<PAGE>
THE
SELECTED FUNDS
SEMI-ANNUAL
REPORT
JUNE 30, 1998
[SELECTED FUNDS LOGO]
<PAGE>
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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Dear Fellow Selected Shareholders:
MARKET OVERVIEW
Earnings are the lifeblood of the market and the reason why, over generations,
stocks tend to do better than bonds.1 This concept can be clearly illustrated
if you think in terms of your son's or daughter's earning power. Let's say you
have this choice: You could receive 1% of your child's first-year salary after
college, fixed at that level every year for the next 30 years. Or you could
receive 1% of whatever your child's salary turns out to be in each of the next
30 years.
In the first case, your dollar return would be the same for 30 years, which is
equivalent to the fixed-coupon return from a bond. In the second case, your
dollar return would vary with earning power, which is equivalent to the
variable return of a stock. So the level of salary or earnings going forward is
critical. If you believe your son's or daughter's income stream will expand
over 30 years, you would be better off with the second choice, just as you
would be better off investing in the stock of a company whose earnings grow
over the next three decades than in a fixed-return investment like a bond.
If you are going to invest successfully in stocks, you have to think in terms
of the future. You can't just research the past and expect that will help you
too much in understanding the future. Life is always changing, and companies
are always changing, which is why we are continually researching projected
long-term earnings trends.
Today, we are at a point where there are large crosscurrents in the earnings
picture, at least for the near term. Corporate earnings are being hurt by the
General Motors strike, the deepening Asian crisis, the fiercely competitive
business environment, a lack of pricing power, and currency translation
problems related to the strengthening U.S. dollar.
In addition to these negatives, earnings are being overstated by the use of
aggressive accounting practices. These include taking up-front write-offs for
restructuring charges that may mask ongoing business problems, as well as the
extensive use of stock options, which tends to understate the real compensation
costs of a business.
Given this uncertain earnings outlook, we anticipate a choppy market
environment, where individual stocks will understandably react to strength or
weakness in earnings reports. Furthermore, it seems that more earnings reports
are coming in below earlier estimates, indicating a loss of momentum in
earnings trends. As a result, we expect there will be a loss of momentum in the
stock market.
The best case scenario, in our view, would be sort of stealth correction or a
rotational adjustment in which prices of individual stocks or industry groups
are corrected based on disappointing earnings results. But there is always the
possibility that we will have a broader correction because valuation levels are
historically high and priced for a good economic outlook in terms of inflation,
interest rates and earnings.
Such an environment, or course, creates not only risk but opportunity if the
market overreacts and punishes stocks too harshly for short-term earnings
disappointments. As long-term investors, we don't use the latest quarterly
earnings as the only benchmark for valuing a stock. Instead, we try to develop
a normalized growth trend for earnings power that disregards short-term peaks
and valleys. Our objective is to find companies with growing normalized
earnings that are selling at reasonable prices.
<PAGE>
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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We've said before that investors should lower their expectations and that the
market is overdue for a correction. But we don't think we're at the end of the
game. The best approach is to take advantage of volatility through dollar cost
averaging,2 rather than plunging in and out of the market, and to stay aboard
for the long voyage because the earning power of companies--like the earning
power of college graduates--tends to grow over decades.
As investors in the Selected Funds ourselves, we intend to continue to earn
your trust and confidence.
Sincerely,
/s/ James J. McMonagle /s/ Shelby M.C. Davis
James J. McMonagle Shelby M.C. Davis
Chairman Chief Investment Officer
August 3, 1998
2
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SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS
SELECTED AMERICAN SHARES
PERFORMANCE OVERVIEW
o Selected American Shares generated a total return of 11.65% for the six
months ended June 30, 1998. This compares with an average return of 12.14% for
the 762 growth and income funds tracked by Lipper Analytical Services3 and a
return of 17.70% for the Standard & Poor's 500 Index.4
o The fund provided a total return of 27.35% for the one-year period ended on
the same date versus an average return of 22.85% for the 669 growth and income
funds covered by Lipper and a return of 30.15% for the S&P 500.
o From May 6, 1993 through June 30, 1998, the approximate period that Davis
Selected Advisers has managed Selected American Shares, it ranked number 11 out
of 261 funds in the Lipper category, providing an average annual total return
of 22.55%.5
o The fund holds Morningstar's highest ***** (five-star) rating for the latest
three-year period and a **** (four-star) rating for the latest five- and
10-year periods.6
o Moreover, Money magazine included Selected American Shares in its
elite 1998 Money 100 listing, an "all-star lineup of 100 superior stock
portfolios."7
FEINBERG NAMED AS CO-MANAGER OF SELECTED AMERICAN SHARES
Kenneth Charles Feinberg was named Co-Portfolio Manager of Selected American
Shares in May, 1998, joining Christopher C. Davis who has been the fund's sole
manager since February, 1997. "I am delighted that my partner Ken Feinberg has
joined me as portfolio manager for Selected American Shares," says Chris Davis.
