<PAGE>
SELECTED FUNDS
SEMI-ANNUAL
REPORT
June 30, 2000
SELECTING QUALITY COMPANIES FOR THE LONG TERM(TM)
Selected American Shares
Selected Special Shares SELECTED
FUNDS
Selected U.S. Government Income Fund
Selected Daily Government Fund
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
Dear Fellow Shareholder,
We are optimists at heart and we believe that stocks offer the best means of
creating wealth over the long term. Historically, stocks have won over time
because they represent claims on growth, not a fixed promise to pay a fixed
amount, which is the case with bonds.(1) As gross domestic product (GDP) and
corporate profits grow, so does the valuation floor for stocks.
With that as a backdrop, every day when we come to work we try to do four
things. First, we seek out businesses that will grow, preferably ones that need
little new capital because that means they are the most self-sufficient.
Second, we evaluate the judgment, vision and integrity of management. We want to
get a good feel for what management plans to do with the free cash flows
generated by the business--be it making new investments, acquiring other
businesses or increasing dividends.
Third, we value those businesses against the alternatives, seeking to determine
what "mystery" coupon or rate of return the business will produce for its
stockowners. In other words, we determine what we would be willing to pay for
the business in order to provide us with a better projected rate of return than
the coupon rate on risk-free alternatives such as 10-year Treasury bonds, and we
try to buy the companies when they are attractively valued.
Fourth, we consider this analysis within the context of where we are in the
stock market cycle. We know we are on a long journey. If equities will grow at a
rate of around 7% a year over the next 30 years, which is a little less than
their long term average, that would take the Dow Jones Industrial Average from
around 10,000 to 80,000 by 2030.(2) At the same time, we are mindful that road
conditions will not always be favorable and that there will be checkpoints along
the way because different eras create different risk profiles.
Looking ahead over the next few years, we recognize that we are unlikely to
continue enjoying the big drivers of stock performance that we have had over the
past 15 to 20 years--namely, dramatically rising corporate profits, steeply
falling interest rates and sharply higher price/earnings (P/E) valuations.
Inflation and interest rates have plateaued at best and may be increasing, which
means caution lights are flashing on the road ahead. If inflation keeps
climbing, the Federal Reserve will take concerted action after the presidential
election, raising interest rates even further and therefore the risk-free hurdle
rate against which all stocks have to compete. As for corporate profits, they
still have a green light, but they have been inflated by various accounting
practices and cannot keep growing their share of GDP forever.
All of this leads us to believe that the market could be in a 30% to 50% trading
range over the next 5 to 10 years before there is a big break out again. That is
a lot of movement in points, but not much in percentage terms, particularly when
you consider the market went up tenfold (from 1,000 to 10,000) over the past 20
years. Although the rate of growth may be slowing, we still anticipate a fairly
favorable environment for stocks. The Federal Reserve is doing its job right by
trying to prolong the cycle, deflate a bubble and prevent a boom/bust scenario.
Even if we stay in a trading-range market for some time, there should always be
opportunities for stock picking.
We think multinationals may be a fertile area to investigate whether they are in
the technology, drug or financial sector. For several years, these companies
have been fighting headwinds related to various financial crises around the
world, the strength of the dollar and the market's fixation on Internet
companies. Now high-quality multinationals with proven management teams may move
into the spotlight because they have flexibility to allocate capital around the
globe to wherever it may earn the best return, and with a world population of
around six billion, their potential customer base is huge.
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
Contrary to what some people may believe, we are not against technology.
Particularly in a difficult market when you have to be a good stock picker, it
is useful to identify a theme. Over the next decade, technology is almost
certain to be a key investment trend, whether it be the inventors of technology
or traditional companies that successfully apply technology in their business
models. American Express(3) is one example of a company that is likely to
benefit as consumers buy more and more over the Internet, charging purchases on
their credit cards. In addition, there are a number of financial and other
companies that will use the Internet to drive down their costs or to leverage
their brand power and broaden their marketing reach. If these companies are also
multinational, so much the better because they can do this all over the world.
Of course, no one knows for sure exactly what the next few years will bring. But
regardless of election results, inflation, interest rates or profit trends, we
will continue to manage money according to the same generational philosophy we
have applied for decades in all types of markets. Investing is a batting average
business, full of strikeouts and mistakes as well as home runs. Rest assured
that we will try to do sensible things every day when we come to work and do the
best we can because our money is invested side by side with our fellow
shareholders. We continue to believe that stocks are the best way to build
long-term wealth. Staying invested puts time on our side and gives compounding
the opportunity to work for us all.(4)
Sincerely,
/s/ James J. McMonagle /s/ Shelby M.C. Davis
---------------------- ---------------------
James J. McMonagle Shelby M.C. Davis
Chairman Senior Research Adviser
August 4, 2000
2
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
SELECTED AMERICAN SHARES
PERFORMANCE OVERVIEW
Selected American Shares delivered a total return of 6.65% for the six-month
period and 10.53% for the one-year period ended June 30, 2000,(5) outpacing the
performance of the Large-Cap Value Fund category tracked by Lipper Analytical
Services(6) and the Standard & Poor's 500 Index.(7) The average large-cap fund
provided a return of (1.64)% and (0.87)%, respectively, over the latest
six-month and one-year periods while the S&P 500 returned (0.43)% and 7.25%,
respectively, over the same time frames.
From May 1, 1993 through June 30, 2000 the approximate period of time that Davis
Selected Advisers has managed Selected American Shares, the Fund provided an
average annual total return of 20.79%. This performance ranked the Fund #2 out
of the 92 funds in Lipper's large-cap value category.(6)
Moreover, Standard & Poor's has awarded Selected American Shares its prestigious
Select Fund designation because of the Fund's "experienced management team,
disciplined value investment style, and above-average historical performance
relative to its value peers."(8)
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS
Q. How would you describe the performance of the Fund so far this year?
A. As Ken and I have often said, performance over any half-year, one-year or
even two-year period is often unpredictable and rarely significant. Thus, we are
reluctant to read too much into the strong relative results of Selected American
Shares in the first six months of the year 2000.
That said, with regard to individual holdings, we have been very pleased with
the performance of several companies that were relatively recent additions to
the portfolio. In general, these companies were purchased while their stock
prices languished under clouds of uncertainty or even scandal. In such cases,
Ken and I believe that while we are taking what might be called "headline" risk,
the fact that we are buying the companies after bad news has been disclosed
often limits our economic risk.
Our purchase of American Home Products,(3) for example, came at a time when the
company was facing litigation concerning unforeseen side effects with one of its
drugs. While there was always a risk that the consequences of this litigation
could have been much worse than we anticipated, we believed that the stock price
more than discounted the likely outcome and that, as the clouds of uncertainty
lifted, investors would again recognize the powerful new products and strong
position of this company. Our colleague Danton Goei was an important resource in
the Fund's opportunistic purchase of this company at significantly lower prices.
Similarly, our purchase of Tyco came at a time when the company was undergoing
SEC scrutiny regarding its accounting for a number of mergers and acquisitions.
Ken led an incredibly thorough research effort on this complex company and was
ably assisted by Adam Seessel in reconstructing all of the company's recent
acquisitions.
3
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
Although these companies could still prove to be disappointing investments if
bad news subsequently comes to light, we think both are illustrative of our
willingness to purchase companies opportunistically while others are anxiously
selling. Such decisions can only be made with conviction based on thorough and
independent research and on the recognition that short-term movements in stock
prices often reflect changes in psychology rather than changes in economics.
Q. Could you comment on the overall market environment this year and its impact
on the Fund's portfolio?
A. Turning from those specifics of the portfolio to the market in general, the
year 2000 has proven to be another period of enormous stock price volatility.
The relative flatness of the market averages masks enormous underlying gyrations
in the prices of individual issues. The best way to demonstrate this is by
examining the portfolio holdings of Selected American Shares.
Over the past 12 months, 32 of our top 40 holdings--representing more than 70%
of the portfolio--had a range of more than 50% between their lowest low and
their highest high. Even more telling, 15 of the Fund's top 40 positions had a
range of more than 100%, five a range of more than 150% and two a range of more
than 200% between their lowest and highest price for the period.
Given that we generally own more established companies, as opposed to Internet
start-ups, these sorts of ranges are remarkable. A natural consequence of such
volatility, other factors being equal, is a tendency toward higher turnover.
These enormous price swings mean companies are more likely to advance from a
range of fair value to levels at which Ken and I would consider them overvalued
and therefore candidates for sale, or conversely to decline to such prices that
we would consider adding to our positions.
Another recent characteristic of the market has been a constant lowering of the
quality of reported earnings. As anyone who runs a business can attest,
perfectly predictable and consistent results can rarely be achieved in precise
12-week intervals. Yet Wall Street has come to place such a premium on
consistent results that increasingly corporate America is torturing accounting
policies to create the illusion of predictability and consistency in these short
quarterly periods. As a result, earnings are frequently not what they seem, and
reported results often include nonrecurring items such as favorable changes in
pension fund assumptions, gains on sales of operations or securities, expense
reductions from previously incurred restructuring charges and other financial
gimmicks. Thus, most companies' quarterly earnings must be scrutinized much more
intensively than ever before.
While we hope not to own many of the most flagrant offenders in Selected
American Shares, we would expect that over the next several years the newspapers
will be full of companies forced to come clean when their bag of accounting
tricks is empty. Once a company starts down this path, it is difficult to stop
as inflated results in the current quarter become increasingly difficult
comparisons for future quarters.
