<PAGE> 1
THE
SELECTED FUNDS
SEMI-ANNUAL
REPORT
June 30, 1997
SELECTED
FUNDS
DAVIS SELECTED ADVISERS
<PAGE> 2
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
Dear Shareholder:
Market Overview
During the last six months, we continued to see strong equity market returns,
a healthy economy and low inflation. Looking ahead, we remain optimistic
about the role of U.S.-style capitalism, the ability for companies to grow
and prosper over time and the impact good management can have in creating
shareholder value.
Our approach is strictly long term and we judge every investment in relation
to the risk-free return available from bonds. With U.S. Treasury bonds now
yielding around 7%, investors could buy a zero-coupon Treasuryand double
their money in 10 years or quadruple it in 20 years. That's a tough bogey
for stocks. Yet over 70 years stocks have compounded at more than 10% as an
annual average.
We think the economy has become less cyclical for several reasons. More than
70% of the jobs today are held in less cyclical service sectors of the
economy. Computers are used increasingly to manage inventories and that
helps prevent big inventory cycles. The Federal Reserve has taken to
announcing its intentions in advance so that interest rate shocks are less
likely. And we are still reaping an enormous peace dividend from the end of
the Cold War, as technology has been applied more and more to the private
sector and cutbacks in defense spending have eased budget deficit pressures.
The longest economic cycle on record lasted 107 months in the 1960s. We are
now in the 77th month of this expansion and see no apparent reason why the
cycle should come to a speedy end. In fact, our hope is that the economy
will fluctuate around a 2% to 3% growth rate, avoiding both boom and
recession, with interest rates ranging from 6% to 8% and inflation contained
at 2% to 4%.
The Dow has the potential to approach 10,000 around the turn of the century,
punctuated by volatility and corrections of up to 1,000 points along the way.
Even so, the Dow has advanced very rapidly, and the percentage gains will not
be what we are used to.
As long-term investors, we will undoubtedly be investing through market
drops, adding to our core holdings and building new positions at attractive
valuations so that we can continue to participate in the optimism that has
always followed pessimism. We encourage our shareholders to maintain a
similar long-term perspective as they seek to build wealth over time.
Sincerely,
/s/ Robert J. Greenebaum /s/ Shelby M.C. Davis
- ---------------------------------- ------------------------------
Robert J. Greenebaum Shelby M.C. Davis
Chairman Chief Investment Officer
August 20, 1997
<PAGE> 3
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, PORTFOLIO MANAGER OF SELECTED
AMERICAN SHARES
Selected American Shares, our large-cap growth-and-income fund, was the #1
performing growth-and-income fund for the one-year period ended June 30,
1997. The fund generated a return of 44.55% for the period compared to an
average of 28.12% for the 547 growth-and-income funds tracked by Lipper
Analytical Services, Inc.<F1> In the first six months of 1997, Selected
American provided a total return of 20.28%, also well ahead of the average
growth and income fund. In addition, as of June 30, 1997, the fund held an
overall Morningstar rating of **** (four stars) for risk-adjusted
performance.<F2>
In February 1997, Christopher C. Davis became sole Portfolio Manager of
Selected American Shares after serving as Co-Portfolio Manager since 1995. A
recent Morningstar report cited Davis' contribution to the fund's outstanding
record, noting: "Shareholders should be heartened to learn...that the fund
will probably be managed in a similar fashion for a long time to come....his
strategy and experience inspire confidence."<F3>
Q. What's your primary message for shareholders today?
A. The incredible performance and duration of this bull market has led to
careless thinking on the part of many investors. For example, many index
fund investors would undoubtedly be delighted if they could be guaranteed the
market would reach 10,000 in four years. But they may not be delighted to
learn that this performance equates to an annualized return of only 5.7%,
less than the return now available on government bonds of comparable
duration.
In the midst of this market euphoria, we continue to stick to the basics,
applying an investment approach that has been successfully employed by the
Davis family in bull and bear markets during the past 50 years. Most
importantly, we recognize that stocks are not merely pieces of paper, but
represent ownership interests in businesses. As a result, our entire
investment process boils down to two simple questions: What kind of
businesses do we want to own and how much should we pay for them?
At the annual meeting of Berkshire Hathaway this year, Chairman Warren
Buffett made the same point in a different way. He noted that in investing
there are two kinds of risks-business risk, or the risks inherent in the type
of business you own, and valuation risk. In today's high market, we think
it's more important than ever to focus on managing risk both in the
businesses that we buy and in the prices we pay for them.
Q. How do you control business risk?
A. Our basic philosophy is to buy financially strong, growing companies at
discount prices-what we call growth stocks in disguise-and to hold them for
the long term. In this regard, we think that financial stocks offer the
greatest opportunity for the 90s and beyond. These stocks have been, and we
believe will continue to be, a driving force in our overall performance.
Financial companies are in non-faddish businesses that don't become obsolete,
which is an important consideration in controlling risk. These companies
also continue to benefit from favorable long-term demographic and
macroeconomic trends, as the baby boomers enter their peak earning and
investing years and as capitalism spreads around the world.
2
<PAGE> 4
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, PORTFOLIO MANAGER OF SELECTED
AMERICAN SHARES - CONTINUED
Other types of businesses that we believe offer lower risk potential are
high-quality consumer companies, pharmaceutical companies that have broad
product ranges and some energy services companies, which continue to be an
area of growing interest for the fund.
As always, we also try to control risk by looking closely at the managements
with which we invest. We want managers who are doers, not bluffers.
Companies with first-class managements tend to anticipate change and can
become prudent acquirers of competitors during bad times.
Q. How do you control valuation risk?
A. We think of ourselves as opportunistic buyers. We generally buy
companies when they are under a cloud, that is, when some short-term
disappointment has created an opportunity to buy growth at a value price,
particularly at a low valuation relative to the market. For example,
Selected American Shares has benefited from the recovery of some technology
issues purchased during the "tech wreck" a year ago.
Because of our strong price discipline, our portfolio, by and large, has a
lower price/earnings multiple than the market. We think that buying
companies with modest but sustainable growth prospects, strong dividend
yields and solid balance sheets when expectations and valuations are low is a
good formula to follow in a high market.
Investing in a world-class company when it is out of favor because of
short-term events reduces the risk of incurring the calamitous losses that
occur when glamour stocks with high valuations fail to live up to the market's
great expectations and their prices plunge. We never lose sight of the fact
that our firm's long-term investment record has been built as much by
avoiding the big losers as by picking winners.
Q. What's your long-term outlook?
A. Our focus on risk should not lead anyone to think that we have changed
our firmly held conviction that equities offer the best way to create
long-term wealth. Because the fund's turnover remains low, changes in the
portfolio tend to be quite gradual and our philosophy is always the same:
We buy value and hold it for the long term.
Nevertheless, the bullish story on equities is well known and we must temper
our optimism with the understanding that markets will rarely be as generous
as they have been in the last several years.
3
<PAGE> 5
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, MANAGER OF SELECTED SPECIAL SHARES
Selected Special Shares, our diversified small- and mid-cap growth fund, rose
10.6% for the first six months of 1997 compared to a first-half return of
6.0% for the Lipper Small Company Funds Index and 13.0% for the S&P MidCap
400 Index. After posting a (7.0)% decline in the first quarter of the year,
the fund scored strong gains in the second quarter, generating a total return
of 19.0% versus returns of 14.7% for the S&P 400 and 17.1% for the Lipper
Small Company Funds Index over the same three-month period.<F4>
Many small-cap funds pursue short-term performance by aggressively
concentrating on volatile speculative plays and hot sectors. We have
positioned Selected Special Shares as a small company growth fund designed to
build long-term wealth for shareholders over a prolonged period of time while
seeking to deliver less volatile returns and avoid major losses. The fund's
three-year performance record-an average annual total return of
20.1%-supports this objective.
Q. Could you provide some perspective on the performance of the
small-capmarket and your fund this year?
A. The performance of the small-cap market in the first half demonstrates
how important it is to invest with a long-term view rather than trading in
and out of these stocks. You want to be invested when the market turns up
because historically, most of the gains are made in the first few weeks, as
we saw happen this year.
When the Federal Reserve raised interest rates at the end of March to head
off inflation, small company shares dropped precipitously. Then subsequent
economic indicators showed growth to be healthy but moderating with little
sign of inflation, and the Fed chose not to raise rates further in May and
July.