"Over the last five years, shareholders have already benefited from Ken's
contribution of such investment ideas as McDonald's, Allstate and American
Express. In an industry that often seems dominated by short-term traders and
speculators, Ken's patient and thorough analysis stands out."
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG,
PORTFOLIO MANAGERS
Q. How would you characterize the fund's performance so far this year?
A. The fund's return for the six-month period was good in absolute
terms--particularly after two exceptional years--but it was disappointing
relative to the even stronger performance of the S&P 500. Although we do not
focus on short-term performance, it's worth reflecting on both the exceptional
strengths and the weaknesses contained within the fund's results.
As long-term shareholders, we employ a fundamental investment approach that
focuses on the recognition that stocks are not just pieces of paper, but
represent ownership interests in real businesses. As a result, our investment
process has always boiled down to two questions: What kind of businesses do we
want to own, and how much should we pay for them?
3
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SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
We like to buy high-quality companies with these characteristics: exceptional
management, a high return on capital, a lean expense structure, a dominant
share in a growing market, products or services that do not become obsolete, a
strong balance sheet, and successful international operations.
But we also adhere closely to a price discipline that helps us mitigate risk
and that often prevents us from buying many high-quality companies because
their multiples are too high. This was the case in the first half of 1998 when
a number of companies that fit our quality and growth criteria but fell well
outside our price discipline surged to even higher levels of valuation. This
was particularly evident in the pharmaceutical and consumer sectors where
companies such as Pfizer, Gillette and the Gap--all of which are high-quality
operations--soared to valuation levels that far exceeded our price discipline.
At the other extreme, many companies that may have looked cheap but did not
measure up to our quality criteria were also strong performers in the first
half. This includes companies such as Apple Computer, Kmart and Advanced Micro
Devices. Because these companies did not meet our quality criteria,
shareholders of Selected American Shares did not benefit from their strong
performance.
Despite these results, shareholders should know that we will stick to our
principles of focusing on both quality and price in our investment process. We
think this is a proven method of building and preserving wealth over time, even
though other approaches may be enjoying success in the short run.
Although it is difficult to dwell on mistakes, we must also note that the
fund's holdings in the energy sector performed poorly during this period. These
results were partly due to a change in investor psychology, which we would tend
to ignore, but, more importantly, to a deterioration in industry fundamentals
that we underestimated. In particular, the impact of the slowdown in Asia on
oil demand and capital spending plans coupled with a much warmer winter in the
United States wreaked havoc on our oil services companies. We have taken
advantage of this weakness to add to our favorite holdings, particularly
Schlumberger,8 but we have also sold our holdings in some companies where we
feel the recovery has stretched out much further.
Q. What other important developments affected portfolio performance in the
first half?
A. One unprecedented occurrence in the first half was the fact that five of our
top 10 holdings were involved in major mergers. Two of these companies actually
merged with one another, namely Citicorp and Travelers. Although there was
short-term elation when the merger was announced, the stocks subsequently fell
some 15% to 20% from their highs. Skeptics point out differences in cultures
within the two organizations. But we think both companies have exceptional
managements and strong shareholder cultures, and we expect this merger to prove
out in time. Further, we are reminded that the "culture clash" argument was
levied against two of our other holdings that merged last year--namely Morgan
Stanley and Dean Witter--and yet the resulting company has performed
exceptionally well.
Two other bank mergers in our top 10 holdings included the Wells Fargo merger
with Norwest and the BankAmerica merger with NationsBank. In both cases, we
feel that strong banking franchises are being brought together--resulting in
greater geographic diversity, perhaps more cross-selling opportunities and,
quite definitely, a strong management team. These stocks have also performed
unsatisfactorily since the merger announcement, as investors who were looking
for the short-term gratification of a big takeover premium expressed their
disappointment by selling the shares. We think that their action is
shortsighted and that those investors seeking high-quality, long-term
investments at reasonable prices will do well over time holding these
first-rate financial companies.
4
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SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
Finally, our largest holding, General Reinsurance, recently announced that it
has been acquired by Berkshire Hathaway, the Omaha-based company run by
legendary investor Warren Buffett. In this case, although we are somewhat
disappointed that the price was not higher, we recognize the strategic fit and
we are proud to be part of this exceptional organization.
In summary, the decent results of this first half in absolute terms reflect
both pockets of exceptional strengths and also weaknesses within the portfolio.
But in the longer run, we think that the first-rate quality of the companies
held by Selected American Shares coupled with the price discipline used in
acquiring them should continue to serve our shareholders well.