4
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
Q. What final thoughts would you like to leave with your fellow shareholders?
A. While these observations may sound pessimistic, I am reminded of my father's
comment last year that our goal is to be neither optimistic nor pessimistic, but
to do our best to be realistic. As we have said in the past, the reality is that
returns in the next decade are unlikely to be near the levels enjoyed in the
last two decades. The danger is that as investors move from a position of almost
universal optimism to a more realistic stance equity valuations could suffer
significantly. It is the tendency of markets, like pendulums, not to move to the
middle ground and stop, but instead to swing markedly to the other side. While
such a significant correction would create many buying opportunities, it is
unlikely that investors would have the stomach to pursue them. Therein lies the
biggest danger facing investors.
This danger was illustrated in the March issue of Mutual Funds magazine, which
featured the following statistic. According to the magazine, "Between 1984 and
the end of 1998, the average stock fund gained 509%, or 12.8% per year over 15
years. Meanwhile, the typical mutual fund investor, whose average holding period
was less than three years, earned just 186% or 7.25% a year." This staggering
underperformance of the average fund investor was self-inflicted as it came from
money flowing into the funds with great short-term performance and then flowing
out of those funds when future results were disappointing.
If Ken and I can leave any message with our fellow shareholders, it is to fight
the very human tendency to feel elated and optimistic when prices are high (as
they are today) and discouraged and pessimistic when prices are low. Now when
times are good is the right time to sound the cautious note. In doing so, we
hope that we will all be better positioned to be optimistic and opportunistic
when times look more bleak.(4)
SELECTED SPECIAL SHARES
PERFORMANCE OVERVIEW
Selected Special Shares generated a return of 4.82% for the six-month period and
14.90% for the one-year period ended June 30, 2000.(5) This compares with
returns of 8.98% and 16.96%, respectively, for the Standard & Poor's MidCap 400
Index and (0.43)% and 7.25%, respectively, for the Standard & Poor's 500 Index
over the same time periods.(7) Unlike more aggressive small-cap and mid-cap
funds, Selected Special Shares seeks to deliver less volatile returns while
building wealth for shareholders over the long term. The Fund's three-year and
five-year returns--average annual returns of 20.49% and 19.45%,
respectively--reflect this objective.
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, PORTFOLIO MANAGER
Q. Could you provide some perspective on the Fund's performance this year?
5
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, PORTFOLIO MANAGER - CONTINUED
A. The market for mid-cap and small-cap stocks was favorable relative to
large-caps in the first half of 2000. Economic strength from the fourth quarter
of 1999 carried over into the first quarter of 2000, which was also buoyed by
continued employment gains, positive wealth effect from a strong stock market,
continued strong technology spending, and entrepreneurial capital being poured
into start-up companies. In the second quarter, the Federal Reserve's multiple
interest rate increases began to take hold and the economy began to slow, as
indicated by slower employment gains and slowing retail sales.
The Fund's top 10 gainers in dollar terms in the first half of 2000 were: On
Assignment,(3) in employee staffing; Sepracor, in single-isomer pharmaceutical
technology; Linear Technology, in high-end computer chips; Kohl's, in discount
department stores; Flextronics, in electronic contract manufacturing; Paychex,
in payroll processing; Robert Half, also in employee staffing; Cardinal Health,
in drug distribution; Jabil Circuit, also in electronic contract manufacturing;
and Charles Schwab, in financial services. Some of these companies such as On
Assignment, Robert Half and Cardinal Health were poor stock performers in 1999
but have performed spectacularly this year, with the stock prices of the first
two doubling this year and the third rising more than 50%. Our focus is on
investing for the long term.
Looking ahead, although the economy appears to be slowing from 5%+, it is still
growing at a healthy pace of an estimated 3-4%, and noninflationary long-term
growth is likely to be more sustainable. We believe that interest rates are
likely to peak in the third quarter with the Fed less likely to raise rates now
that there are signs of a slowing economy, minimal core inflation, record
government surpluses and a presidential election on the horizon. In our opinion,
the price/earnings (P/E) multiple shrinkage induced by higher interest rates has
largely run its course, and that would be very favorable to the equity markets.
On the other hand, the dot.coms suffered a major correction in the second
quarter. This has had a negative impact on the wealth effect and could restrain
or redirect capital spending going forward. So we are taking a cautious and
selective stance. We believe it is a stock picker's market and are using market
volatility to buy what we perceive as attractive companies for the long term at
more favorable valuations.
Q. Where do you see the greatest opportunities now?
A. We try to invest in companies that will benefit from favorable secular
change, not just some event that will occur in the next month or two. While we
are cautious, we are positioning the Fund for continuing advances in
communications and technology, where we see opportunities for meaningful
investment gains. This is an age of tremendous entrepreneurial creativity and
drive. We are investing both in companies that invent new technology and those
that employ it well. To our way of thinking, it is not an either/or choice
between the New and the Old economy, but rather choosing those companies within
both categories with vision that execute well.
We live in a wonderful era of huge technological and medical change. The fact
that scientists have now mapped the human genome suggests the possibility of
tremendous discoveries in new medications and individualized treatment longer
term. Investments with promising R&D include Sepracor and Human Genome Sciences.
6
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, PORTFOLIO MANAGER - CONTINUED
The Internet is also changing all our lives. While our focus is not directly on
dot.com companies, we are on the lookout for companies that are survivors, have
sustainable business models and provide efficiencies and new business
opportunities such as in supply side management. Recent additions include Ariba,
in electronic business-to-business commerce, and Saba Software, which
specializes in Internet corporate training.
Outsourcing is another strong secular trend. Here we continue to like electronic
contract manufacturers such as Jabil and Flextronics, which are benefiting from
the accelerating shift to outsourcing by communications and technology
companies. By moving manufacturing offsite to a specialist, companies can focus
on their main business and also get to market faster--a critical factor given
the accelerating rate of change. Moreover, outsourcing improves investment
metrics such as returns on equity and returns on capital.
In addition, we believe the increased use of multimedia favors companies in the
graphics and printing area such as Adobe Systems, which is particularly well
positioned to benefit as the growing use of broadband technology accelerates the
need for more complex graphics.
We also think that the oil services industry will benefit from higher prices and
increased capital spending plans projected by the oil producers. In this area,
we own companies such as Nabors and Transocean Sedco Forex.
Asset management companies have also done exceptionally well. The Fund
participates through Charles Schwab, a company that we have owned for some time,
and Blackrock, an initial public offering we bought last year. Another holding
in this area is Stilwell Financial, which owns the Janus funds, whose shares
were distributed in a recent spin-off to shareholders of Kansas City Southern,
another longtime Fund position.
Q. How are you managing the Fund to control risk while achieving potentially
attractive returns in the current market environment?
A. As always, we invest on a stock-by-stock basis. We analyze businesses from
the bottom up--calling on companies, attending conferences, developing our
investment models and making decisions within the context of the macroeconomic
framework. We pay particular attention to factors such as vision, execution,
management strength, earnings consistency and valuations, such as the
price/earnings to growth [(P/E)/G] ratio.
The Fund's price discipline--buying companies selling at favorable P/E multiples
to their projected earnings growth rates or to the overall market--is one way we
seek to limit risk. Our estimated earnings growth rate for the portfolio for
2001 is 34% and the P/E ratio is around 27, which results in a P/E to growth
ratio of less than 1. We think that this is attractive relative to the S&P 500
where we project earnings growing 10% on a secular basis--less than one-third
the projected growth rate of the Fund--and yet the S&P 500 is selling at a P/E
multiple of 23 times 2001 estimated earnings or 2.3 times growth.
Diversification is another method of managing risk. The Fund, which currently
has a weighted median market capitalization of approximately $9.6 billion, holds
54 companies in 17 industries--and usually has no more than 4% of net assets in
any one stock. Moreover, the Fund generally establishes positions over time
using a dollar cost averaging approach, which helps to smooth the effects of
fluctuating prices and turn volatility to our advantage.(4)
7
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
SELECTED U.S. GOVERNMENT INCOME FUND
PERFORMANCE OVERVIEW
The Selected U.S. Government Income Fund provided a total return of 2.67% for
the six-month period and 2.72% for the one-year period ended June 30, 2000.(5)
The Fund's benchmark, the Lehman Brothers Intermediate Term U.S. Treasury
Securities Index,(7) returned 3.54% and 4.67%, respectively, over the same time
periods while the Intermediate U.S. Government Fund category tracked by Lipper
Analytical Services provided average returns of 3.35% and 3.53%,
respectively.(6)
AN INTERVIEW WITH CRESTON A. KING, PORTFOLIO MANAGER
Q. What key factors influenced the Fund's performance in the first half of this
year?
A. The bond market rallied nicely in the first quarter of the year, sold off in
April and May, and then rallied again in June. The Fund underperformed relative
to its peer group for two reasons. First, the portfolio's average maturity was
shorter than its peer group's in the first quarter of 2000 and so trailed
dramatically when the market rallied. In addition, the Fund had a larger
position in mortgage-backed securities than its peer group funds, and when the
Federal Reserve began raising interest rates, those securities underperformed
U.S. Treasury securities.
Moreover, the Fund's U.S. government agency investments were held back by the
fact that agency securities traded poorly relative to Treasuries. Ongoing debate
about reining in the growth of Fannie Mae and Freddie Mac, two
government-sponsored enterprises charged with maintaining the availability of
funds for mortgage lending, and proposed Congressional legislation that would
increase regulatory oversight of both entities has had a dampening effect on
this sector of the market.