As a result, many small stocks made a stunning recovery in the second quarter
and that is reflected in the results achieved by Selected Special Shares. An
important element of our approach is to capitalize on volatility by building
positions when stock prices are down so that the fund is positioned to
benefit when the market rallies.
Q. Which of the fund's holdings have performed particularly well so far this
year?
A. A broad range of our themes have generated good returns. The fund's core
strategy is to invest in some of America's most dynamic, steadily growing
small companies that are developing innovative products and technologies.
Dell Computer, whose direct purchase system has changed the way computers are
sold, has been a terrific performer and is one of the fund's three largest
holdings.<F6>
We remain bullish on financial stocks, particularly companies that are using
technology to competitive advantage in order to reduce costs and expand
product distribution and cross-marketing. Among the fund's top 10 holdings
are two financial stocks that did particularly well in the first
half-Washington Mutual and Northern Trust.
Other strong performers among our major positions were: Robert Half
International and Interim Services in the temporary help business; Tiffany, a
global brand name in retailing; OM Group, the world's largest cobalt
supplier; Kent Electronics; and Diamond Offshore Drilling. In addition, we
like Leggett & Platt and Lear, component manufacturers for the office
furniture and automotive industries, respectively, and Cinar Films and Regal
Cinema in the entertainment area.
4
<PAGE> 6
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, MANAGER OF SELECTED SPECIAL SHARES -
CONTINUED
During the first half, we added to our position in Computer Sciences, a
computer services outsourcing company, taking advantage of a stock price
decline that reflected disappointments elsewhere in the industry, not a
change in the company's fundamentals. Besides helping companies focus on
their core businesses, we believe that Computer Sciences is also positioned
to help companies update their databases for the year 2000.
Q. How do you manage the fund to control risk while achieving potentially
attractive returns?
A. Selected Special Shares seeks to offer shareholders above-average gains
by investing in the less efficient small and mid-cap areas of the market.
But because these companies are less seasoned, they are less liquid and more
volatile. That's why the fund should be viewed as a long-term investment for
investors who can accept the possibility of short-term price swings.
Keeping that in mind, we employ a variety of techniques to help manage risk
and volatility. The fund is diversified with 75 companies in 19 industries
with different characteristics and we generally don't invest more than 4% of
the assets in any one stock. Furthermore, we primarily target companies
growing at 15% to 35%, rather than faster growing companies where risk is
inherently greater. Then we look for companies that are trading at discounts
to their potential future growth rates.
The fund's strong price discipline is one of the major ways we seek to limit
risk. Over time, we believe that stock prices should move at the rate of
their earnings growth and if the P/E multiples on the stocks we own also
expand, so much the better for the fund.
Q. What's your market outlook?
A. The chances of P/E ratios rising for carefully chosen small- and mid-cap
companies with above-average future growth prospects have improved when
selling at such substantial discounts to their projected growth. At the same
time, many large company stocks have become quite expensive at 1.5-2.0 times
future growth based on 1998 estimated earnings. Better performance for
small- and mid-cap stocks began to occur in the second quarter. We believe
that Selected Special Shares is positioned to benefit as the market broadens,
bearing in mind that careful stock selection will continue to be the primary
force behind the fund's returns.
5
<PAGE> 7
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
AN INTERVIEW WITH CAROLYN H. SPOLIDORO, MANAGER OF THE SELECTED U.S.
GOVERNMENT INCOME FUND
The Selected U.S. Government Income Fund seeks to provide stable yet
competitive current income consistent with capital preservation by investing
in debt securities sponsored or guaranteed by the U.S. government or its
agencies.<F5> The Selected U.S. Government Income Fund generated a total return
of 2.28% for the six months ended June 30, 1997 versus a return of 2.47% for
the Lipper general U.S. government fund category. For the one year period
ended on that date, the Selected U.S. Government Fund was up 6.90% versus
7.01% for the Lipper average.
Q. What were the key factors that influenced the fund's performance?
A. At Davis Selected Advisers, we take a middle-of the-road approach to
managing fixed-income funds that emphasizes risk-adjusted performance. Put
another way, we seek to deliver competitive results with less risk or
volatility than our competitors. Our cautious approach offers downside
protection in bearish bond markets but may underperform in bullish bond
markets.
During the first quarter of 1997, interest rates rose due to inflationary
fears related to strong economic growth. Rates then declined a bit in the
second quarter as it became clearer that the economy was not overheating,
causing inflationary fears to ease.
As the market rallied in the second quarter, we sold certain collateralized
mortgage obligations (CMOs) at attractive prices. However, the rally
extended longer than we expected and the fund did not fully participate in
those gains, which dampened second quarter results relative to our peers. On
a positive note, the fund is now well-situated to take advantage of
opportunities as the market turns.
Q. What is your general strategy for the fund?
A. We are positioning the fund as an all-weather or middle-of-the-road
fund. This balanced approach is designed to smooth out fund performance and
provide stability in a variety of market climates. Our plan is to hold
securities with a somewhat even distribution of maturities over the
intermediate range of the yield curve, allowing us to capture most of the
yield and potential return advantage of long-term bonds with substantially
less risk.
The fund's strategy is to diversify among different types of government
securities, maturity lengths, call provisions and interest rate coupons.
Owning a wide variety of fixed-income securities is beneficial because
different kinds of securities react differently to interest rate changes. In
addition, agency securities tend to offer slightly higher yields than
comparable U.S. Treasury securities.
The Selected U.S. Government Income Fund's current portfolio breakdown is:
17% CMOs, 41% mortgage pools, 28% government agencies and 14% cash. The
portfolio's duration is 3.9 years and its average life is 6.6 years.
Q. Why should investors choose a government bond fund?
6
<PAGE> 8
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
AN INTERVIEW WITH CAROLYN H. SPOLIDORO, MANAGER OF THE SELECTED U.S.
GOVERNMENT INCOME FUND - CONTINUED
A. A government bond fund can help create a strong foundation for any
long-term financial program. The Selected U.S. Government Income Fund
provides potentially higher monthly income than is offered by most
short-term investments and can be an excellent means of broadening portfolio
diversification for investors seeking to balance equity holdings with
fixed-income securities of the highest credit quality.
Q. What is your forecast for the bond market?
A. We think all the good news has already been built into the bond market.
As investors become increasingly comfortable with the idea that it is
possible to have greater growth without inflation, our concern is that the
market's euphoria may be overdone. Furthermore, we think it is important
that the inflation hawks at the Federal Reserve avoid complacency and remain
ready to consider a further round of tightening sooner, rather than latter,
if conditions warrant.
While we believe it is more likely that interest rates may move somewhat
higher, rather than lower, we do not anticipate major interest rate shifts at
this point. As a result, barring unexpected extraordinary developments, we
do not foresee any substantial changes in the composition of the fund's
portfolio. We look for steady results and a continuation of our current
policies focused on maintaining portfolio balance and positioning the fund
for low interest rate risk and high credit quality.
[FN]
<F1> For the five- and ten-year periods ended June 30, 1997 Lipper Analytical
Services, Inc. ranked Selected American Shares 29th out of 214
growth-and-income funds and 5th out of 126 growth-and-income funds,
respectively. Lipper Analytical Services rankings are based on total return
performance unadjusted for commissions.
<F2> Morningstar proprietary ratings reflect historical risk-adjusted
performance as of June 30, 1997. Subject to change every month, Morningstar
ratings are calculated from a fund's three-, five- and 10-year average annual
returns in excess of 90-day Treasury bill (T-bill) returns, and a risk factor
that reflects fund performance below 90-day T-bill returns. Selected American
received ***** (5 stars), **** (4 stars) and **** (4 stars) for the three-,
five- and ten-year periods, respectively. Selected American Shares was rated
against 1,997, 1,134 and 618 large value funds for the periods measured. Ten
percent of the funds in an investment category receive five stars; 22.5%,
four stars; 35%, three stars; 22.5%, two stars; and 10%, one star. Past
performance is no guarantee of future results.
<F3> Source: Morningstar Mutual Funds, April 11, 1997
<F4> The S&P MidCap 400 Index is an unmanaged market-weighted index consisting
of 400 domestic stocks chosen for market size, liquidity and industry group
representation. Investors cannot invest directly in the index.
<F5> Shares of Selected U.S. Government Income fund, like all mutual fund
shares, are not federally insured or guaranteed.
<F6> Portfolio holdings are subject to change.