SELECTED SPECIAL SHARES
PERFORMANCE OVERVIEW
o Selected Special Shares' strong performance within its universe continues.
The fund provided a total return of 18.83% for the six months ended June 30,
1998. This compares with returns of 6.45% for the Lipper Small Company Funds
Index9 and 3.16% for the Wilshire Mid Cap Company Growth Index10 for the same
time period.
o Moreover, according to The Wall Street Journal, the fund ranked among the top
10 small-cap funds for the 12-month period ended July 1, 1998, providing a
return of 36.3%.11
o Unlike many small-cap funds that pursue short-term performance by
aggressively concentrating on volatile, speculative plays, Selected Special
Shares seeks to deliver less volatile returns and build long-term wealth for
shareholders over a prolonged period of time. The fund's three- and five-year
track record--average annual returns of 23.73% and 18.94%,
respectively--supports this objective.12
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, PORTFOLIO MANAGER
Q. What factors contributed to the fund's strong performance?
A. The fund has benefited from continuing low inflation and declining interest
rates--which are favorable to the multiples paid for equities--as well as from
the market advance broadening to include small-cap and mid-cap companies. The
industries that were attractive in the first half of 1998--information
processing, employee staffing, retailing and communications--are reflected in
the fund's top 10 contributors to appreciation. These include: Dell Computer,
Computer Sciences, Robert Half, Amazon.com, Labor Ready, Kohl's, Kansas City
Southern, On Assignment, WorldCom, and Neurex.8
The sharp decline in oil prices had a negative impact on the fund's energy
holdings. However, the fund did benefit from its holding of Camco, an oil field
services company that received a premium takeover bid from Schlumberger.
5
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SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
Furniture stocks were held back by the unwarranted fear of higher interest
rates, which would make furniture less affordable. But the industry's
fundamentals remain strong and we view the sell-off as an opportunity to
enhance the fund's performance by buying furniture stocks that we continue to
like at lower prices than we could earlier.
Q. How has your strategy positioned the fund to benefit from the current market
environment?
A. A primary strategy is to invest in stocks at a discount to their future
earnings growth rates or to the overall market. The price/earnings (P/E) to
growth ratio [(P/E)/G ratio] on the fund continues to be compelling relative to
the broad market.
For example, we estimate that the 1999 earnings growth rate on the fund's
portfolio is around 25%, for which we are currently paying a P/E ratio of 22.
That gives the fund a P/E to growth ratio of 88%. At the same time, we estimate
1999 earnings growth for the S&P 500 at around 6% and investors are paying well
over two times that much lower growth for the S&P 500. In other words, our 1999
estimated earnings growth on the fund's portfolio is about four times that of
the S&P 500 and yet the fund is selling at only 88% future growth while the S&P
500 is selling for the same P/E multiple at more than 200% future growth.
Over time, stock prices should move with their earnings growth, and if the P/E
multiples on the stocks we own also expand, the fund's performance benefits
incrementally. Moreover, all things being equal, as emerging companies become
better recognized and investor confidence increases, their valuations are
likely to improve.
Q. What is your market outlook?
A. We continue to look for low inflation and flat-to-lower interest rates.
This environment should be favorable to equity valuations and especially to
small- and mid-cap companies that are selling at discounts to their expected
growth rates and the overall market. We think, in general, that there are
better valuations in small- and mid-cap stocks than in the large-cap growth
stocks represented in the S&P 500.
We are wary about the impact of economic deceleration in Asia and the sharp
declines in commodity prices. But, on the other hand, we expect corporate
purchasers and consumers to benefit from greater affordability of imported
goods.
Our strategy going forward is to concentrate on companies that have strong
revenue growth. Growth should be valued highly in a slowing global economy. We
are also focusing on companies with unique products and services that have
pricing flexibility and whose P/E to growth ratios are at discounts to those of
the top 50 stocks in the S&P 500.
SELECTED U.S. GOVERNMENT INCOME FUND
PERFORMANCE OVERVIEW
o 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
and its agencies.13
6
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SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
o The fund generated a total return of 2.61% for the six-month period and 7.65%
for the one-year period ended June 30, 1998.14 By way of comparison, Lipper
Analytical Services' general U.S. government fund category provided returns of
3.62% and 10.17%, respectively, for the latest six-month and one-year periods.3
AN INTERVIEW WITH CAROLYN H. SPOLIDORO, PORTFOLIO MANAGER
Q. What key factors influenced the fund's performance?
A. In the first half of 1998, long-term interest rates came down, but not in a
straight line. During the first two months of the year, interest rates on the
long bond--the 30-year Treasury bond--actually rose and then they stayed the
same, on average, over the next two months. The bond market rally only occurred
in the last two months. On the other hand, short-term interest rates, such as
one-year and two-year Treasury notes, have been much more stable. Many
investors seem to believe the Federal Reserve is still biased toward
tightening, and that is keeping short-term rates up.