At the start of the second quarter, we anticipated the market sell-off and
raised cash, shortening the maturity of the Fund's portfolio even more, so that
we could take advantage of the rising interest rates we expected. Cash
outperformed longer term alternatives for the first two months of the quarter
because interest rates were rising and there were concerns that further rate
increases were in store from the Federal Reserve. As a result, the Fund's
returns were much improved in the second quarter, even though the portfolio
underperformed in June. At that time, the market rallied following the Fed's
aggressive 50 basis-point hike in short-term rates in May because investors
began to believe that the Fed had finished raising rates, and the Fund did not
participate fully in the rally because of its larger cash position.
Q. What is your general strategy in managing the Fund?
A. Our goal is to provide investors with a well diversified portfolio that
allows them to participate in the returns and security of U.S. government bonds.
The Fund's research process focuses on evaluating U.S. economic and interest
rate trends, which essentially drive bond market performance. Our strategy is to
diversify among different types of government securities, maturity lengths, call
provisions and interest rate coupons. Specifically, by emphasizing investments
in the intermediate maturity range, the Fund seeks to smooth out performance and
provide stability in a variety of market climates. We are also committed to a
long-term investment approach intended to reduce portfolio turnover.
8
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CRESTON A. KING, PORTFOLIO MANAGER - CONTINUED
The Selected U.S. Government Income Fund is designed to create a strong
foundation for any long-term investment plan. The Fund provides potentially
higher monthly income than most short-term investments and can offer investors
an excellent means of balancing equity holdings with fixed-income securities of
the highest credit quality.(4)
----------------------------
This Semi-Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of the Selected Funds which contains more
information about risks, fees and expenses. Please read the prospectus carefully
before investing or sending money.
1 Historically, common stocks have outperformed both bonds and cash. There is no
assurance that this will continue to be true in the future.
2 This hypothetical example illustrates the power of compounding over a 30-year
period, and is not intended to be indicative of future investment results which
may be higher or lower than the assumed 7% rate.
3 See each Fund's Schedule of Investments for a detailed list of portfolio
holdings.
4 This report reflects the professional opinions of Shelby M.C. Davis, James J.
McMonagle and the Selected Funds' portfolio managers. All investments involve
some degree of risk, there can be no assurance that the Funds' investment
strategies will be successful. Prices of shares will vary, so that when
redeemed, an investor's shares could be worth more or less than their original
cost.
5 Total return assumes reinvestment of dividends and capital gain distributions.
Past performance is not a guarantee of future results. Investment return and
principal value will vary so that, when redeemed, an investor's shares may be
worth more or less than when purchased. The following table lists the average
annual total returns for the periods ended June 30, 2000.
----------------------------------------------------------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR 10 YEAR
----------------------------------------------------------------------
Selected American Shares 10.53% 19.41% 24.81% 18.61%
----------------------------------------------------------------------
Selected Special Shares 14.90% 20.49% 19.45% 14.20%
----------------------------------------------------------------------
Selected U.S. Government Income 2.72% 3.79% 4.38% 6.12%
----------------------------------------------------------------------
6 Lipper Analytical Services' investment performance, rankings and comparisons
are based on total returns unadjusted for commissions. For the one, five and
ten-year period ended 06/30/00, Selected American Shares was ranked as follows:
18 out of 344 funds, 1 out of 152 funds, and 2 out of 55 funds, respectively, in
the Lipper "Large Cap Value Funds" category.
9
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
7 The definitions of indices quoted in this annual report appear below.
Investments cannot be made directly in any of these indices.
I. The S&P 500 Index is an unmanaged index of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The index is adjusted for
dividends, weighted towards stocks with large market capitalizations, and
represents approximately two-thirds of the total market value of all domestic
common stocks.
II. The Standard & Poor's Midcap 400 is a capitalization-weighted index that
measures the performance of the mid-range sector of the U.S. stock market. The
index was developed with a base level of 100 as of 12-31-90.
III. The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is a
recognized unmanaged index of U.S. Government Securities performance.
8 Standard & Poor's awarded its Select Fund designation to Selected American
Shares based upon proprietary analysis focusing on its experienced management
team, disciplined value investment style, and above-average historical
performance relative to its value peers. See Standard & Poors Select Fund
Profile dated 04/26/00.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
10
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC.
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
========================================================================================================================
COMMON STOCK - (90.68%)
<S> <C> <C>
ADVERTISING AGENCIES - (0.07%)
220,000 WPP Group PLC...................................................................... $ 3,212,306
--------------
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (5.70%)
2,382,200 Golden West Financial Corp. (b)..................................................... 97,223,538
2,250,000 Lloyds TSB Group PLC................................................................ 21,238,919
3,696,560 Wells Fargo & Co.................................................................... 143,241,700
--------------
261,704,157
--------------
BUILDING MATERIALS - (3.77%)
930,600 Martin Marietta Materials, Inc...................................................... 37,631,138
5,304,610 Masco Corp. ........................................................................ 95,814,518
924,100 Vulcan Materials Co. (b)............................................................ 39,447,519
--------------
172,893,175
--------------
CONSUMER PRODUCTS - (1.37%)
370,000 Gillette Co. ....................................................................... 12,926,875
1,887,500 Philip Morris Cos., Inc. ........................................................... 50,136,719
--------------
63,063,594
--------------
DIVERSIFIED - (2.06%)
1,754 Berkshire Hathaway Inc., Class A*................................................... 94,365,200
16 Berkshire Hathaway Inc., Class B *.................................................. 28,160
--------------
94,393,360
--------------
DIVERSIFIED MANUFACTURING - (4.53%)
1,158,200 Dover Corp. ........................................................................ 46,979,488
3,395,000 Tyco International Ltd. ............................................................ 160,838,125
--------------
207,817,613
--------------
ELECTRONICS - (5.62%)
689,133 Agilent Technologies, Inc.* (b)..................................................... 50,823,559
230,000 Applied Materials, Inc.* (b)........................................................ 20,843,750
507,840 Koninklijke Philips Electronics N.V................................................. 24,122,400
698,437 Molex Inc. ......................................................................... 33,655,933
1,870,000 Texas Instruments Inc. ............................................................. 128,445,625
--------------
257,891,267
--------------
ENERGY - (0.51%)
418,021 Devon Energy Corp. ................................................................. 23,487,555
--------------
FINANCIAL SERVICES - (15.59%)
4,474,500 American Express Co. ............................................................... 233,233,313
3,153,142 Citigroup, Inc. .................................................................... 189,966,876
1,575,000 Freddie Mac......................................................................... 63,787,500
3,902,100 Household International, Inc. ...................................................... 162,181,031
738,700 Providian Financial Corp. .......................................................... 66,483,000
--------------
715,651,720
--------------
</TABLE>
11
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC. - CONTINUED
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=======================================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
FOOD/BEVERAGE & RESTAURANT - (2.62%)
3,650,000 McDonald's Corp. ................................................................... $ 120,221,875
--------------
HOTELS & MOTELS - (0.78%)
988,700 Marriott International, Inc. ....................................................... 35,654,994
--------------
INDUSTRIAL - (1.43%)
1,257,700 Sealed Air Corp.* (b)............................................................... 65,872,038
--------------
INVESTMENT FIRMS - (3.00%)
320,000 Donaldson, Lufkin & Jenrette, Inc. ................................................. 13,580,000
1,489,864 Morgan Stanley Dean Witter & Co. ................................................... 124,031,178
--------------
137,611,178
--------------
LIFE INSURANCE - (0.15%)
400,000 Sun Life Financial Services of Canada* ............................................. 6,750,000
--------------
MULTI-LINE INSURANCE - (3.98%)
1,556,217 American International Group, Inc. ................................................. 182,855,498
--------------
PHARMACEUTICAL AND HEALTH CARE - (8.76%)
2,964,900 American Home Products Corp. ....................................................... 174,187,875
1,864,800 Bristol-Myers Squibb Co. ........................................................... 108,624,600
335,000 Eli Lilly & Co. (b)................................................................. 33,458,125
200,000 Merck & Co., Inc. .................................................................. 15,325,000
228,900 Pharmacia Corp. .................................................................... 11,831,269
895,600 SmithKline Beecham PLC - ADR (b).................................................... 58,381,925
--------------
401,808,794
--------------
PROPERTY/CASUALTY INSURANCE - (2.72%)
288,400 Chubb Corp.......................................................................... 17,736,600
618,800 Progressive Corp. (Ohio) (b)........................................................ 45,791,200
732,200 Transatlantic Holdings, Inc. (b).................................................... 61,321,750
--------------
124,849,550
--------------
PUBLISHING - (1.47%)
173,400 Dow Jones & Co., Inc. .............................................................. 12,701,550
483,300 Gannett Co., Inc. .................................................................. 28,907,381
740,000 Tribune Co. ........................................................................ 25,900,000
--------------
67,508,931
--------------
REAL ESTATE - (1.42%)
77,000 Avalonbay Communities, Inc. (b)..................................................... 3,214,750
1,451,194 Centerpoint Properties Corp. (b)(d)................................................. 59,136,156
70,000 Centerpoint Properties Corp. Private (c)(d)......................................... 2,781,188
--------------
65,132,094
--------------
</TABLE>
12
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC. - CONTINUED
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES/PRINCIPAL SECURITY (NOTE 1)
=======================================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
TECHNOLOGY - (13.48%)
1,317,100 BMC Software, Inc.* (b)............................................................. $ 47,991,831
1,701,975 Hewlett-Packard Co. ................................................................ 212,534,128
725,000 Intel Corp. ........................................................................ 96,878,125
1,430,000 International Business Machines Corp................................................ 156,674,375
1,385,500 Lexmark International Group, Inc., Class A*......................................... 93,174,875
1,211,900 Novell, Inc.*....................................................................... 11,210,075
--------------
618,463,409
--------------
TELECOMMUNICATIONS - (8.97%)
1,878,340 AT&T Corp. ......................................................................... 59,402,503
500,000 AT&T Wireless Group* (b)............................................................ 13,937,500
414,500 Globalstar Telecommunications Ltd.* (b)............................................. 3,678,688
1,186,200 Loral Space & Communications, Ltd.* (b)............................................. 8,229,263
1,675,000 Lucent Technologies Inc. (b)........................................................ 99,243,750
2,850,000 Motorola, Inc....................................................................... 82,828,125
190,000 Sprint Corp......................................................................... 9,690,000
1,813,600 Tellabs, Inc.*...................................................................... 124,118,250
230,000 WorldCom, Inc.*..................................................................... 10,551,250
--------------
411,679,329
--------------
TRANSPORTATION - (0.15%)
77,700 Kansas City Southern Industries, Inc................................................ 6,891,019
--------------
WHOLESALE - (2.53%)
3,525,000 Costco Wholesale Corp.*............................................................. 116,325,000
--------------
Total Common Stock - (identified cost $2,709,973,306)........................ 4,161,738,456
--------------
PREFERRED STOCK - (0.24%)
59,100 SAP AG, Pfd (b) - (identified cost $6,131,914). .................................... 10,916,636
--------------
SHORT TERM INVESTMENTS - (7.79%)
$357,361,000 Lehman Brothers Repurchase Agreement, 6.70%, 07/03/00, dated 06/30/00,
repurchase value $357,560,527 (collateralized by: $249,210,000 par value
Fannie Mae, 5.375%-6.650%, 03/15/02-09/10/08, market value
$240,045,327 and $129,094,000 par value Freddie Mac, 5.125%-7.250%,
08/16/02-04/29/09, market value $124,463,474) - (identified
cost $357,361,000)................................................................ 357,361,000
--------------
</TABLE>
13
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC. - CONTINUED
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
=======================================================================================================================
<S> <C> <C>
Total Investments - (98.71%) - (identified cost $3,073,466,220) - (a)............ $4,530,016,092
Other Assets Less Liabilities - (1.29%).......................................... 59,371,399
--------------
Net Assets - (100%)....................................................... $4,589,387,491
==============
</TABLE>
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $3,073,466,220. At June
30, 2000, unrealized appreciation (depreciation) of securities for Federal
Income Tax purposes is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation.......................................................... $1,559,854,625
Unrealized depreciation.......................................................... (103,304,753)
--------------
Net unrealized appreciation .............................................. $1,456,549,872
==============
</TABLE>
(b) Loaned security - See Note 7 of Notes to Financial Statements
(c) Restricted security - See Note 8 of Notes to Financial Statements.