7
<PAGE> 9
<TABLE>
SELECTED FUNDS PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS
(ALL PERIODS THROUGH JUNE 30, 1997)
<CAPTION>
Six One Three Five Ten Life of
Fund Months Year Years Years Years Fund
- ---- ------ ---- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Selected American Shares 20.28% 44.55% 29.82% 19.65% 14.97% ------
Selected Special Shares 10.63% 14.76% 20.08% 15.09% 10.73% ------
Selected U.S. Government Income 2.28% 6.90% 6.75% 6.02% ------- 6.72%<F*>
<FN>
<F*>Selected U.S. Government Income Fund began operations on November 11, 1987
</TABLE>
Total returns include all capital gains and losses, as well as the
reinvestment of all dividends and capital gains distributions. Past
performance is no guarantee of future results. Prices of shares will
fluctuate so that an investment, when redeemed, may be worth more or less
than originally invested.
The Selected Funds are managed by Davis Selected Advisers, L.P., which
assumed management of the funds on May 1, 1993.
8
<PAGE> 10
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED AMERICAN SHARES, INC.
<CAPTION>
VALUE
SHARES (NOTE 1)
============================================================================================================
<S> <C>
COMMON STOCK - (98.06%)
AEROSPACE - (0.44%)
150,000 Boeing Co. $ 7,959,375
------------
AGRICULTURE - (1.52%)
1,177,500 Archer-Daniels-Midland Co. 27,671,250
------------
BANKS AND SAVING AND LOAN ASSOCIATIONS - (11.84%)
332,500 Banc One Corp. 16,105,469
610,000 BankAmerica Corp. 39,383,126
355,465 Citicorp. 42,855,749
488,434 First Bank System, Inc. 41,700,053
183,800 Golden West Financial Corp. 12,866,000
259,400 State Street Corporation 11,997,250
20,000 TCF Financial Corp. 987,500
184,404 Wells Fargo & Co. 49,696,878
------------
215,592,025
------------
BUILDING MATERIALS - (3.27%)
700,600 Martin Marietta Materials, Inc. 22,681,925
882,000 Masco Corporation. 36,823,500
------------
59,505,425
------------
CONSUMER PRODUCTS - (3.35%)
150,000 The Gillette Co. 14,212,500
1,055,000 Phillip Morris Companies 46,815,625
------------
61,028,125
------------
ELECTRONICS - (0.09%)
47,000 Molex Incorporated 1,715,500
------------
ENERGY - (10.19%)
150,000 British Petroleum Company PLC - ADR. 11,231,917
635,000 Burlington Resources, Inc. 28,019,375
570,000 Cooper Cameron Corp.<F*> 26,647,500
574,000 Halliburton Co. 45,489,500
30,000 Nabors Industries, Inc.<F*> 750,000
365,985 Noble Affiliates, Inc. 14,159,045
375,000 Noble Drilling Corp.<F*> 8,460,938
210,000 Schlumberger Ltd. 26,250,000
401,900 Smith International, Inc.<F*> 24,415,425
------------
185,423,700
------------
ENTERTAINMENT - (0.77%)
175,000 The Walt Disney Co. 14,043,750
------------
FINANCIAL - (14.47%)
930,000 American Express Co. 69,285,000
290,700 Donaldson, Lufkin & Jenrette, Inc. 17,369,325
1,100,000 Fannie Mae 37,812,500
235,000 J.P. Morgan & Co., Inc. 24,528,125
9
<PAGE> 11
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED AMERICAN SHARES, INC. - CONTINUED
<CAPTION>
VALUE
SHARES (NOTE 1)
============================================================================================================
<S> <C>
COMMON STOCK - CONTINUED
FINANCIAL - CONTINUED
1,387,432 Morgan Stanley, Dean Witter, Discover & Co. $ 59,746,290
867,889 Travelers Group Inc. 54,731,250
------------
263,472,490
------------
FOOD/BEVERAGE & RESTAURANT - (3.32%)
1,130,000 McDonald's Corp. 54,593,125
80,000 Nestle SA - ADR 5,510,000
18,000 Tyson Foods, Inc. 344,250
------------
60,447,375
------------
INSURANCE - (14.05%)
582,514 The Allstate Corp. 42,523,522
225,000 American International Group, Inc. 33,609,375
348,000 W.R. Berkley Corp. 20,488,500
450,400 Chubb Corp. 30,120,500
306,700 General Re Corp. 55,819,400
225,000 Progressive Corp. (Ohio) 22,185,000
769,904 SunAmerica, Inc. 37,532,820
135,000 Transatlantic Holdings, Inc. 13,398,750
------------
255,677,867
------------
PHARMACEUTICAL AND HEALTH CARE - (7.24%)
136,000 Bristol-Meyers Squibb Company 9,720,000
300,000 Johnson & Johnson 19,312,500
105,000 Lilly Eli & Co. 11,477,812
80,000 Merck & Co., Inc. 8,280,000
162,000 Novartis AG - ADR 12,980,250
300,000 Pfizer Inc. 35,850,000
372,800 SmithKline Beecham PLC - ADR 34,157,800
------------
131,778,362
------------
PUBLISHING - (3.14%)
236,200 Gannett Co., Inc. 23,324,750
205,000 Harcourt General, Inc. 9,763,125
500,000 Tribune Co. 24,031,250
------------
57,119,125
------------
RAILROAD - (4.27%)
446,000 Burlington Northern Santa Fe 40,084,250
592,700 Illinois Central Corp. 20,707,456
240,000 Union Pacific Corp. 16,920,000
------------
77,711,706
------------
10
<PAGE> 12
</TABLE>
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED AMERICAN SHARES, INC. - CONTINUED
<CAPTION>
VALUE
SHARES (NOTE 1)
============================================================================================================
<S> <C>
COMMON STOCK - CONTINUED
REAL ESTATE - (5.55%)
77,000 Bay Apartment Communities, Inc. $ 2,849,000
110,000 Cali Realty Corp. 3,740,000
1,101,194 Centerpoint Properties Corporation 34,962,909
700,000 Crescent Real Estate Equities Company 22,225,000
71,500 Federal Realty Investment Trust 1,930,500
54,600 Patriot American Hospitality, Inc. 1,392,300
157,500 Public Storage, Inc. 4,606,875
406,900 Vornado Realty Trust 29,347,663
--------------
101,054,247
--------------
TECHNOLOGY - (11.58%)
1,108,000 Hewlett-Packard Company 62,048,000
305,000 Intel Corp. 43,252,812
740,000 International Business Machines Corporation 66,738,750
470,000 Komag Inc.<F*> 7,696,250
215,000 Novellus Systems, Inc.<F*> 18,597,500
90,000 Seagate Technology, Inc.<F*> 3,166,875
250,000 Sun Microsystems, Inc.<F*> 9,304,688
--------------
210,804,875
--------------
TELECOMMUNICATIONS - (2.97%)
793,000 AirTouch Communications, Inc.<F*> 21,708,375
290,000 Motorola, Inc. 22,040,000
605,000 360 (Degree) Communications Company<F*> 10,360,625
--------------
54,109,000
--------------
Total Common Stock - (identified cost $1,114,830,453) 1,785,114,197
--------------
CONVERTIBLE PREFERRED STOCK - (1.40%)
20,600 AirTouch Communications, Inc., 4.25%, Ser. C Conv. Pfd. 988,800
50,000 Banc One, $3.50, Ser. C Conv. Pfd. 4,650,000
230,000 Devon Financing Trust, $3.25, Ser. 144A Conv. Pfd. 16,100,000
25,000 Devon Financing Trust, $3.25, Conv. Pfd. 1,750,000
42,000 Rouse Company, $3.00, Conv. Pfd. 2,026,500
--------------
Total Convertible Preferred Stock - (identified cost $23,117,001) 25,515,300
--------------
11
<PAGE> 13
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED AMERICAN SHARES, INC. - CONTINUED
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
============================================================================================================
<S> <C>
SHORT TERM - (0.26%)
$4,690,000 Federal Home Loan Bank Discount Note, 5.55%, 07/01/97
- (identified cost $4,690,000) $ 4,690,000
--------------
TOTAL INVESTMENTS - (99.72%) - (identified cost $1,142,637,454) - <Fa> 1,815,319,497
OTHER ASSETS LESS LIABILITIES - (0.28%) 5,084,737
--------------
NET ASSETS - (100%) $1,820,404,234
==============
<FN>
<F*>Non-Income Producing Security
<Fa> Aggregate cost for Federal Income Tax purposes is $1,142,637,454. At
June 30, 1997 unrealized appreciation (depreciation) of securities for Federal
Income Tax purposes is as follows:
<S> <C>
Unrealized appreciation $ 678,730,817
Unrealized depreciation (6,048,774)
--------------
Net unrealized appreciation $ 672,682,043
==============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
12
<PAGE> 14
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED SPECIAL SHARES, INC.