Overall, domestic economic news has been very favorable for bonds. Inflation
remains low, and we've even seen some welcome signs of economic slowing
recently. In addition, the federal budget still looks good.
International developments--particularly the continuing financial crisis in
Asia and specifically what is happening in Japan--have also been auspicious for
bonds. These events have resulted in a flight to quality as investors bring
money to the U.S. government bond market, causing interest rates to go down and
bond prices to rise. Competitive pricing from overseas manufacturers and the
relative strengthening of the U.S. dollar are other positives for the domestic
government bond market.
Q. What is your interest rate outlook and how is it affecting your investment
strategy?
A. Interest rates have come down because of all those favorable developments,
and we think rates could continue to move lower. But, as we experienced in the
first half of this year, rates don't decline in a straight line. That's why it
is important for us to maintain a somewhat defensive investment posture that
provides some protection against rising interest rates.
Our strategy is to create a well-diversified portfolio in terms of types of
government securities, maturity lengths, call provisions and interest rate
coupons so that the fund is positioned to benefit in various market
environments. Currently, the fund's portfolio is divided roughly equally
between mortgage-backed securities, including pass-through securities and
collateralized mortgage obligations (CMOs), and U.S. government agency notes,
including some issues that can be called by the issuer before maturity and some
that cannot. The portfolio's duration is 4.2 years and its average life is 6.9
years.
The fund's cautious approach offers downside protection in declining bond
markets but may underperform in rising bond markets. In other words, the
portfolio tends to hold up a little bit better when interest rates back up or
are variable, as happened in the first quarter this year. The price we pay for
this stability is that the fund does not rally as well when rates go down as
they did in the second quarter.
7
<PAGE>
SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
Q. Are there any changes you've made recently in the portfolio you would
particularly like to highlight?
A. The purchases we have made were intended to add some length to the
portfolio. This was necessary to maintain the fund's balanced approach since
mortgage prepayments and prepayment expectations tend to increase when interest
rates fall and that shortens the life of mortgage-backed securities. For
example, we bought a noncallable 10-year U.S. government agency note.8 We also
purchased a mortgage pool with a low coupon of only 6 1/2%. The low coupon
means there is less risk that homeowners might repay these loans more quickly
than expected and that should keep the security's average life relatively long.
While there is good reason to think interest rates could trend downward, we
remain vigilant. As always, we recognize the importance of maintaining a
disciplined approach with an all-weather diversified portfolio designed to
smooth out fund performance and provide stability in a variety of market
climates.
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This Semi-Annual Report is furnished to you by Davis Distributors, LLC, which
acts as the distributor for the Selected Funds. 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 fees and
expenses. Please read the prospectus carefully before investing or sending
money.
1 Historically, common stocks have provided investors higher long-term returns
than bonds. Past performance is no guarantee of future results.
2 Neither dollar cost averaging nor any other mechanical method of investing
can guarantee a profit.
3 Lipper Analytical Services' rankings and comparisons are based on total
returns unadjusted for commissions.
4 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.
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 average annual total return for Selected American Shares for the one,
three, five and 10-year periods ended June 30, 1998 was 27.35%, 31.32%, 22.68%
and 18.19%, respectively. Selected American Shares ranked 174th out of 699
funds in the Lipper Growth and Income Fund category for the one-year period
ended June 30, 1998; 8th out of 432 such funds for the three-year period ended
the same date; 10th out of 275 such funds for the five-year period ended the
same date; and 9th out of 143 such funds for the 10-year period ended the same
date.
8
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SELECTED FUNDS
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
6 Morningstar proprietary ratings reflect historical risk-adjusted performance
as of June 30, 1998. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's 3, 5 and 10-year average annual returns
(based on available track records) in excess of 90-day Treasury bill (T-bill)
returns, with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day T-bill returns. Ten percent of the funds in an
investment category receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars, and the last
10% receive one star. Selected American Shares was rated against 2,545, 1,462
and 707 domestic equity funds for the three- five- and 10-year periods,
respectively.
7 Source: Money, June, 1998. Money assembled their own all-star lineup of 100
superior stock portfolios spanning a wide range of investing styles which they
believe are the best available. Money began with a rigorous quantitative
analysis of fund performance from February, 1993 through February, 1998. Money
then relied upon the collective judgment of its staff to add or subtract from
the funds selected by the quantitative screens. The staff looked for low to
moderate expenses, a well-defined investing strategy and experienced, talented
managers. Of course, there can be no guarantee that the 100 funds named to
Money's all-star lineup list will outperform other funds in the future.