(d) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is an affiliate, as defined in the Investment
Company Act of 1940, at or during the six months ended June 30, 2000. The
aggregate fair value of the securities of affiliated companies held by the Fund
as of June 30, 2000 amounts to $61,917,344. Transactions during the period in
which the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1999 Additions Reductions June 30, 2000 Income
-------- ----------------- --------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C>
Centerpoint Properties
Corporation 1,451,194 - - 1,451,194 1,458,450
Centerpoint Properties
Corporation Private 70,000 - - 70,000 70,350
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED SPECIAL SHARES, INC.
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=======================================================================================================================
COMMON STOCK - (83.52%)
<S> <C> <C>
APPAREL - (0.41%)
55,000 Cutter & Buck, Inc.*................................................................ $ 436,562
-------------
CHEMICALS/METALS - (3.36%)
30,000 Minerals Technologies, Inc.......................................................... 1,380,000
50,000 OM Group, Inc....................................................................... 2,200,000
-------------
3,580,000
-------------
COMMUNICATIONS - (1.02%)
5,000 Palm, Inc.*......................................................................... 166,875
35,000 Telocity, Inc.*..................................................................... 159,688
25,000 UTStarcom, Inc.*.................................................................... 759,375
-------------
1,085,938
-------------
ELECTRONICS - (14.66%)
5,000 AVX Corp............................................................................ 114,687
50,000 Flextronics International Ltd.*..................................................... 3,434,375
60,000 Jabil Circuit, Inc.*................................................................ 2,977,500
40,000 KLA Tencor Corp.*................................................................... 2,342,500
48,000 Linear Technology Corp.............................................................. 3,066,000
50,000 Teradyne, Inc.*..................................................................... 3,675,000
-------------
15,610,062
-------------
EMPLOYEE STAFFING - (5.48%)
17,000 Heidrick & Struggles International, Inc.*........................................... 1,072,062
100,000 On Assignment, Inc.*................................................................ 3,050,000
60,000 Robert Half International, Inc.*.................................................... 1,710,000
-------------
5,832,062
-------------
ENERGY - (5.46%)
45,000 Diamond Offshore Drilling, Inc. .................................................... 1,580,625
50,500 Nabors Industries, Inc.*............................................................ 2,098,906
40,000 Transocean Sedco Forex Inc.......................................................... 2,137,500
-------------
5,817,031
-------------
ENTERTAINMENT/LEISURE TIME - (3.55%)
49,000 Cinar Corp., Class B* (b)........................................................... 122,500
70,000 Imax Corp.*......................................................................... 1,583,750
20,000 Univision Communications, Inc. Class A*............................................. 2,070,000
-------------
3,776,250
-------------
</TABLE>
15
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED SPECIAL SHARES, INC. - CONTINUED
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=======================================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
FINANCIAL SERVICES - (7.89%)
45,000 Blackrock, Inc.*.................................................................... $ 1,305,000
108,000 The Charles Schwab Corp............................................................. 3,631,500
50,000 Firstar Corp........................................................................ 1,053,125
35,000 LendingTree, Inc.*.................................................................. 262,500
25,000 Northern Trust Corp................................................................. 1,625,000
30,000 TD Waterhouse Group, Inc.*.......................................................... 519,375
-------------
8,396,500
-------------
HEALTHCARE - (5.12%)
35,000 Cardinal Health, Inc................................................................ 2,590,000
30,000 Focal, Inc.*........................................................................ 86,250
5,000 Human Genome Sciences, Inc.*........................................................ 666,563
10,000 Regeneron Pharmaceuticals, Inc.*.................................................... 298,125
15,000 Sepracor, Inc.*..................................................................... 1,808,438
-------------
5,449,376
-------------
HOME/OFFICE FURNITURE - (2.14%)
45,000 Ethan Allen Interiors, Inc.......................................................... 1,080,000
72,600 Leggett & Platt, Inc................................................................ 1,197,900
-------------
2,277,900
-------------
INDUSTRIAL PRODUCTS - (5.48%)
10,000 Grainger, W.W., Inc.*............................................................... 308,125
15,600 Illinois Tool Works, Inc............................................................ 889,200
87,695 Molex Inc., Class A................................................................. 3,069,325
30,000 Sealed Air Corp.*................................................................... 1,571,250
-------------
5,837,900
-------------
INFORMATION PROCESSING - OFFICE EQUIPMENT - (0.95%)
15,000 Lexmark International Group, Inc., Class A*......................................... 1,008,750
-------------
INFORMATION PROCESSING - SERVICES - (10.76%)
30,000 Agency.Com Inc.*.................................................................... 532,500
70,000 Computer Sciences Corp.*............................................................ 5,228,125
32,000 DST Systems, Inc.*.................................................................. 2,436,000
77,437 Paychex, Inc........................................................................ 3,252,354
-------------
11,448,979
-------------
INFORMATION PROCESSING - SOFTWARE - (2.87%)
12,000 Adobe Systems, Inc.................................................................. 1,558,500
8,000 Ariba, Inc.*........................................................................ 784,000
30,000 Saba Software, Inc.*................................................................ 630,000
2,600 Safeguard Scientifics, Inc.*........................................................ 83,363
-------------
3,055,863
-------------
</TABLE>
16
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED SPECIAL SHARES, INC. - CONTINUED
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES/PRINCIPAL SECURITY (NOTE 1)
=======================================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
REAL ESTATE SERVICES - (0.63%)
50,000 Jones Lang LaSalle, Inc.*........................................................... $ 668,750
-------------
RETAILING - (11.66%)
30,000 Cheap Tickets, Inc.*................................................................ 358,125
45,000 The Home Depot, Inc................................................................. 2,247,187
65,800 Kohl's Corp.*....................................................................... 3,660,125
75,000 Tiffany & Co........................................................................ 5,062,500
50,000 Yankee Candle Company, Inc.*........................................................ 1,081,250
-------------
12,409,187
-------------
TRANSPORTATION - (2.08%)
25,000 Kansas City Southern Industries, Inc................................................ 2,217,188
-------------
Total Common Stock - (identified cost $46,597,692)........................... 88,908,298
-------------
SHORT TERM INVESTMENTS - (15.87%)
$ 16,887,000 Lehman Brothers Repurchase Agreement, 6.70%, 07/03/00, dated 06/30/00,
repurchase value $16,896,429 (collateralized by: $13,896,000 par value
U.S. Treasury Nts., 5.375%-6.37%, 12/31/00-08/15/09, market value
$13,900,331, and $3,139,000 par value U.S. Treasury Bonds, 7.625%-8.375%,
02/15/07-08/15/08, market value $3,325,992) - (identified cost $16,887,000)........ 16,887,000
-------------
Total Investments - (99.39%) - (identified cost $63,484,692) - (a)................. 105,795,298
Other Assets Less Liabilities - (0.61%)............................................. 653,956
-------------
Net Assets - (100%)............................................................ $ 106,449,254
=============
</TABLE>
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $63,484,692. At June 30,
2000, unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation............................................................. $ 46,167,664
Unrealized depreciation............................................................. (3,857,058)
--------------
Net unrealized appreciation ................................................... $ 42,310,606
==============
</TABLE>
(b) Restricted security - See Note 8 of Notes to Financial Statements.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
PRINCIPAL SECURITY (NOTE 1)
=======================================================================================================================
MORTGAGES - (13.44%)
<S> <C> <C>
FREDDIE MAC POOLS - (12.82%)
$ 453,692 7.00%, 12/01/15, Pool No. D9-1178 - (identified cost $455,819)........................ $ 446,723
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION POOLS - (0.62%)
9,586 6.75%, 09/20/23, Pool No. 008299 (b).................................................. 9,639
12,113 7.375%, 01/20/24, Pool No. 008360 (b)............................................... 12,144
------------
Total GNMA - (identified cost $20,186)....................................... 21,783
------------
Total Mortgages - (identified cost $476,005)................................. 468,506
------------
U.S. TREASURY NOTES - (28.57%)
500,000 United States Treasury Notes, 5.625%, 09/30/01........................................ 494,685
500,000 United States Treasury Notes, 6.25%, 02/15/07......................................... 500,390
------------
Total U.S. Treasury Notes - (identified cost $1,002,949)..................... 995,075
------------