<CAPTION>
VALUE
SHARES (NOTE 1)
============================================================================================================
<S> <C>
COMMON STOCK - (97.42%)
APPAREL - (1.29%)
35,000 Cutter & Buck, Inc.<F*> $ 568,750
5,000 Nike Inc. 291,875
-----------
860,625
-----------
AUTOMOTIVE/HEAVY EQUIPMENT - (1.73%)
26,000 Lear Corporation<F*> 1,153,750
-----------
CHEMICALS - (2.38%)
48,000 OM Group, Inc. 1,590,000
-----------
COMMUNICATIONS - (1.20%)
25,000 WorldCom, Inc.<F*> 800,000
-----------
ELECTRONICS - (6.83%)
28,000 Black Box Corporation<F*> 1,127,000
30,000 Ingram Micro, Inc.<F*> 723,750
10,000 Intel Corporation 1,418,125
35,000 Kent Electronics Corporation<F*> 1,284,063
-----------
4,552,938
-----------
ENERGY - (6.24%)
20,000 Camco International, Inc. 1,095,000
15,500 Diamond Offshore Drilling, Inc.<F*> 1,210,937
30,000 Global Marine, Inc.<F*> 697,500
25,000 Input/Output, Inc.<F*> 453,125
25,000 Rowan Companies, Inc.<F*> 704,688
-----------
4,161,250
-----------
ENTERTAINMENT/LEISURE TIME - (4.06%)
22,000 Cinar Films, Inc., Class B<F*> 715,000
60,500 Regal Cinemas, Inc.<F*> 1,996,500
-----------
2,711,500
-----------
FINANCIAL SERVICES - (17.85%)
15,000 American Express Co. 1,117,500
35,000 The Charles Schwab Corporation 1,424,063
15,000 First Union Corporation 1,387,500
15,000 MSB Bancorp, Inc. 301,875
14,000 NationsBank Corporation 903,000
40,000 Northern Trust Company 1,935,000
5,000 Star Banc Corporation 211,250
30,000 TCF Financial Corporation 1,481,250
40,000 Washington Mutual, Inc. 2,390,000
20,000 Zions Bancorporation 752,500
-----------
11,903,938
-----------
HEALTHCARE - (6.40%)
15,000 Alkermes, Inc.<F*> 217,500
33,500 Biacore International, AB - ADS<F*> 389,437
13
<PAGE> 15
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED SPECIAL SHARES, INC. - CONTINUED
<CAPTION>
VALUE
SHARES (NOTE 1)
============================================================================================================
<S> <C>
COMMON STOCK - CONTINUED
HEALTHCARE - CONTINUED
30,000 BioChem Parmaceuticals Inc.<F*> - ADR. $ 667,500
10,000 Cardinal Health, Inc. 572,500
10,000 Closure Medical Corporation<F*> 192,500
15,000 CYTYC Corporation<F*> 406,875
25,000 Elan Corporation, PLC 1,131,250
7,000 Myriad Genetics, Inc.<F*> 189,000
35,500 Neurex Corporation<F*> 501,438
-----------
4,268,000
-----------
HOME/OFFICE FURNITURE - (4.29%)
20,000 Knoll, Inc.<F*> 475,000
38,800 Leggett & Platt, Inc. 1,668,400
20,000 Miller, Herman Inc. 720,000
-----------
2,863,400
-----------
INDUSTRIAL PRODUCTS - (8.41%)
20,000 Fastenal Company 980,000
20,600 Illinois Tool Works, Inc. 1,028,712
10,000 Littlefuse, Inc.<F*> 282,500
25,000 Minerals Technologies, Inc. 937,500
34,125 Molex Inc., Class A 1,190,109
25,000 Shaw Group, Inc.<F*> 406,250
50,700 ThermoQuest Corporation<F*> 785,850
-----------
5,610,921
-----------
INFORMATION PROCESSING - OFFICE EQUIPMENT - (4.51%)
5,000 Compaq Computer Corporation<F*> 496,250
20,000 Dell Computer Corporation<F*> 2,348,750
5,000 Gateway 2000 Inc.<F*> 162,187
-----------
3,007,187
-----------
INFORMATION PROCESSING - SERVICES - (7.76%)
50,000 APAC TeleServices, Inc.<F*> 971,875
45,000 Claremont Technology Group, Inc.<F*> 1,068,750
30,000 Computer Sciences Corporation<F*> 2,163,750
25,500 Paychex, Inc. 969,000
-----------
5,173,375
-----------
INFORMATION PROCESSING - SOFTWARE - (3.75%)
5,000 Baan Company N.V.<F*> 344,375
200 Great Plains Software, Inc. 5,400
12,000 McAfee Associates, Inc.<F*> 757,500
5,000 Microsoft Corporation<F*> 631,875
27,000 Seachange International, Inc.<F*> 762,750
-----------
2,501,900
-----------
14
<PAGE> 16
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED SPECIAL SHARES, INC. - CONTINUED
<CAPTION>
VALUE
SHARES/PRINCIPAL (NOTE 1)
============================================================================================================
<S> <C>
COMMON STOCK - CONTINUED
INSURANCE - (1.32%)
18,000 Horace Mann Educators Corporation $ 882,000
-----------
PACKAGING - (1.21%)
17,000 Sealed Air Corporation<F*> 807,500
-----------
RESTAURANTS - (0.86%)
25,000 Landry's Seafood Restaurants, Inc.<F*> 575,000
-----------
RETAILING - (6.64%)
10,000 Amazon.com, Inc.<F*> 185,000
10,000 The Home Depot, Inc. 689,375
38,500 Just For Feet, Inc.<F*> 671,344
20,200 Kohl's Corporation<F*> 1,069,337
15,000 Saks Holdings, Inc.<F*> 375,000
22,900 Tiffany & Co. 1,057,694
20,000 Viking Office Products, Inc.<F*> 380,000
-----------
4,427,750
-----------
TEMPORARY HELP - (10.69%)
40,000 Barrett Business Services, Inc.<F*> 545,000
10,000 Data Processing Resources Corporation<F*> 233,750
45,000 Interim Services, Inc.<F*> 2,002,500
35,350 Labor Ready, Inc.<F*> 357,919
40,500 On Assignment, Inc.<F*> 1,579,500
10,500 The Registry, Inc.<F*> 483,000
41,000 Robert Half Inernational, Inc.<F*> 1,929,562
-----------
7,131,231
-----------
Total Common Stock - (identified cost $46,734,787) 64,982,265
-----------
SHORT TERM - (1.76%)
$1,175,000 Federal Home Loan Bank Discount Note, 5.55%, 07/01/97
- (identified cost $1,175,000) 1,175,000
-----------
TOTAL INVESTMENTS - (99.18%) - (identified cost $47,909,787) - <Fa> 66,157,265
OTHER ASSETS LESS LIABILITIES - (0.82%) 547,831
-----------
NET ASSETS - (100%) $66,705,096
===========
<FN>
<F*>Non-Income Producing Security.