8 Portfolio holdings and portfolio manager opinions cited in this material are
current at the time of printing but are subject to change.
9 The Lipper Small Company Funds Index is comprised of the 30 largest funds
that, by prospectus or portfolio practice, normally invest in companies with
market capitalizations of less than $1 billion at the time of purchase. Funds
in the index are equally weighted, and returns include the reinvestment of all
dividends and are net of expenses. Investments cannot be made directly in the
index.
10 The Wilshire Mid Cap Company Growth Index is an unmanaged, market
capitalization-weighted index of companies with market capitalizations ranging
from $826 million to $3 billion and with growth characteristics screened by
sales growth, return on equity and dividend payout. Investments cannot be made
directly in the index.
11 Source: The Wall Street Journal, July 6, 1998. Lipper ranking for the
one-year period ended is based on total returns unadjusted for commissions.
12 The average annual total return for Selected Special Shares for the one,
three, five and ten year periods ended June 30, 1998 were 36.32%, 23.73%,
18.94% and 14.78%, respectively. Selected Special Shares ranked 11th out of 526
funds in the Lipper Small Cap Fund category for the one-year period ended June
30, 1998, 72nd out of 312 such funds for the three-year period ended the same
date, 44th out of 169 such funds for the five-year period ended the same date
and 33rd out of 59 such funds for the ten-year period ended June 30, 1998.
13 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.
14 The average annual total return for Selected U.S. Government Income Fund for
the one, three, five and 10 year periods ended June 30, 1998 was 7.65%, 6.05%,
5.46% and 6.91%, respectively. Selected U.S. Government Income Fund ranked
174th out of 181 funds in the Lipper General U.S. Government Fund category for
the one-year period ended June 30, 1998; 131st out of 151 such funds for the
three-year period ended the same date; 62nd out of 96 such funds for the
five-year period ended the same date; and 46th out of 53 such funds for the
10-year period ended the same date.
9
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED AMERICAN SHARES, INC.
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
========================================================================================================================
<S> <C> <C>
COMMON STOCK - (95.61%)
AEROSPACE - (0.90%)
550,000 Boeing Co........................................................................... $ 24,509,375
-------------
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (13.34%)
471,844 Banc One Corp....................................................................... 26,334,793
865,000 BankAmerica Corp.................................................................... 74,768,437
476,465 Citicorp............................................................................ 71,112,401
153,800 Golden West Financial Corp.......................................................... 16,350,862
100,000 Norwest Corp........................................................................ 3,737,500
40,000 TCF Financial Corp.................................................................. 1,180,000
1,465,302 U.S. Bancorp........................................................................ 63,007,986
291,656 Wells Fargo & Co.................................................................... 107,621,064
-------------
364,113,043
-------------
BUILDING MATERIALS - (3.58%)
800,600 Martin Marietta Materials, Inc...................................................... 36,027,000
1,020,000 Masco Corporation................................................................... 61,710,000
-------------
97,737,000
CONSUMER PRODUCTS - (3.48%)
364,000 Nestle SA - ADR (b)................................................................. 38,948,255
3,600 Nestle SA........................................................................... 7,716,833
1,225,000 Philip Morris Cos., Inc. ........................................................... 48,234,375
-------------
94,899,463
ELECTRONICS - (3.86%)
708,000 Applied Materials, Inc.*............................................................ 20,886,000
558,750 Molex Incorporated.................................................................. 13,968,750
1,210,000 Texas Instruments Incorporated...................................................... 70,558,125
-------------
105,412,875
ENERGY - (9.18%)
152,311 British Petroleum Company PLC - ADR................................................. 13,441,446
761,200 Burlington Resources, Inc........................................................... 32,779,175
100,000 Camco International Inc............................................................. 7,787,500
570,000 Cooper Cameron Corp.*............................................................... 29,070,000
1,430,200 Dover Corp.......................................................................... 48,984,350
1,248,000 Halliburton Co...................................................................... 55,614,000
415,985 Noble Affiliates, Inc............................................................... 15,807,430
475,000 Schlumberger Limited................................................................ 32,448,438
421,900 Smith International, Inc.*.......................................................... 14,687,394
-------------
250,619,733
FINANCIAL - (9.63%)
1,025,000 American Express Co................................................................. 116,850,000
1,100,000 Freddie Mac......................................................................... 51,768,750
1,555,933 Travelers Group Inc................................................................. 94,328,438
-------------
262,947,188
10
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED AMERICAN SHARES, INC. - CONTINUED
VALUE
SHARES (NOTE 1)
========================================================================================================================
COMMON STOCK - CONTINUED
FOOD/BEVERAGE & RESTAURANT - (4.49%)
1,725,000 McDonald's Corp..................................................................... $ 119,025,000
170,000 Tyson Foods, Inc.................................................................... 3,686,875