GOVERNMENT AGENCY NOTES - (45.81%)
1,500,000 Freddie Mac, 6.25%, 07/15/04.......................................................... 1,458,285
500,000 Freddie Mac, Zero Cpn, 01/02/19....................................................... 137,344
------------
Total Government Agency Notes - (identified cost $1,627,796)................. 1,595,629
------------
SHORT TERM INVESTMENTS - (10.16%)
354,000 State Street Corporation Repurchase Agreement, 6.60%, 07/03/00, dated 06/30/00,
repurchase value of $354,195 (collateralized by: $360,000 par value Federal Home
Loan Bank, 7.00%, 08/28/01, market value $367,200) - (identified cost $354,000)..... 354,000
------------
Total Investments - (97.98%) - (identified cost $3,460,750) - (a)..................... 3,413,210
Other Assets Less Liabilities - (2.02%)............................................... 70,218
------------
Net Assets - (100%).......................................................... $ 3,483,428
============
</TABLE>
(a) Aggregate cost for Federal Income Tax purposes is $3,460,750. At June 30,
2000, unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation............................................................... $ 3,889
Unrealized depreciation............................................................... (51,429)
------------
Net unrealized depreciation.................................................. $ (47,540)
============
</TABLE>
(b) The interest rates on floating rate securities, shown as of June 30, 2000,
may change monthly or less frequently and are based on indices of market
interest rates.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
=======================================================================================================================
FANNIE MAE - (26.72%)
<S> <C> <C>
$ 1,250,000 6.33%, 08/11/00....................................................................... $ 1,250,187
2,000,000 5.95%, 08/17/00 Discount Note......................................................... 1,984,464
3,100,000 6.435%, 08/24/00 Discount Note........................................................ 3,070,077
2,000,000 6.664%, 09/06/00 (b).................................................................. 1,999,694
1,050,000 6.29%, 10/04/00....................................................................... 1,048,054
1,890,000 4.45%, 10/16/00....................................................................... 1,876,386
200,000 5.90%, 11/20/00....................................................................... 199,142
10,000,000 6.49%, 11/22/00 (b)................................................................... 9,999,248
2,000,000 6.426%, 12/08/00 (b).................................................................. 1,999,143
2,000,000 8.25%, 12/18/00....................................................................... 2,016,756
1,000,000 5.23%, 01/08/01....................................................................... 994,171
750,000 5.30%, 01/12/01....................................................................... 745,715
1,000,000 5.30%, 01/19/01....................................................................... 992,911
2,000,000 5.28%, 02/20/01....................................................................... 1,982,808
250,000 5.36%, 02/26/01....................................................................... 248,083
2,000,000 5.30%, 04/17/01....................................................................... 1,979,261
1,000,000 5.38%, 04/26/01....................................................................... 986,706
2,000,000 6.244%, 05/10/01 (b).................................................................. 2,000,000
150,000 5.65%, 06/01/01....................................................................... 148,128
------------
Total Fannie Mae - (identified cost $35,520,934) ................................. 35,520,934
------------
FEDERAL FARM CREDIT BANK - (5.26%)
2,000,000 6.293%, 07/03/00 (b).................................................................. 1,999,967
1,000,000 6.43%, 07/10/00 Discount Note......................................................... 998,393
2,000,000 6.481%, 09/01/00 (b).................................................................. 1,999,898
2,000,000 5.65%, 12/29/00....................................................................... 1,992,533
------------
Total Federal Farm Credit Bank - (identified cost $6,990,791)..................... 6,990,791
------------
FEDERAL HOME LOAN BANK - (30.96%)
2,000,000 6.00%, 07/05/00....................................................................... 2,000,046
250,000 5.50%, 07/14/00....................................................................... 249,959
4,500,000 5.56%, 07/14/00....................................................................... 4,499,534
1,030,000 5.89%, 07/24/00....................................................................... 1,030,030
150,000 5.62%, 08/10/00....................................................................... 149,930
1,500,000 5.47%, 08/17/00....................................................................... 1,498,617
500,000 5.875%, 09/07/00...................................................................... 499,931
760,000 5.75%, 09/15/00....................................................................... 759,509
2,000,000 6.13%, 10/04/00 (b)................................................................... 1,999,709
100,000 5.95%, 10/06/00....................................................................... 99,853
5,000,000 6.552%, 10/06/00 (b).................................................................. 5,002,643
</TABLE>
19
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND - CONTINUED
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
=======================================================================================================================
FEDERAL HOME LOAN BANK - CONTINUED
<S> <C> <C>
$ 4,500,000 6.04%, 10/25/00....................................................................... $ 4,489,472
700,000 6.04%, 10/25/00....................................................................... 698,623
2,000,000 6.09%, 11/03/00....................................................................... 1,998,015
2,000,000 6.393%, 12/01/00 (b).................................................................. 1,999,749
1,000,000 5.50%, 12/22/00....................................................................... 993,073
250,000 5.76%, 01/17/01....................................................................... 248,336
500,000 6.315%, 01/19/01...................................................................... 499,275
1,000,000 6.465%, 02/16/01...................................................................... 995,962
1,000,000 6.60%, 02/22/01....................................................................... 999,950
1,000,000 5.58%, 02/23/01....................................................................... 991,160
310,000 5.18%, 02/26/01....................................................................... 307,049
1,000,000 6.76%, 03/13/01....................................................................... 1,000,000
2,000,000 5.40%, 03/15/01....................................................................... 1,982,621
3,000,000 5.625%, 03/19/01...................................................................... 2,972,935
2,000,000 6.194%, 04/12/01 (b).................................................................. 2,000,000
1,200,000 7.00%, 05/18/01....................................................................... 1,196,991
------------
Total Federal Home Loan Bank - (identified cost $41,162,972)...................... 41,162,972
------------
FREDDIE MAC - (12.34%)
400,000 6.515%, 08/25/00...................................................................... 399,756
400,000 6.155%, 09/15/00...................................................................... 400,101
350,000 6.07%, 09/21/00....................................................................... 349,847
5,000,000 6.056%, 01/10/01 (b).................................................................. 4,997,495
2,000,000 5.35%, 01/26/01....................................................................... 1,978,116
300,000 5.25%, 02/16/01....................................................................... 297,197
1,000,000 5.59%, 03/15/01....................................................................... 988,933
2,000,000 7.125%, 07/13/01...................................................................... 1,999,840
5,000,000 6.428%, 09/21/01(b)................................................................... 4,995,859
------------
Total Freddie Mac - (identified cost $16,407,144)................................. 16,407,144
------------
SALLIE MAE - (14.29%)
3,000,000 6.214%, 07/20/00 (b).................................................................. 2,999,962
2,000,000 6.045%, 11/03/00...................................................................... 1,997,431
5,000,000 6.544%, 11/15/00 (b).................................................................. 4,999,083
1,000,000 5.90%, 12/01/00....................................................................... 997,797
8,000,000 6.284%, 03/09/01(b)................................................................... 7,997,457
------------
Total Sallie Mae - (identified cost $18,991,730).................................. 18,991,730
------------
</TABLE>
20
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND - CONTINUED
JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
=======================================================================================================================
OTHER SHORT TERM INVESTMENTS - (11.35%)
<S> <C> <C>
$ 15,092,000 Lehman Brothers Repurchase Agreement, 6.70%, 07/03/00, dated 06/30/00,
repurchase value $ 15,100,426 (collateralized by: $17,490,000 par value
Freddie Mac, 5.125%, 10/15/08, market value $15,397,621)
- (identified cost $15,092,000)................................................... $ 15,092,000
------------
Total Investments - (100.92%) - (identified cost $134,165,571) - (a)................ 134,165,571
Liabilities Less Other Assets - (0.92%)............................................. (1,220,250)
------------
Net Assets - (100%).......................................................... $132,945,321
============
</TABLE>
(a) Aggregate cost for Federal income tax purposes is $134,165,571.