<Fa> Aggregate cost for Federal Income Tax purposes is $47,909,787. At June
30, 1997 unrealized appreciation (depreciation) of securities for Federal
Income Tax purposes is as follows:
<S> <C>
Unrealized appreciation $20,174,888
Unrealized depreciation (1,927,410)
-----------
Net unrealized appreciation $18,247,478
===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
15
<PAGE> 17
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
============================================================================================================
<S> <C>
ADJUSTABLE RATE MORTGAGES - (0.82%)
$ 23,020 Government National Mortgage Association, Pool No. 008299, 7.125%, 09/20/23 $ 23,715
24,091 Government National Mortgage Association, Pool No. 008360, 7.00%, 01/20/24 24,723
-----------
Total ARM - (identified cost $43,443) 48,438
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - (16.74%)
401,050 6.50%, 01/01/04, Pool No. 97289 395,912
176,656 8.00%, 09/01/21, Pool No. D2-7906 182,203
265,657 8.00%, 10/01/21, Pool No. D2-7334 273,624
136,255 8.00%, 06/01/22, Pool No. D2-0670 140,427
-----------
Total FHLMC - (identified cost $983,092) 992,166
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - (7.34%)
3,336 10.00%, 07/01/05, Pool No. 98835 3,524
14,165 10.00%, 08/01/05, Pool No. 99903 15,048
11,531 8.50%, 07/01/17, Pool No. 51539 12,098
8,659 8.50%, 04/01/21, Pool No. 117725 9,067
394,326 7.50%, 01/01/27, Pool No. 356381 395,186
-----------
Total FNMA - (identified cost $431,399) 434,923
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - (16.36%)
39,059 10.00%, 09/15/01, Pool No. 265854 41,090
60,133 9.00%, 04/15/16, Pool No. 147297 64,568
70,160 9.00%, 05/15/16, Pool No. 161091 75,334
173,975 9.00%, 06/15/16, Pool No. 157698 186,804
10,995 9.00%, 07/15/16, Pool No. 162087 11,807
102,195 9.00%, 07/15/16, Pool No. 162605 109,732
92,875 9.00%, 11/15/16, Pool No. 179412 99,725
62,348 9.00%, 08/15/17, Pool No. 209243 66,946
29,546 9.00%, 05/15/18, Pool No. 235263 31,675
62,484 9.00%, 08/15/18, Pool No. 258776 66,985
201,037 9.00%, 08/15/19, Pool No. 227430 215,170
-----------
Total GNMA - (identified cost $904,821) 969,836
-----------
MEDIUM TERM NOTES - (28.04%)
200,000 Federal Home Loan Bank, 7.24%, 11/09/10 197,344
500,000 Federal Home Loan Mortgage Corporation, 6.615%, 03/03/04 487,810
500,000 Federal Home Loan Mortgage Corporation, 8.00%, 06/20/11 508,750
500,000 Federal National Mortgage Association, 6.42%, 12/01/08 468,045
-----------
Total Medium Term Notes - (identified cost $1,655,100) 1,661,949
-----------
16
<PAGE> 18
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND - CONTINUED
<CAPTION> VALUE
PRINCIPAL (NOTE 1)
============================================================================================================
<S>
COLLATERALIZED MORTGAGE OBLIGATIONS & REAL ESTATE MORTGAGE
INVESTMENT CONDUITS - (17.34%)
$ 500,000 Federal National Mortgage Association, 92-152M, 7.75%, 08/25/07 $ 516,090
500,000 United States Department of Veteran Affairs, Mortgage Trust 1992-1,
7.75%, 07/15/17 511,715
-----------
Total CMOs & REMICs - (identified cost $983,133) 1,027,805
-----------
SHORT TERM - (11.73%)
695,000 Federal National Mortgage Association Discount Note, 5.36%, 07/01/97
- (identified cost $695,000) 695,000
-----------
TOTAL INVESTMENTS - (98.37%) - (identified cost $5,695,988) - <Fa> 5,830,117
OTHER ASSETS LESS LIABILITIES - (1.63%) 96,333
-----------
NET ASSETS - (100%) $ 5,926,450
===========
<FN>
<Fa> Aggregate cost for Federal Income Tax purposes is $5,695,988. At June
30, 1997 unrealized appreciation (depreciation) of securities for Federal
Income Tax purposes is as follows:
<S> <C>
Unrealized appreciation $ 142,130
Unrealized depreciation (8,001)
-----------
Net unrealized appreciation $ 134,129
===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
17
<PAGE> 19
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1997 (Unaudited)
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
============================================================================================================
<S> <C>
FEDERAL HOME LOAN BANK - (21.73%)
$ 5,460,000 5.55%, 07/01/97 Discount Note $ 5,460,000
2,950,000 5.49%, 07/03/97 Discount Note 2,949,100
1,490,000 5.41%, 07/09/97 Discount Note 1,488,210
9,320,000 5.43%, 07/25/97 Discount Note 9,286,262
6,105,000 5.41%, 08/07/97 Discount Note 6,071,054
------------
Total Federal Home Loan Bank - (identified cost $25,254,626) 25,254,626
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - (43.58%)
11,120,000 5.43%, 07/03/97 Discount Note 11,116,645
5,310,000 5.43%, 07/07/97 Discount Note 5,305,194
4,500,000 5.43%, 07/14/97 Discount Note 4,491,176
5,805,000 5.50%, 07/15/97 Discount Note 5,792,584
4,510,000 5.42%, 07/17/97 Discount Note 4,499,136
9,405,000 5.42%, 07/18/97 Discount Note 9,380,928
10,200,000 5.43%, 09/18/97 Discount Note 10,078,460
------------
Total Federal Home Loan Mortgage Corporation - (identified cost $50,664,123) 50,664,123
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - (35.10%)
7,455,000 5.40%, 07/02/97 Discount Note 7,453,882
2,110,000 5.43%, 07/08/97 Discount Note 2,107,772
4,270,000 5.43%, 07/10/97 Discount Note 4,264,203
4,200,000 5.44%, 07/11/97 Discount Note 4,193,653
6,250,000 5.37%, 07/21/97 Discount Note 6,231,354
1,620,000 5.37%, 07/22/97 Discount Note 1,614,925
5,740,000 5.42%, 07/24/97 Discount Note 5,720,124
2,405,000 5.40%, 07/25/97 Discount Note 2,396,342
6,875,000 5.44%, 08/18/97 Discount Note 6,825,133
------------
Total Federal National Mortgage Association - (identified cost $40,807,388) 40,807,388
------------
TOTAL INVESTMENTS - (100.41%) - (identified cost $116,726,137) - <Fa> 116,726,137
LIABILITIES LESS OTHER ASSETS - (0.41%) (476,398)
------------
NET ASSETS - (100%) $116,249,739
============
<FN>
<Fa> Aggregate cost for Federal income tax purposes is $116,726,137.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
18
<PAGE> 20
<TABLE>
SELECTED FUNDS
STATEMENT OF ASSETS AND LIABILITIES
At June 30, 1997 (Unaudited)
========================================================================================================================
<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 schedules of investments) $ 1,815,319,497 $ 66,157,265 $ 5,830,117 $ 116,726,137
Cash 213,572 10,672 42,833 3,996
Receivables:
Dividends and interest 1,645,859 12,254 39,617 -
Capital stock sold 3,096,860 32,471 523 10,747
Investment securities sold 7,809,790 492,434 - -
Due from adviser - - 28,262 -
Total assets 1,828,085,578 66,705,096 5,941,352 116,740,880
--------------- ------------ ----------- -------------
LIABILITIES:
Payables:
Capital stock reacquired 775,338 57,762 - 103,588
Investment securities purchased 5,110,319 635,495 - -
Accrued expenses. 1,576,740 47,170 1,583 89,115
Payable to adviser - - - 73,348
Distributions payable 218,947 - 13,319 225,090
--------------- ------------ ----------- -------------
Total liabilities 7,681,344 740,427 14,902 491,141
--------------- ------------ ----------- -------------
NET ASSETS $ 1,820,404,234 $ 65,964,669 $ 5,926,450 $ 116,249,739
=============== ============ =========== =============
SHARES OUTSTANDING (NOTE 5) 71,713,086 5,778,418 670,306 116,249,739
=============== ============ =========== =============
NET ASSET VALUE, offering and
redemption price per share (Net
assets divided by shares outstanding) $ 25.38 $ 11.42 $ 8.84 $ 1.00
========== ========= ========= ==========
NET ASSETS CONSIST OF:
Deficit in undistributed net investment income $ (2,772,498) - - -
Paid-in capital 1,099,526,283 47,062,599 5,845,709 116,249,739
Accumulated net realized gain (loss) 50,968,406 654,592 (53,388) -
Unrealized appreciation on investments 672,682,043 18,247,478 134,129 -
--------------- ------------ ----------- -------------
$ 1,820,404,234 $ 65,964,669 $ 5,926,450 $ 116,249,739
=============== ============ =========== =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
19
<PAGE> 21
<TABLE>
SELECTED FUNDS
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
========================================================================================================================
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 12,698,961 $ 143,463 $ - $ -
Interest 653,956 80,552 224,121 3,082,408
--------------- ------------ ----------- -------------
Total income 13,352,917 224,015 224,121 3,082,408
--------------- ------------ ----------- -------------
Expenses:
Management fees (Note 2) 4,671,461 210,430 15,044 169,914
Custodian fees 238,828 16,789 12,191 20,690
Transfer agent fees 476,588 57,941 6,478 35,269
Audit fees 13,900 6,700 3,400 5,700
Legal fees 64,860 6,853 335 10,401
Reports to shareholders 70,564 7,223 819 3,088
Directors fees and expenses 141,992 4,302 614 14,648
Registration and filing fees 101,574 12,909 8,737 18,137
Miscellaneous 49,634 842 1,058 5,276
Commissions paid under
distribution plan (Note 3) 1,954,957 75,650 7,522 141,595
--------------- ------------ ----------- -------------
Total expenses 7,784,358 399,639 56,198 424,718
Reimbursement of expenses by
adviser (Note 2) - - (11,860) -
--------------- ------------ ----------- -------------
Net expenses 7,784,358 399,639 44,338 424,718
--------------- ------------ ----------- -------------