-------------
122,711,875
INVESTMENT FIRMS - (5.65%)
235,000 J.P. Morgan & Co., Inc.............................................................. 27,524,375
1,387,432 Morgan Stanley, Dean Witter, Discover & Co.......................................... 126,776,599
-------------
154,300,974
LIFE INSURANCE - (2.37%)
1,124,356 SunAmerica, Inc.................................................................... 64,580,198
-------------
PHARMACEUTICAL AND HEALTH CARE - (6.05%)
170,000 Johnson & Johnson................................................................... 12,537,500
80,000 Merck & Co., Inc.................................................................... 10,700,000
272,000 Novartis AG - ADR................................................................... 22,630,618
600,000 Pfizer Inc.......................................................................... 65,212,500
895,600 SmithKline Beecham PLC - ADR........................................................ 54,183,800
-------------
165,264,418
PROPERTY/CASUALTY INSURANCE - (12.39%)
582,514 The Allstate Corp................................................................... 53,336,438
337,500 American International Group, Inc................................................... 49,275,000
450,400 Chubb Corp.......................................................................... 36,200,900
474,700 General Re Corp..................................................................... 120,336,450
255,000 Progressive Corp. (Ohio)............................................................ 35,955,000
559,500 Transatlantic Holdings, Inc......................................................... 43,256,344
-------------
338,360,132
PUBLISHING - (2.94%)
400,000 Gannett Co., Inc.................................................................... 28,425,000
286,000 Harcourt General, Inc............................................................... 17,017,000
230,000 The News Corp. Ltd., Sponsored ADR.................................................. 7,388,750
400,000 Tribune Co.......................................................................... 27,525,000
-------------
80,355,750
RAILROAD - (2.96%)
456,000 Burlington Northern Santa Fe........................................................ 44,773,500
391,004 Canadian National Railway Co........................................................ 20,772,087
345,000 Union Pacific Corp.................................................................. 15,223,125
-------------
80,768,712
REAL ESTATE - (4.21%)
77,000 Bay Apartment Communities, Inc...................................................... 2,926,000
1,451,194 Centerpoint Properties Corporation.................................................. 47,980,102
75,000 Crescent Operating, Inc.*........................................................... 1,260,937
816,300 Crescent Real Estate Equities Company............................................... 27,448,088
165,400 Mack-Cali Realty Corporation........................................................ 5,685,625
11
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED AMERICAN SHARES, INC. - CONTINUED
VALUE
SHARES/PRINCIPAL (NOTE 1)
========================================================================================================================
COMMON STOCK - CONTINUED
REAL ESTATE - CONTINUED
54,599 Patriot American Hospitality, Inc.................................................. $ 1,306,964
713,800 Vornado Realty Trust............................................................... 28,328,938
---------------
114,936,654
---------------
TECHNOLOGY - (8.34%)
1,468,000 Hewlett-Packard Company............................................................ 87,896,500
450,000 Intel Corp......................................................................... 33,328,125
765,000 International Business Machines Corporation........................................ 87,831,563
524,000 Novellus Systems, Inc.*............................................................ 18,700,250
---------------
227,756,438
---------------
TELECOMMUNICATIONS - (2.24%)
793,000 AirTouch Communications, Inc.*..................................................... 46,340,937
280,000 Motorola, Inc...................................................................... 14,717,500
---------------
61,058,437
---------------
Total Common Stock - (identified cost $1,504,716,734)....................... 2,610,332,265
---------------
CONVERTIBLE PREFERRED STOCK - (1.43%)
20,600 AirTouch Communications, Inc., 4.25%, Ser. C Conv. Pfd............................. 1,699,500
70,000 Centerpoint , 8.48%, Ser. A Conv. Pfd.............................................. 2,198,656
230,000 Devon Financing Trust, $3.25, Ser. 144A Conv. Pfd. (b)............................. 14,101,875
25,000 Devon Financing Trust, $3.25, Conv. Pfd. (b)....................................... 1,532,812
361,400 Rouse Company, $3.00, Conv. Pfd.................................................... 17,979,650
30,000 Union Pacific Cap. Trust, 6.25%, Ser. 144A Conv. Pfd. (b).......................... 1,383,750
---------------
Total Convertible Preferred Stock - (identified cost $39,914,216)........... 38,896,243
---------------
SHORT TERM - (2.84%)
$ 18,375,000 Fannie Mae Discount Note, 5.44%, 07/01/98.......................................... 18,375,000
10,055,000 Fannie Mae Discount Note, 5.43%, 07/02/98.......................................... 10,053,483
14,100,000 Fannie Mae Discount Note, 5.46%, 07/07/98.......................................... 14,087,169
9,915,000 Federal Farm Credit Bank Discount Note, 5.50%, 07/06/98............................ 9,907,426
25,220,000 Freddie Mac Discount Note, 5.48%, 07/14/98......................................... 25,170,092
---------------
Total Short Term (identified cost $77,593,170).............................. 77,593,170
---------------
TOTAL INVESTMENTS - (99.88%) - (identified cost $1,622,224,120) - (a).............. 2,726,821,678
OTHER ASSETS LESS LIABILITIES- (0.12%)............................................. 3,365,380
---------------
NET ASSETS - (100%)......................................................... $ 2,730,187,058
---------------
</TABLE>
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $1,622,224,120.