(b) The interest rates on floating rate securities, shown as of June 30, 2000,
may change daily or less frequently and are based on indices of market
rates. For purposes of amortized cost valuation, the maturity dates of
these securities are considered to be the effective maturities, based on
the reset dates of the securities' variable rates.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
SELECTED FUNDS
STATEMENT OF ASSETS AND LIABILITIES
At June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
=====================================================================================================================
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value * (see
accompanying Schedules of Investments)
Unaffiliated companies...................... $4,468,098,748 $105,795,298 $ 3,413,210 $134,165,571
Affiliated companies........................ 61,917,344 - - -
Collateral for securities loaned (Note 7)..... 179,777,165 - - -
Prepaid expenses.............................. 197,108 5,750 4,131 9,527
Cash.......................................... 162,113 14,521 6,097 12,760
Receivables:
Dividends and interest...................... 3,927,991 27,668 64,900 1,510,998
Capital stock sold.......................... 9,549,006 642,007 - 247
Investment securities sold.................. 71,713,044 220,165 - -
Due from adviser............................ - - 7,697 -
-------------- ------------ ----------- ------------
Total assets............................ 4,795,342,519 106,705,409 3,496,035 135,699,103
-------------- ------------ ----------- ------------
LIABILITIES:
Return of collateral for securities loaned
(Note 7).................................... 179,777,165 - - -
Payables:
Capital stock reacquired.................... 751,478 2,542 - 333,801
Investment securities purchased............. 21,511,553 132,500 - 1,999,840
Accrued expenses.............................. 3,914,832 121,113 5,933 90,213
Distributions payable......................... - - 6,674 329,928
-------------- ------------ ----------- ------------
Total liabilities....................... 205,955,028 256,155 12,607 2,753,782
-------------- ------------ ----------- ------------
NET ASSETS ...................................... $4,589,387,491 $106,449,254 $ 3,483,428 $132,945,321
============== ============ =========== ============
SHARES OUTSTANDING (NOTE 5)...................... 120,510,482 6,281,028 416,105 132,945,321
============== ============ =========== ============
NET ASSET VALUE, offering and
redemption price per share (Net
Assets / shares outstanding)................ $ 38.08 $ 16.95 $ 8.37 $ 1.00
=========== ========== ========== ==========
NET ASSETS CONSIST OF:
Par value of shares of capital stock ......... $2,551,799,423 $ 51,850,033 $ 3,657,662 $119,650,789
Additional paid-in capital.................... 150,638,103 1,570,257 41,611 13,294,532
Overdistributed net investment income......... (2,774,625) (304,217) - -
Accumulated net realized gain (loss).......... 433,174,718 11,022,575 (168,305) -
Net unrealized appreciation (depreciation) on
investments................................. 1,456,549,872 42,310,606 (47,540) -
-------------- ------------ ----------- ------------
$4,589,387,491 $106,449,254 $ 3,483,428 $132,945,321
============== ============ =========== ============
</TABLE>
* Including repurchase agreements of $357,361,000, $16,887,000, $354,000, and
$15,092,000 for Selected American Shares, Selected Special Shares, Selected U.S.
Government Income Fund and Selected Daily Government Fund, respectively, and
cost of $3,073,466,220, $63,484,692, $3,460,750 and $134,165,571 for Selected
American Shares, Selected Special Shares, Selected U.S. Government Income Fund
and Selected Daily Government Fund, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
SELECTED FUNDS
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
===================================================================================================================
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Income:
Dividends
Unaffiliated companies....................... $ 15,907,617 $ 138,729 $ - $ -
Affiliated companies......................... 1,528,800 - - -
Interest....................................... 5,748,834 166,416 127,469 4,007,084
Lending fees................................... 183,940 - - -
------------- ----------- -------- ----------
Total income............................... 23,369,191 305,145 127,469 4,007,084
------------- ----------- -------- ----------
Expenses:
Management fees (Note 2)....................... 11,650,322 355,679 5,926 197,419
Custodian fees................................. 273,263 12,972 4,577 9,485
Transfer agent fees............................ 1,374,934 64,021 6,137 31,896
Audit fees..................................... 12,075 5,750 3,450 5,175
Legal fees..................................... 75,277 7,237 192 7,040
Reports to shareholders........................ 273,988 8,690 291 8,525
Directors fees and expenses.................... 152,908 4,533 215 5,683
Registration and filing fees................... 69,380 11,141 10,695 13,304
Miscellaneous.................................. 53,685 3,117 3,396 4,494
Payments under distribution plan (Note 3)...... 5,157,554 129,431 4,938 164,516
------------- ----------- -------- ----------
Total expenses............................. 19,093,386 602,571 39,817 447,537
Expenses paid indirectly (Note 6).......... (11,918) (954) (37) (92)
Reimbursement of expenses by
adviser (Note 2)......................... - - (17,426) -
------------ ----------- -------- ----------
Net expenses............................... 19,081,468 601,617 22,354 447,445
------------- ----------- -------- ----------
Net investment income (loss)............... 4,287,723 (296,472) 105,115 3,559,639
------------- ----------- -------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from
investment transactions...................... 434,420,077 11,146,727 (30,775) -
Net change in unrealized
appreciation/(depreciation) of investments
during the period............................ (184,307,475) (6,114,589) 21,816 -
------------- ----------- --------- ----------
Net realized and unrealized
gain (loss) on investments................... 250,112,602 5,032,138 (8,959) -
------------- ----------- -------- ----------
Net increase in net assets resulting from
operations................................. $ 254,400,325 $ 4,735,666 $ 96,156 $3,559,639
============= =========== ======== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
===================================================================================================================
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................ $ 4,287,723 $ (296,472) $ 105,115 $ 3,559,639
Net realized gain (loss) from
investment transactions................... 434,420,077 11,146,727 (30,775) -
Net change in unrealized
appreciation/(depreciation) of investments (184,307,475) (6,114,589) 21,816 -
-------------- ------------ ----------- ------------
Net increase in net
assets resulting from operations.......... 254,400,325 4,735,666 96,156 3,559,639
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income....................... (6,873,333) - (104,273) (3,559,639)
Realized gains from investment
transactions.............................. (4,940,677) - - -
CAPITAL SHARE TRANSACTIONS
(NOTE 5).................................... 642,431,647 (5,878,175) (921,253) 1,602,908
-------------- ------------ ---------- ------------
Total increase (decrease) in net assets......... 885,017,962 (1,142,509) (929,370) 1,602,908
NET ASSETS:
Beginning of period......................... 3,704,369,529 107,591,763 4,412,798 131,342,413
-------------- ------------ ---------- ------------
End of period............................... $4,589,387,491 $106,449,254 $3,483,428 $132,945,321
============== ============ ========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
===================================================================================================================
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................ $ 7,855,983 $ (567,926) $ 277,075 $ 5,720,923
Net realized gains/(losses) from
investment transactions................... 135,025,695 4,921,785 (137,530) -
Net increase (decrease) in unrealized
appreciation of investments............... 457,447,484 11,104,600 (250,320) -
-------------- ------------ ----------- ------------
Net increase (decrease) in net
assets resulting from operations.......... 600,329,162 15,458,459 (110,775) 5,720,923
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income....................... (7,855,983) - (277,075) (5,720,923)
Realized gains from investment
transactions.............................. (148,111,926) (6,184,763) (27,599) -
Return of capital........................... - (1,137) - -
Distribution in excess of net investment
income.................................... - - (840) -
CAPITAL SHARE TRANSACTIONS
(NOTE 5).................................... 354,101,450 3,675,089 (1,407,546) 5,139,905
-------------- ------------ ----------- ------------
Total increase (decrease) in net assets......... 798,462,703 12,947,648 (1,823,835) 5,139,905
NET ASSETS:
Beginning of period......................... 2,905,906,826 94,644,115 6,236,633 126,202,508
-------------- ------------ ----------- ------------
End of period............................... $3,704,369,529 $107,591,763 $ 4,412,798 $131,342,413
============== ============ =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Selected Funds (the Funds) consist of Selected American Shares, Inc.,
(American Shares, Inc.), Selected Special Shares, Inc., (Special Shares, Inc.),
and the Selected Capital Preservation Trust (the Trust). The Trust operates as a
series fund, consisting of the U.S. Government Income Fund and Daily Government
Fund. The Funds and Trust are registered under the Investment Company Act of
1940, as amended, as diversified, open-end management investment companies. The
Trust accounts separately for the assets, liabilities and operations of each
series. The following is a summary of significant accounting policies followed
by the Funds in the preparation of financial statements.
American Shares, Inc. and Special Shares, Inc. are diversified,
professionally managed stock-oriented funds.
Selected U.S. Government Income Fund (U.S. Government Income) seeks to
obtain current income consistent with preservation of capital by investing
primarily in debt obligations of the U.S. Government, its agencies or
instrumentalities.
Selected Daily Government Fund (Daily Government) seeks to provide a high
level of current income from short-term money market securities consistent with
prudent investment management, preservation of capital and maintenance of
liquidity. It invests in U.S. Government Securities and repurchase agreements in
respect thereto.
An investment in any of the Funds, as with any mutual fund, includes risks
that vary depending upon the fund's investment objectives and policies. There is
no assurance that the investment objective of any fund will be achieved. A
fund's return and net asset value will fluctuate, although Daily Government
seeks to maintain a net asset value of $1.00 per share.
A. VALUATION OF SECURITIES - Securities listed on national securities exchanges
are valued at the last reported sales price on the day of valuation. Securities
traded in the over the counter market and listed securities for which no sale
was reported on that date are stated at the last quoted bid price. Securities
for which market quotations are not readily available are valued at fair value
as determined by the Boards of Directors/Trustees. The Daily Government Fund
uses the amortized cost method of valuing investment securities, which
represents fair value as determined by the Board of Trustees. These valuation
procedures are reviewed and subject to approval by the Board of
Directors/Trustees.