Investment income (loss) - net 5,568,559 (175,624) 179,783 2,657,690
--------------- ------------ ----------- -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain from
investment transactions 52,268,841 686,343 21,728 -
Net increase (decrease) in unrealized
appreciation of investments
during the period 233,456,698 5,748,817 (65,065) -
--------------- ------------ ----------- -------------
Net realized and unrealized
gain (loss) on investments 285,725,539 6,435,160 (43,337) -
--------------- ------------ ----------- -------------
Net increase in net
assets resulting from
operations $ 291,294,098 $ 6,259,536 $ 136,446 $ 2,657,690
=============== ============ =========== =============
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
20
<PAGE> 22
<TABLE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
========================================================================================================================
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 5,568,559 $ (175,624) $ 179,783 $ 2,657,690
Net realized gain from
investment transactions 52,268,841 686,343 21,728 -
Net increase (decrease) in unrealized
appreciation of investments 233,456,698 5,748,817 (65,065) -
--------------- ------------ ----------- -------------
Net increase in net
assets resulting from operations 291,294,098 6,259,536 136,446 2,657,690
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (8,341,057) - (179,783) (2,657,690)
Realized gains from investment
transactions (23,247,940) (3,065,924) - -
CAPITAL SHARE
TRANSACTIONS
(NOTE 5) 184,232,995 335,564 (963,887) 3,575,505
--------------- ------------ ----------- -------------
Total increase (decrease)
in net assets 443,938,096 3,259,176 (1,007,224) 3,575,505
NET ASSETS:
Beginning of period 1,376,466,138 62,435,493 6,933,674 112,674,234
--------------- ------------ ----------- -------------
End of period (including deficit in
undistributed net income of $(2,772,498)
for Selected American Shares $ 1,820,404,234 $ 65,964,669 $ 5,926,450 $ 116,249,739
=============== ============ =========== =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
21
<PAGE> 23
<TABLE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996
========================================================================================================================
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 9,511,645 $ (407,853) $ 434,927 $ 6,753,488
Net realized gain (loss) from
investment transactions 83,894,963 7,632,828 (75,100) -
Net increase (decrease) in unrealized
appreciation of investments 212,458,746 (390,261) (162,807) -
--------------- ------------ ----------- -------------
Net increase in net
assets resulting from operations 305,865,354 6,834,714 197,020 6,753,488
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (9,661,781) - (434,927) (6,753,488)
Realized gains from investment
transactions (77,556,567) (6,390,679) (13,355) -
CAPITAL SHARE
TRANSACTIONS
(NOTE 5) 232,307,432 3,016,674 (626,116) (71,928,943)
--------------- ------------ ----------- -------------
Total increase (decrease)
in net assets 450,954,438 3,460,709 (877,378) (71,928,943)
NET ASSETS:
Beginning of period 925,511,700 58,974,784 7,811,052 184,603,177
--------------- ------------ ----------- -------------
End of period $ 1,376,466,138 $ 62,435,493 $ 6,933,674 $ 112,674,234
=============== ============ =========== =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
22
<PAGE> 24
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
==============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Selected Funds consist of Selected American Shares, Inc., Selected
Special Shares, Inc. and the Selected Capital Preservation Trust. The
Companies and Trust are registered under the Investment Company Act of 1940,
as amended, as diversified, open-end management investment companies. The
Selected Capital Preservation Trust operates as a series fund, consisting of
the U.S. Government Income Fund and Daily Government Fund. The Trust accounts
separately for the assets, liabilities and operations of each series. Davis
Selected Advisers, L.P. became investment adviser effective May 1, 1993.
Prior to May 1, 1993, Selected Financial Services, Inc. was the investment
manager. The following is a summary of significant accounting policies
followed by the Funds in the preparation of financial statements.
Selected American Shares, Inc. and Selected Special Shares, Inc. are
diversified, professionally managed stock-oriented funds.
Selected U.S. Government Income Fund 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 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
Selected 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.
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 income to shareholders.
At June 30, 1997 the U.S. Government Income Fund had capital loss carryovers
of $75,116 available to offset future capital gains, if any, which expire in
2004.
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 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.
23
<PAGE> 25
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
==============================================================================
D. OTHER - Securities transactions are accounted for on the trade date (date
the order to buy or sell is executed) with gain or loss on the sale of
securities being determined based upon identified cost. Interest income is
recorded on the accrual basis. Dividends and distributions to shareholders
are recorded on the ex-dividend date. Discounts and premiums on securities
(excluding convertible bonds) purchased are amortized over the life of the
respective securities.
NOTE 2 - INVESTMENT ADVISORY FEES
Advisory fees are paid monthly to the investment adviser. The rate for
American Shares, Inc. is .65% on the first $500 million of average daily net
assets, .60% on the next $500 million and .55% of average daily net assets in
excess of $1 billion. The rate for Special Shares, Inc. is .70% on the first
$50 million of average daily net assets, .675% on the next $100 million, .65%
on the next $100 million and .60% of average daily net assets in excess of
$250 million. The rate for the U.S. Government Income Fund is .50% of 1% of
average daily net assets. The rate for the Daily Government Fund is based upon
daily net assets at an annual rate of .30%. The Adviser has agreed to
reimburse the U.S. Government Income Fund for any expenses in excess of 1.50%
of average net assets.
Each Fund has adopted procedures to treat Shelby Cullom Davis & Co.
("SCD") as an affiliate of the Adviser. SCD received $23,430 in commissions
on the purchases/sales of portfolio securities.
NOTE 3 - DISTRIBUTION
For services under the distribution agreement, the Funds pay a fee of
..25% of average daily net assets. For the six months ended June 30, 1997, for
American Shares, Special Shares, U.S. Government Income and Daily Government
Funds, the Funds incurred distribution services fees totaling $1,954,957,
$75,650, $7,522 and $141,595, 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, 1997 for American Shares,
Special Shares and U.S. Government Income Fund were as follows:
<TABLE>
<CAPTION>
SELECTED SELECTED
AMERICAN SPECIAL U.S. GOVERNMENT
SHARES SHARES INCOME FUND
------ ------ -----------
<S> <C> <C> <C>
Cost of purchases $413,236,186 $20,005,583 $ 398,375
Proceeds of sales $247,955,518 $22,625,576 $ 910,063
</TABLE>
24
<PAGE> 26
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 1997 (Unaudited)
==============================================================================
NOTE 5 - CAPITAL STOCK
At June 30, 1997, there were 100 million shares of capital stock of
Selected American Shares ($1.25 par value per share) authorized. At June 30,
1997, there were 100 million shares of capital stock of Selected Special
Shares ($0.25 par value per share) authorized. At June 30, 1997, 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, 1997 (UNAUDITED)
----------------------------------------------------------------
U.S.
AMERICAN SPECIAL GOVERNMENT DAILY
SHARES SHARES INCOME GOVERNMENT
INC. INC. FUND FUND
------ ------ ---- ----
<S> <C> <C> <C> <C>
Shares sold 13,976,964 135,851 17,474 7,879,182
Shares issued in reinvestment
of distributions 1,330,332 285,318 16,444 2,247,420
------------- ----------- ----------- -------------
15,307,296 421,169 33,918 10,126,602
Shares redeemed (7,535,655) (374,915) (142,535) (6,551,097)
------------- ----------- ----------- -------------
Net increase (decrease) 7,771,641 46,254 (108,617) 3,575,505
============= =========== =========== =============
Proceeds from shares sold $ 324,231,453 $ 1,430,611 $ 154,788 $ 7,879,182
Proceeds from shares issued in
reinvestment of distributions 30,195,928 2,856,035 145,228 2,247,420
------------- ----------- ----------- -------------
354,427,381 4,286,646 300,016 10,126,602
Cost of shares redeemed (170,194,386) (3,951,082) (1,263,903) (6,551,097)
------------- ----------- ----------- -------------
Net increase (decrease) $ 184,232,995 $ 335,564 $ (963,887) $ 3,575,505
============= =========== =========== =============
<CAPTION>
YEAR ENDED
DECEMBER 30, 1997
----------------------------------------------------------------
U.S.