At June 30, 1998 unrealized appreciation (depreciation) of securities for
Federal Income Tax purposes is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation............................................................ $ 1,128,361,343
Unrealized depreciation............................................................ (23,763,785)
---------------
Net unrealized appreciation ................................................ $ 1,104,597,558
</TABLE>
(b) These securities are subject to Rule 144A. The Board of Directors of the
Fund has determined that there is sufficient liquidity in these securities to
realize current valuations. These securities amounted to $55,966,692 and 2.05%
of the Fund's total net assets as of June 30, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED SPECIAL SHARES, INC.
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
===========================================================================================================================
<S> <C> <C>
COMMON STOCK - (95.54%)
APPAREL - (1.03%)
35,000 Cutter & Buck, Inc.*................................................................ $ 936,250
-------------
AUTOMOTIVE/HEAVY EQUIPMENT - (2.78%)
30,000 Hays Lemmerz International, Inc.*................................................... 1,192,500
26,000 Lear Corporation*................................................................... 1,334,125
-------------
2,526,625
--------------
CHEMICALS - (3.41%)
48,000 OM Group, Inc....................................................................... 1,980,000
22,000 Minerals Technologies, Inc.......................................................... 1,119,250
-------------
3,099,250
-------------
COMMUNICATIONS - (4.33%)
20,000 CIENA Corporation*.................................................................. 1,390,000
4,000 EarthLink Network, Inc.*............................................................ 307,000
20,000 Orbital Sciences Corporation.*...................................................... 747,500
20,000 Teleglobe, Inc...................................................................... 530,000
20,000 WorldCom, Inc.*..................................................................... 966,250
-------------
3,940,750
-------------
ELECTRONICS - (0.70%)
35,000 Kent Electronics Corporation *...................................................... 640,938
-------------
EMPLOYEE STAFFING - (11.64%)
28,000 DA Consulting Group, Inc.*.......................................................... 402,500
10,000 Data Processing Resources Corporation*.............................................. 310,625
60,000 Interim Services, Inc.*............................................................. 1,927,500
45,788 Labor Ready, Inc.*.................................................................. 1,382,210
74,000 On Assignment, Inc.*................................................................ 2,585,375
25,000 Renaissance Worldwide, Inc.*........................................................ 543,750
61,500 Robert Half International, Inc.*.................................................... 3,436,313
-------------
10,588,273
-------------
ENERGY - (4.52%)
25,000 Camco International, Inc............................................................ 1,946,875
25,000 Diamond Offshore Drilling, Inc. .................................................... 1,000,000
25,000 Friede Goldman International, Inc.*................................................. 720,312
25,000 Input/Output, Inc.*................................................................. 445,313
-------------
4,112,500
-------------
ENTERTAINMENT/LEISURE TIME - (2.98%)
44,000 Cinar Films, Inc., Class B*......................................................... 814,000
40,000 Imax Corporation*................................................................... 900,000
15,000 Premier Parks, Inc.*................................................................ 999,375
-------------
2,713,375
-------------
13
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED SPECIAL SHARES, INC. - CONTINUED
VALUE
SHARES (NOTE 1)
========================================================================================================================
COMMON STOCK - CONTINUED
FINANCIAL SERVICES - (14.43%)
10,000 American Express Co................................................................. $ 1,140,000
35,000 The Charles Schwab Corporation...................................................... 1,137,500
30,000 Federated Investors, Inc............................................................ 555,000
30,000 LaSalle Partners, Inc.*............................................................. 1,335,000
20,000 North Fork Bancorporation, Inc...................................................... 488,750
22,000 Northern Trust Company.............................................................. 1,676,125
16,100 Star Banc Corporation............................................................... 1,028,388
60,000 TCF Financial Corporation........................................................... 1,770,000
55,500 Washington Mutual, Inc.............................................................. 2,407,313
30,000 Zions Bancorporation................................................................ 1,593,750
-------------
13,131,826
-------------
FOOD/BEVERAGE - (0.91%)
30,000 Keebler Foods Co.*.................................................................. 825,000
-------------
HEALTHCARE - (6.72%)
15,000 Alkermes, Inc.*..................................................................... 269,062
20,000 BioChem Pharmaceuticals Inc.* - ADR................................................. 527,500
12,500 Cardinal Health, Inc................................................................ 1,171,875