B. FEDERAL INCOME TAXES - It is each fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to
shareholders. Therefore, no provision for federal income or excise tax is
required. At June 30, 2000, Selected Special Shares had approximately $20,510 of
post October losses available to offset future capital gains which expire in
2008. At June 30, 2000, Selected U.S. Government Income had approximately
137,350 of capital loss carryovers and post October losses available to offset
future capital gains which expire in 2007 and 2008.
C. USE OF ESTIMATES IN FINANCIAL STATEMENTS - In preparing financial statements
in conformity with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of income and expenses
during the reporting period. Actual results may differ from these estimates.
26
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
D. SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME - Securities
transactions are accounted for on the trade date (date the order to buy or sell
is executed) with realized gain or loss on the sale of securities being
determined based upon identified cost. Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend date. Discounts
and premiums on debt securities (excluding convertible bonds) purchased are
amortized over the lives of the respective securities in accordance with the
requirements of the Internal Revenue Code.
E. DIRECTORS/TRUSTEES FEES AND EXPENSES - The Funds' has adopted a non funded
retirement plan for the Fund's independent directors/trustees. Benefits are
based upon years of service and fees paid to each director/trustee during the
years of service. During the six months ended June 30, 2000, for Selected
American Shares, a credit of $84,122 was made for the projected benefit
obligations, resulting in an accumulated liability of $350,109. During the six
months ended June 30, 2000, for Selected Special Shares, a credit of $2,330 was
made for the projected benefit obligations, resulting in an accumulated
liability of $10,076. During the six months ended June 30, 2000, for Selected
U.S. Government Income, a credit of $49 was made for the projected benefit
obligations, resulting in an accumulated liability of $461. During the six
months ended June 30, 2000, for Selected Daily Government, a credit of $752 was
made for the projected benefit obligations, resulting in an accumulated
liability of $8,772.
The Board of Directors/Trustees has adopted a deferred compensation plan for
independent Directors/Trustees that enables Directors/Trustees to elect to defer
receipt of all for a portion of annual fees they are entitled to receive from
Selected American Shares and Selected Special Shares. Under the plan, the
compensation deferred is periodically adjusted as though an equivalent amount
had been invested for the Director/Trustee in shares of one or more Selected
funds selected by the Director/Trustee. The amount paid to the Director/Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Director/Trustees' fees under the plan will not affect the
net assets of the Funds, and will not materially affect the Fund's assets,
liabilities or net income per share.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions to
shareholders are recorded on the ex-dividend date. The character of the
distributions made during the year from net investment income may differ from
its ultimate characterization for federal income tax purposes. Also, due to the
timing of distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which income or gain was recorded by the Funds.
The Funds adjust the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations.
NOTE 2 - INVESTMENT ADVISORY FEES
Advisory fees are paid monthly to Davis Selected Advisers, L.P., the Fund's
investment adviser. The rate for Selected American Shares is 0.65% on the first
$500 million of average net assets, 0.60% of the average net assets on the next
$500 million, 0.55% of the average net assets on the next $2 billion, 0.54% of
the average net assets on the next $1 billion, 0.53% of the average net assets
on the next the next $1 billion, 0.52% of the average net assets on the next $1
billion, 0.51% of the average net assets on the next $1 billion and 0.50% of the
average net assets in excess of $7 billion. The rate for Special Shares, Inc. is
0.70% on the first $50 million of average net assets, 0.675% on the next $100
million, 0.65% on the next $100 million and 0.60% of average net assets in
excess of $250 million. The rate for both the U.S. Government Income Fund and
the Daily Government Fund is 0.30% of average net assets.
State Street Bank is the Funds' primary transfer agent. Davis Selected
Advisers, L.P. (the "Adviser") is also paid for certain transfer agent services.
The fee paid to the Adviser for the six months ended June 30, 2000 was $68,764,
$6,473,
27
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
================================================================================
NOTE 2 - INVESTMENT ADVISORY FEES - (Continued)
$365 and $2,250 for American Shares, Inc., Special Shares, Inc., U.S. Government
Income and Daily Government Funds, respectively. Certain directors/trustees and
officers of the Funds are also directors/trustees and officers of the general
partner of the Adviser.
The Adviser has agreed to reimburse the U.S. Government Income Fund for any
Fund expenses in excess of 1.30% of average net assets.
Davis Selected Advisers - NY, Inc. ("DSA-NY"), a wholly-owned subsidiary of
the Adviser, acts as sub-adviser to the Funds. The Funds pay no fees directly to
DSA-NY.
NOTE 3 - DISTRIBUTION
With respect to Special Shares, Inc., Bramwell Capital Management, Inc.
("Bramwell") also acts as sub-adviser and manages the day-to-day investment
operations for the fund. The Fund pays no fees directly to Bramwell, who
receives from the Adviser, a percentage of the total annual investment advisory
fees paid by the Fund to the Adviser.
Each fund has adopted procedures to treat Shelby Cullom Davis & Co. ("SCD")
as an affiliate of the Adviser. For American Shares, Inc., SCD received $42,270
in commissions on the purchases/sales of portfolio securities.
For services under the distribution agreement, the Funds pay a fee of 0.25%
of average daily net assets. For the six months ended June 30, 2000, American
Shares, Inc., Special Shares, Inc., U.S. Government Income and Daily Government
Funds incurred distribution services fees totaling $5,157,554, $129,431, $4,938
and $164,516, respectively.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities) during the six months ended June 30, 2000 were as follows:
AMERICAN SPECIAL U.S. GOVERNMENT
SHARES, INC. SHARES, INC. INCOME
-------------- ------------ ---------------
Cost of purchases..... $1,029,951,679 $ 12,669,210 $ 134,835
Proceeds of sales..... $ 715,288,981 $ 35,710,339 $ 948,985
28
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
================================================================================
NOTE 5 - CAPITAL STOCK
At June 30, 2000, there were 300 million shares of capital stock of American
Shares, Inc. ($1.25 par value per share) authorized. At June 30, 2000, there
were 50 million shares of capital stock of Special Shares, Inc. ($0.25 par value
per share) authorized. At June 30, 2000, there were unlimited shares of capital
stock of Selected Capital Preservation Trust ($0.10 par value per share)
authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 (UNAUDITED)
---------------------------------------------------------------
AMERICAN SPECIAL U.S.
SHARES SHARES GOVERNMENT DAILY
INC. INC. INCOME GOVERNMENT
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold............................................... 25,393,391 2,490,802 13,354 10,109,981
Shares issued in reinvestment of distributions............ 291,406 58 10,654 3,552,610
------------- ------------ ----------- ------------
25,684,797 2,490,860 24,008 13,662,591
Shares redeemed........................................... (8,650,688) (2,864,543) (135,185) (12,059,683)
------------- ------------ ----------- ------------
Net increase (decrease)............................. 17,034,109 (373,683) (111,177) 1,602,908
============= ============ =========== ============
Proceeds from shares sold................................. $ 948,636,274 $ 41,056,131 $ 111,164 $ 10,109,981
Proceeds from shares issued in
reinvestment of distributions......................... 11,417,134 1,000 88,501 3,552,610
------------- ------------ ----------- ------------
960,053,408 41,057,131 199,665 13,662,591
Cost of shares redeemed................................... (317,621,761) (46,935,306) (1,120,918) (12,059,683)
------------- ------------ ----------- ------------
Net increase (decrease)............................. $ 642,431,647 $ (5,878,175) $ (921,253) $ 1,602,908
============= ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
---------------------------------------------------------------
AMERICAN SPECIAL U.S.
SHARES SHARES GOVERNMENT DAILY
INC. INC. INCOME GOVERNMENT
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold............................................... 22,168,838 1,447,351 66,570 15,388,012
Shares issued in reinvestment of distributions............ 4,424,497 384,122 29,508 5,601,074
------------- ------------ ----------- ------------
26,593,335 1,831,473 96,078 20,989,086
Shares redeemed........................................... (16,364,757) (1,586,891) (258,633) (15,849,181)
------------- ------------ ----------- ------------
Net increase (decrease)............................. 10,228,578 244,582 (162,555) 5,139,905
============= ============ =========== ============
Proceeds from shares sold................................. $ 750,251,715 $ 21,526,141 $ 584,615 $ 15,388,012
Proceeds from shares issued in
reinvestment of distributions......................... 150,287,145 5,672,955 255,999 5,601,074
------------- ------------ ----------- ------------
900,538,860 27,199,096 840,614 20,989,086
Cost of shares redeemed................................... (546,437,410) (23,524,007) (2,248,160) (15,849,181)
------------- ------------ ----------- ------------
Net increase (decrease)............................. $ 354,101,450 $ 3,675,089 $(1,407,546) $ 5,139,905
============= ============ =========== ============
</TABLE>
29
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
================================================================================
NOTE 6 - CUSTODIAN FEES
Under an agreement with the custodian bank, each fund's custodian fees are
reduced for earnings on cash balances maintained at the custodian by the Funds.
During the six months ended June 30, 2000, such reductions amounted to $11,918,
$954, $37 and $92 for American Shares, Inc., Special Shares, Inc., U.S.
Government Income and Daily Government, respectively.
NOTE 7 - SECURITIES LOANED
American Shares, Inc. (the "Fund") has entered into a securities lending
arrangement with PaineWebber, Inc. Under the terms of the agreement, the Fund
receives fee income from lending transactions; in exchange for such fees,
PaineWebber, Inc. is authorized to loan securities on behalf of the Fund,
against receipt of collateral at least equal to the value of the securities
loaned. Cash collateral is invested by the Adviser in money market instruments.
As of June 30, 2000, the Fund had on loan securities valued at $173,541,021;
cash of $179,777,165 was received as collateral for the loans and has been
invested in approved instruments. The Fund bears the risk of any deficiency in
the amount of the collateral available for return to a borrower due to a loss in
an approved investment.
