys-in-fact, or his substitute or substitutes,
may do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney as
of the date listed below.

OFFICERS:

Christopher C. Davis Date: April 19, 2000
- - --------------------------------- -------------------
Christopher C. Davis
President

Sharra L. Reed Date: April 19, 2000
- - --------------------------------- -------------------
Sharra L. Reed
Treasurer, Chief Financial Officer and Chief Accounting Officer

<PAGE>

Exhibit 23(p)(4)

SELECTED CAPITAL PRESERVATION TRUST

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes
and appoints Sheldon R. Stein and Arthur Don, and each of them, as the
undersigned's attorneys-in-fact, each with the power of substitution, for him or
her in any and all capacities, to sign any post-effective amendments to the
registration statement under the Securities Act of 1933 (Registration No.
33-15807) and/or the Investment Company Act of 1940 (Registration No. 811-5240),
whether on Form N-1A or any successor forms thereof, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and all other applicable state or federal
regulatory authorities. Each of the undersigned hereby ratifies and confirms all
that each of the aforenamed attorneys-in-fact, or his substitute or substitutes,
may do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney as
of the date listed below.

OFFICERS:

Creston King, III Date: April 19, 2000
- - ----------------------------- ---------------------
Creston King, III
President

Sharra L. Reed Date: April 19, 2000
- - ----------------------------- ---------------------
Sharra L. Reed
Treasurer, Chief Financial Officer and Chief Accounting Officer