AMERICAN SPECIAL GOVERNMENT DAILY
SHARES SHARES INCOME GOVERNMENT
INC. INC. FUND FUND
------ ------ ---- ----
<S> <C> <C> <C> <C>
Shares sold 15,567,086 625,367 24,347 24,374,970
Shares issued in reinvestment
of distributions 3,980,585 536,003 42,111 6,823,075
------------- ----------- ----------- -------------
19,547,671 1,161,370 66,458 31,198,045
Shares redeemed (7,951,322) (889,193) (136,618) (103,126,988)
------------- ----------- ----------- -------------
Net increase (decrease) 11,596,349 272,177 (70,160) (71,928,943)
============= =========== =========== =============
Proceeds from shares sold $ 307,057,971 $ 7,008,830 $ 216,118 $ 24,374,970
Proceeds from shares issued in
reinvestment of distributions 81,960,295 5,908,372 373,713 6,823,075
------------- ----------- ----------- -------------
389,018,266 12,917,202 589,831 31,198,045
Cost of shares redeemed (156,710,834) (9,900,528) (1,215,947) (103,126,988)
------------- ----------- ----------- -------------
Net increase (decrease) $ 232,307,432 $ 3,016,674 $ (626,116) $ (71,928,943)
============= =========== =========== =============
</TABLE>
25
<PAGE> 27
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 1997 (Unaudited)
==============================================================================
NOTE 6 - MATTERS SUBMITTED TO A VOTE OF SHAREHOLDERS
A special meeting of shareholders was held on March 25, 1997. Matters
submitted for approval included consideration of a Sub-Advisory Agreement
between Davis Selected Advisers, L.P., the Investment Adviser of the Funds,
and Davis Selected Advisers-NY, Inc., an affiliate of the Adviser, approval of
amendments to the Funds' fundamental investment restrictions, ratification of
Tait, Weller & Baker as the Funds' independent auditors and election of Mr.
William P. Barr, Ms. Marsha Williams, Mr. Richard C. O'Brien, Mr. Jerome E.
Hass and Ms. Katherine L. MacWilliams as directors/trustees of the Funds.
Results of the meeting were as follows:
SELECTED AMERICAN SHARES - With respect to consideration of the Sub-Advisory
Agreement, 39,712,272 votes were cast in favor, 346,689 votes were cast
against and 890,845 votes abstained. With respect to approval of amendments to
the Fund's fundamental investment restrictions, 36,996,879 votes were cast in
favor, 537,874 votes were cast against and 913,882 votes abstained. With
respect to ratification of Tait, Weller & Baker as the Fund's independent
auditors, 40,160,014 votes were cast in favor, 194,474 votes were cast against
and 595,318 votes abstained. With respect to the election of Mr. Barr,
40,401,137 votes were cast in favor and 548,672 votes were withheld. With
respect to the election of Ms. Williams, 40,404,815 votes were cast in favor
and 544,993 votes were withheld. With respect to the election of Mr. O'Brien,
40,339,250 votes were cast in favor and 610,559 votes were withheld. With
respect to the election of Mr. Hass, 40,351,192 votes were cast in favor and
598,616 votes were withheld. With respect to the election of Ms. MacWilliams,
40,330,042 votes were cast in favor and 619,767 votes were withheld. The
terms of office of Mr. Floyd A. Brown, Mr. William G. Cole, Mr. Shelby M.C.
Davis, Mr. Robert J. Greenebaum, Mr. James J. McMonagle and Mr. Larry Robinson
also continued after the meeting.
SELECTED SPECIAL SHARES - With respect to consideration of the Sub-Advisory
Agreement, 3,144,383 votes were cast in favor, 87,117 votes were cast against
and 314,912 votes abstained. With respect to approval of amendments to the
Fund's fundamental investment restrictions, 2,945,058 votes were cast in
favor, 69,097 votes were cast against and 322,723 votes abstained. With
respect to ratification of Tait, Weller & Baker as the Fund's independent
auditors, 3,277,587 votes were cast in favor, 10,924 votes were cast against
and 257,901 votes abstained. With respect to the election of Mr. Barr,
3,300,402 votes were cast in favor and 246,011 votes were withheld. With
respect to the election of Ms. Williams, 3,303,289 votes were cast in favor
and 243,124 votes were withheld. With respect to the election of Mr. O'Brien,
3,281,144 votes were cast in favor and 265,268 votes were withheld. With
respect to the election of Mr. Hass, 3,295,734 votes were cast in favor and
250,678 votes were withheld. With respect to the election of Ms. MacWilliams,
3,292,801 votes were cast in favor and 253,612 votes were withheld. The terms
of office of Mr. Floyd A. Brown, Mr. William G. Cole, Mr. Shelby M.C. Davis,
Mr. Robert J. Greenebaum, Mr. James J. McMonagle and Mr. Larry Robinson also
continued after the meeting.
SELECTED U.S. GOVERNMENT INCOME FUND - With respect to consideration of the
Sub-Advisory Agreement, 421,678 votes were cast in favor, 8,768 votes were
cast against and 10,137 votes abstained. With respect to approval of
amendments to the Fund's fundamental investment restrictions, 423,811 votes
were cast in favor, 6,635 votes were cast against and 10,137 votes abstained.
With respect to ratification of Tait, Weller & Baker as the Fund's independent
auditors, 434,176 votes were cast in favor, 4,057 votes were cast against and
2,350 votes abstained. With respect to the election of Mr. Barr, 423,710
votes were cast in favor and 7,873 votes were withheld. With respect to the
election of Ms. Williams, 432,710 votes were cast in favor and 7,873 votes
were withheld. With respect to the election of Mr. O'Brien, 432,710 votes
were cast in favor and 7,873 votes were withheld. With respect to the
election of Mr. Hass, 432,710 votes were cast in favor and 7,873 votes were
withheld. With respect to the election of Ms. MacWilliams, 432,710 votes were
cast in favor and 7,873 votes were withheld. The terms of office of Mr.
Floyd A. Brown, Mr.
26
<PAGE> 28
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 1997 (Unaudited)
===============================================================================
NOTE 6 - MATTERS SUBMITTED TO A VOTE OF SHAREHOLDERS - CONTINUED
William G. Cole, Mr. Shelby M.C. Davis, Mr. Robert J. Greenebaum, Mr. James J.
McMonagle and Mr. Larry Robinson also continued after the meeting.
SELECTED DAILY GOVERNMENT FUND - With respect to consideration of the
Sub-Advisory Agreement, 101,811,501 votes were cast in favor, 294,519 votes
were cast against and 473,183 votes abstained. With respect to approval of
amendments to the Fund's fundamental investment restrictions, 101,465,318
votes were cast in favor, 544,029 votes were cast against and 569,855 votes
abstained. With respect to ratification of Tait, Weller & Baker as the Fund's
independent auditors, 102,249,478 votes were cast in favor, 19,028 votes were
cast against and 310,696 votes abstained. With respect to the election of Mr.
Barr, 102,278,030 votes were cast in favor and 301,173 votes were withheld.
With respect to the election of Ms. Williams, 102,352,154 votes were cast in
favor and 227,049 votes were withheld. With respect to the election of Mr.
O'Brien, 102,294,115 votes were cast in favor and 285,088 votes were withheld.
With respect to the election of Mr. Hass, 102,304,970 votes were cast in favor
and 274,232 votes were withheld. With respect to the election of Ms.
MacWilliams, 102,299,660 votes were cast in favor and 279,543 votes were
withheld. The terms of office of Mr. Floyd A. Brown, Mr. William G. Cole, Mr.
Shelby M.C. Davis, Mr. Robert J. Greenebaum, Mr. James J. McMonagle and Mr.
Larry Robinson also continued after the meeting.