NOTE 8 - RESTRICTED SECURITIES
Restricted securities are not registered under the Securities Act of 1933
and may have contractual restrictions on resale. They are valued under methods
approved by the Board of Directors as reflecting fair value. The aggregate value
of restricted securities in American Shares, Inc. was $2,781,188, or 0.06% of
the net assets as of June 30, 2000. The aggregate value of restricted securities
in Special Shares, Inc. was $122,500, or 0.12% of the net assets as of June 30,
2000. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Number of Valuation per Unit as
Fund Security Acquisition Date Shares Cost per Unit of June 30, 2000
---- -------- ---------------- ------ ------------- ----------------
<S> <C> <C> <C> <C> <C>
American Centerpoint Properties
Shares, Inc. Corp. Private 04/02/98 70,000 $32.86069 $39.73125
Special Cinar Corp.
Shares, Inc. Class B 04/07/95 49,000 $6.46939 $2.50
</TABLE>
30
<PAGE>
SELECTED FUNDS
FINANCIAL HIGHLIGHTS
SELECTED AMERICAN SHARES, INC.
================================================================================
The following financial information represents selected data for each share of
capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 -----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 35.80 $ 31.16 $ 27.18 $ 21.53 $ 17.68 $ 13.09
---------- ---------- ---------- --------- --------- ---------
Income From Investment Operations
Net Investment Income.................. .04 .15 .15 .16 .18 .22
Net Realized and Unrealized
Gains............................... 2.35 6.08 4.24 7.72 5.15 4.74
---------- ---------- ---------- --------- --------- ---------
Total From Investment Operations.... 2.39 6.23 4.39 7.88 5.33 4.96
Dividends and Distributions
Dividends from Net Investment Income... (.06) (.15) (.15) (.17) (.17) (.22)
Distributions from Realized Gains...... (.05) (1.44) (.26) (2.05) (1.31) (.15)
Dividends in Excess of Net
Investment Income................... - - - (.01) - -
---------- ---------- ---------- --------- --------- ---------
Total Dividends and Distributions... (.11) (1.59) (.41) (2.23) (1.48) (.37)
---------- ---------- ---------- --------- --------- ---------
Net Asset Value, End of Period.......... $ 38.08 $ 35.80 $ 31.16 $ 27.18 $ 21.53 $ 17.68
========== ========== ========== ========= ========= =========
Total Return(1)......................... 6.65% 20.32% 16.27% 37.25% 30.74% 38.09%
Ratios/Supplemental Data
Net Assets, End of Period
(000,000 omitted)................... $4,589 $3,704 $2,906 $2,222 $1,376 $926
Ratio of Expenses to Average Net Assets .93%(3)* .93% .94% .96% 1.03% 1.09%
Ratio of Net Investment Income to
Average Net Assets.................. .21%* .24% .52% .62% .87% 1.42%
Portfolio Turnover Rate(2)............. 18% 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. Total returns are not annualized for periods of less than one year.
2 The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
3 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 0.92% for the six months ended June
30, 2000.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
SELECTED FUNDS
FINANCIAL HIGHLIGHTS
SELECTED SPECIAL SHARES, INC.
================================================================================
The following financial information represents selected data for each share of
capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30,2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...... $ 16.17 $ 14.76 $ 13.03 $ 10.89 $ 10.80 $ 9.02
---------- ---------- ---------- --------- --------- ---------
Income (Loss) From Investment Operations
Net Investment Loss...................... (.05) (.09) (.08) (.07) - -
Net Realized and Unrealized Gains....... .83 2.47 3.14 2.83 1.27 3.04
---------- ---------- ---------- --------- --------- ---------
Total From Investment Operations...... .78 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............ $ 16.95 $ 16.17 $ 14.76 $ 13.03 $ 10.89 $ 10.80
========== ========== ========== ========= ========= =========
Total Return(2)...........................
4.82% 16.83% 24.52% 26.91% 11.86% 34.24%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).. $106,449 $107,592 $94,644 $74,930 $62,435 $58,975
1.16%* 1.17% 1.26%(3) 1.28% 1.33% 1.48%
Ratio of Expenses to Average Net Assets..
Ratio of Net Investment Loss to Average
Net Assets............................ (.57)%* (.59)% (.58)% (.60)% (.66)% (.58)%
Portfolio Turnover Rate(4)............... 13% 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. Total returns are not annualized for periods of less than one year.
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.
* Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
SELECTED FUNDS
FINANCIAL HIGHLIGHTS
SELECTED U.S. GOVERNMENT INCOME FUND
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The following financial information represents selected data for each share of
capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 8.37 $ 9.04 $ 9.01 $ 8.90 $ 9.20 $ 8.45
----------- ----------- --------- --------- --------- ---------
Income From Investment Operations
Net Investment Income................. .22 .45 .47 .51 .53 .54
Net Realized and Unrealized
Gains (Losses).................... - (.62) .06 .11 (.28) .78
----------- ----------- --------- --------- --------- ---------
Total From Investment Operations.... .22 (.17) .53 .62 .25 1.32
Dividends and Distributions
Dividends from Net Investment Income... (.22) (.45) (.47) (.51) (.53) (.54)
Distributions from Realized Gains...... - (.05) (.03) - (.02) (.03)
----------- ----------- --------- --------- --------- ---------
Total Dividends and Distributions... (.22) (.50) (.50) (.51) (.55) (.57)
----------- ----------- --------- --------- --------- ---------
Net Asset Value, End of Period.......... $ 8.37 $ 8.37 $ 9.04 $ 9.01 $ 8.90 $ 9.20
=========== =========== ========= ========= ========= =========
Total Return(1).........................
2.67% (1.97)% 5.90% 7.32% 2.85% 15.97%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $3,483 $4,413 $6,237 $5,962 $6,934 $7,811
1.13%(2)* 1.28%(2) 1.52%(2,3) 1.50%(2) 1.44%(2) 1.44%(2)
Ratio of Expenses to Average Net Assets
Ratio of Net Investment Income to
Average Net Assets.................. 5.32%* 5.15% 5.17% 5.79% 5.96% 6.09%
Portfolio Turnover Rate(4).............
4% 134% 36% 16% 26% 76%
</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. Total
returns are not annualized for periods of less than one year.
2 Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets for the six months ended June 30, 2000 and the years
ended December 31, 1999, 1998, 1997, 1996 and 1995 would have been 2.02%,
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.
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.
* Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
SELECTED FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DAILY GOVERNMENT FUND
================================================================================
The following financial information represents selected data for each share of
capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income.................... .027 .044 .047 .048 .046 .051
Dividends and Distributions
Dividends from Net Investment Income..... (.027) (.044) (.047) (.048) (.046) (.051)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ========== ==========
Total Return(1)...........................
2.72% 4.48% 4.85% 4.91% 4.70% 5.23%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).. $ 132,945 $ 131,342 $ 126,203 $ 117,471 $ 112,674 $ 184,603
Ratio of Expenses to Average Net Assets.. .68%* .68% .71% 70% .75% .75%(2)
Ratio of Net Investment Income
to Average Net Assets................. 5.41%* 4.44% 4.74% 4.80% 4.62% 5.13%
</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. Total returns are not annualized for periods less than one year.
2 Had the Adviser not absorbed certain expenses, the ratio of expenses for
the year ended 1995 would have been 0.78%.
* Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
SELECTED
FUNDS
2949 East Elvira Road, Tucson, Arizona 85706
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DIRECTORS OFFICERS
William P. Barr James J. McMonagle
Floyd A. Brown Chairman
Andrew A. Davis Christopher C. Davis
Christopher C. Davis President - Selected American
Jerome Hass Shares & Selected Special
James J. McMonagle Shares, Vice President - Selected
Katherine L. MacWilliams U.S. Government Income Fund
Richard O'Brien & Selected Daily Government
Larry Robinson Fund
Marsha Williams Creston A. King
President - Selected U.S.
Government Income Fund &
Selected Daily Government
Fund
Andrew A. Davis
Vice President
Kenneth C. Eich
Vice President
Sharra L. Reed
Vice President, Treasurer
& Assistant Secretary
Thomas D. Tays
Vice President
& Secretary
Arthur Don
Assistant Secretary
Sheldon R. Stein
Assistant Secretary
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
(800) 243-1575
DISTRIBUTOR
Davis Distributors, LLC
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
TRANSFER AGENT & CUSTODIAN
State Street Bank and Trust Company
c/o Selected Funds
P.O. Box 8243
Boston, Massachusetts 02266-8243
AUDITORS
KPMG LLP
707 Seventeenth Street, Suite 2300
Denver, Colorado 80202
COUNSEL
D'Ancona & Pflaum
111 E. Wacker Drive
Chicago, Illinois 60601-4205
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FOR MORE INFORMATION ABOUT THE SELECTED FUNDS, INCLUDING MANAGEMENT
FEE, CHARGES AND EXPENSES, SEE THE CURRENT PROSPECTUS WHICH MUST
PRECEDE OR ACCOMPANY THIS REPORT.
=====================================================================
<PAGE>
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, AZ 85706
DISTRIBUTOR
Davis Distributors, LLC
2949 East Elvira Road, Suite 101
Tucson, AZ 85706
TRANSFER AGENT AND CUSTODIAN
State Street Bank & Trust Company
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
LEGAL COUNSEL
D'Ancona & Pflaum
111 E. Wacker Dr., Suite 2800
Chicago, IL 60601-4205
AUDITORS
KPMG, LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
800-243-1575
www.selectedfunds.com