27
<PAGE> 29
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, 1997 ---------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993<F2> 1992
----------- ---- ---- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 21.53 $ 17.68 $ 13.09 $ 14.59 $ 17.13 $ 18.43
------- ------- ------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income .08 .18 .22 .20 .24 .19
Net Gains or Losses on Securities
(both realized and unrealized) 4.23 5.15 4.74 (.66) .70 .89
------- ------- ------- ------- ------- -------
Total From Investment Operations 4.31 5.33 4.96 (.46) .94 1.08
Less Distributions
- ------------------
Dividends (from net investment
income) (.12) (.17) (.22) (.20) (.24) (.19)
Distributions (from capital gains) (.34) (1.31) (.15) (.83) (3.24) (2.19)
Distributions in Excess of Net
Investment Income - - - (.01) - -
------- ------- ------- ------- ------- -------
Total Distributions (.46) (1.48) (.37) (1.04) (3.48) (2.38)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 25.38 $ 21.53 $ 17.68 $ 13.09 $ 14.59 $ 17.13
======= ======= ======= ======= ======= =======
Total Return 20.28% 30.74% 38.09% (3.20)% 5.42% 5.78%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted) 1,820,404 1,376,466 925,512 529,404 451,392 580,889
Ratio of Expenses to Average
Net Assets 1.00%<F*> 1.03% 1.09% 1.26% 1.01%<F1> 1.17%
Ratio of Net Income to Average
Net Assets .71%<F*> .87% 1.42% 1.42% 1.37% .95%
Portfolio Turnover Rate 16% 29% 27% 23% 79% 50%
Average Commission Rate per Share $.050 $.058 - - - -
<FN>
<F1> Had the Adviser not absorbed certain expenses, the ratio of expenses for
the year ended December 31, 1993 would have been 1.22%.
<F2> Effective May 1, 1993, Davis Selected Advisers, became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
<F*> Annualized
</TABLE>
28
<PAGE> 30
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, 1997 ---------------------------------------------------------
(UNAUDITED) 1996 1995 1994<F2><F3> 1993<F3> 1992<F3>
----------- ---- ---- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.89 $ 10.80 $ 9.02 $ 10.20 $ 10.40 $ 10.16
-------- -------- -------- -------- -------- --------
Income From Investment Operations
- ---------------------------------
Net Investment Income (.03) - - (.03) - .07
Net Gains or Losses on Securities
(both realized and unrealized) 1.11 1.27 3.04 (.22) 1.10 .78
-------- -------- -------- -------- -------- --------
Total From Investment Operations 1.08 1.27 3.04 (.25) 1.10 .85
Less Distributions
- ------------------
Dividends (from net investment
income) - - - - - (.07)
Distributions (from capital gains) (.55) (1.18) (1.26) (.93) (1.30) (.54)
-------- -------- -------- -------- -------- --------
Total Distributions (.55) (1.18) (1.26) (.93) (1.30) (.61)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 11.42 $ 10.89 $ 10.80 $ 9.02 $ 10.20 $ 10.40
======== ======== ======== ======== ======== ========
Total Return 10.63% 11.86% 34.24% (2.56)% 10.81% 8.43%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted) 65,965 62,435 58,975 47,275 53,257 57,605
Ratio of Expenses to Average
Net Assets 1.32%<F*> 1.33% 1.48% 1.41%<F1> 1.24%<F1> 1.41%<F1>
Ratio of Net Income to Average
Net Assets (.58)%<F*> (.66)% (.58)% (.27)% (.07)% .56%
Portfolio Turnover Rate 34% 98% 127% 99% 100% 41%
Average Commission Rate per Share $.060 $.060 - - - -
<FN>
<F1> Had the former manager not absorbed certain expenses, the ratio of
expenses for the year ended December 31, 1992 would have been 1.47%. Had
the Adviser not absorbed certain expenses, the ratio of expenses for the
years ended December 31, 1993 and 1994 would have been 1.51% and 1.62%,
respectively.
<F2> Effective May 1, 1993, Davis Selected Advisers became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
<F3> Per share data has been restated to give effect to a 2 for 1 stock split
to shareholders of record as of the close of January 4, 1994.
<F*> Annualized
</TABLE>
29
<PAGE> 31
SELECTED FUNDS
FINANCIAL HIGHLIGHTS
SELECTED U.S. GOVERNMENT INCOME 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, 1997 ------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993<F2> 1992
----------- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31 $ 9.70
-------- -------- -------- -------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income .26 .53 .54 .50 .56 .61
Net Gains or Losses on Securities
(both realized and unrealized) (.06) (.28) .78 (.75) .21 (.13)
-------- -------- ------- -------- ------- -------
Total From Investment Operations .20 .25 1.32 (.25) .77 .48
Less Distributions
- ------------------
Dividends (from net investment
income) (.26) (.53) (.54) (.50) (.56) (.61)
Distributions (from capital gains) - (.02) (.03) - (.32) (.26)
-------- -------- -------- -------- ------- -------
Total Distributions (.26) (.55) (.57) (.50) (.88) (.87)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of Period $ 8.84 $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31
======== ======== ======== ======== ======= =======
Total Return 2.27% 2.85% 15.97% (2.71)% 7.99% 5.11%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted) 5,926 6,934 7,811 10,263 10,336 13,945
Ratio of Expenses to Average
Net Assets 1.47%<F1><F*> 1.44% 1.44%<F1> 1.42%<F1> 1.34%<F1> 1.44%<F1>
Ratio of Net Income to Average
Net Assets 5.98%<F*> 5.96% 6.09% 5.70% 5.85% 6.26%<F1>
Portfolio Turnover Rate 7% 26% 76% 65% 29% 53%
<FN>
<F1> Had the former manager not absorbed certain expenses, the ratio of
expenses would have been 1.72% for the year ended December 31, 1992.
Had the Adviser not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1993, 1994, 1995, 1996 and the six months
ended June 30, 1997 would have been 1.88%, 1.69%, 1.58%, 1.67% and 1.87%
respectively.
<F2> Effective May 1, 1993, Davis Selected Advisers, became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
<F*> Annualized
</TABLE>
30
<PAGE> 32
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, 1997 ------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993<F2> 1992
----------- ---- ---- ---- ------- ----
<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 .023 .046 .051 .034 .023 .030
Less Distributions
- ------------------
Dividends (from net investment
income) (.023) (.046) (.051) (.034) (.023) (.030)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return 2.35% 4.70% 5.23% 3.51% 2.34% 3.07%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted) 116,250 112,674 184,603 121,886 8,732 6,626
Ratio of Expenses to Average
Net Assets .75%<F*> .75% .75%<F1> .75%<F1> .75%<F1> .75%<F1>
Ratio of Net Income to Average
Net Assets 4.69%<F*> 4.62% 5.13% 3.44% 2.31% 3.02%
<FN>
<F1> Had the former manager not absorbed certain expenses, the ratio of
expenses for the year ended December 31, 1992 would have been 1.23%. Had
the Adviser not absorbed certain expenses, the ratio of expenses for the
years ended December 31, 1993, 1994 and 1995 would have been 2.29%,
1.07% and 0.78%, respectively.
<F2> Effective May 1, 1993, Davis Selected Advisers became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
<F*> Annualized
</TABLE>
31
<PAGE> 33
SELECTED
FUNDS
124 East Marcy Street Santa Fe, New Mexico 87501
=================================================
DIRECTORS OFFICERS
William P. Barr Robert J. Greenebaum
Floyd A. Brown Chairman
William G. Cole Shelby M.C. Davis
Shelby M.C. Davis President
Robert J. Greenebaum Kenneth C. Eich
Jerome Hass Vice President
James J. McMonagle Samuel P. Ynzunza
Katherine L. MacWilliams Vice President
Richard O'Brien & Secretary
Larry Robinson Eileen R. Street
Marsha Williams Vice President, Treasurer
& Assistant Secretary
Arthur Don
Assistant Secretary
Sheldon R. Stein
Assistant Secretary
INVESTMENT ADVISER & DISTRIBUTOR
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
TRANSFER AGENT & CUSTODIAN
Investors Fiduciary Trust Company
P.O. Box 419782
Kansas City, MO 64141-6782
COUNSEL
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
========================================================================
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> 34
DAVIS SELECTED ADVISERS, L.P. THE
GROUP OF FUNDS
SELECTED FUNDS
Selected American Shares
SEMI-ANNUAL
Selected Special Shares
REPORT
Selected U.S. Government
Income Fund JUNE 30, 1997
Selected Daily Government Fund
INVESTMENT ADVISER & DISTRIBUTOR
Davis Selected Advisers, L.P.
124 E. Marcy Street
Santa Fe, NM 87501
TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company
c/o Selected Funds
P.O. Box 419782
Kansas City, MO 64141-6782
LEGAL COUNSEL
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, IL 60602-2502
AUDITORS
Selected
Tait, Weller and Baker Funds
Two Penn Center, Suite 700 DAVIS SELECTED ADVISERS
Philadelphia, PA 19102-1707