500 CliniChem Development Inc.*......................................................... 2,859
10,000 Closure Medical Corporation*........................................................ 248,750
15,000 Elan Corporation, PLC ADR*.......................................................... 964,687
30,000 Focal, Inc*......................................................................... 296,250
5,000 Myriad Genetics, Inc.*.............................................................. 73,125
35,000 PAREXEL International Corporation*.................................................. 1,268,750
22,000 Quintiles Transnational Corporation*................................................ 1,080,750
5,000 Superior Consultant Holdings Corporation*........................................... 215,313
-------------
6,118,921
-------------
HOME/OFFICE FURNITURE - (7.18%)
20,000 Ethan Allen Interiors, Inc.......................................................... 998,750
35,000 Furniture Brands International, Inc.*............................................... 982,187
30,000 Herman Miller, Inc.................................................................. 727,500
34,000 HON Industries, Inc................................................................. 1,151,750
25,000 Knoll, Inc.*........................................................................ 737,500
77,600 Leggett & Platt, Inc................................................................ 1,940,000
-------------
6,537,687
-------------
INDUSTRIAL PRODUCTS - (3.24%)
20,600 Illinois Tool Works, Inc............................................................ 1,373,763
35,156 Molex Inc., Class A................................................................. 821,772
50,700 ThermoQuest Corporation*............................................................ 757,331
-------------
2,952,866
-------------
14
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED SPECIAL SHARES, INC. - CONTINUED
VALUE
SHARES (NOTE 1)
========================================================================================================================
COMMON STOCK - CONTINUED
INFORMATION PROCESSING - OFFICE EQUIPMENT - (3.06%)
30,000 Dell Computer Corporation*.......................................................... $ 2,782,500
-------------
INFORMATION PROCESSING - SERVICES - (11.69%)
70,000 Computer Sciences Corporation*...................................................... 4,480,000
27,000 DST Systems, Inc.*.................................................................. 1,512,000
15,000 Galileo International, Inc.......................................................... 675,937
45,750 Paychex, Inc........................................................................ 1,858,594
14,000 SPR, Inc.*.......................................................................... 416,500
35,000 Sterling Commerce, Inc.*............................................................ 1,697,500
-------------
10,640,531
-------------
INFORMATION PROCESSING - SOFTWARE - (0.49%)
13,200 Great Plains Software, Inc.*........................................................ 445,500
-------------
INSURANCE - (2.43%)
36,000 Horace Mann Educators Corporation................................................... 1,242,000
15,000 Mercury General Corporation......................................................... 966,563
-------------
2,208,563
-------------
PACKAGING - (0.61%)
15,000 Sealed Air Corporation*............................................................. 551,250
-------------
RETAILING - (11.48%)
10,000 Abercrombie & Fitch Co.*............................................................ 440,000
13,000 Amazon.com, Inc.*................................................................... 1,295,937
34,000 CVS Corporation..................................................................... 1,323,875
15,000 The Home Depot, Inc................................................................. 1,245,937
40,400 Kohl's Corporation*................................................................. 2,095,750
20,000 Linens `n Things, Inc.*............................................................. 611,250
35,000 The Maxim Group, Inc.*.............................................................. 695,625
25,000 Proffitt's, Inc.*................................................................... 1,009,375
23,000 Tiffany & Co........................................................................ 1,104,000
20,000 Viking Office Products, Inc.*....................................................... 622,500
-------------
10,444,249
-------------
TRANSPORTATION - (1.91%)
35,000 Kansas City Southern Industries, Inc................................................ 1,736,875
-------------
Total Common Stock - (identified cost $51,225,137)........................... 86,933,729
-------------
15
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED SPECIAL SHARES, INC. - CONTINUED
VALUE
PRINCIPAL (NOTE 1)
========================================================================================================================
SHORT TERM - (4.51%)
$ 4,100,000 State Street Corporation Repurchase Agreement, 5.70%, 07/01/98,
dated 06/30/98, repurchase value of $4,100,649 (collateralized by $3,910,000 par
value U.S. Treasury Notes, 6.50%, 07/16/07, market value $4,184,001) -
(identified cost $4,100,000)................................................... $ 4,100,000
-------------
TOTAL INVESTMENTS - (100.05%) - (identified cost $55,325,137) - (a)................. 91,033,729
LIABILITIES LESS OTHER ASSETS - (0.05%)............................................. (43,761)
-------------
NET ASSETS - (100%)............................................................ $ 90,989,968
=============
</TABLE>
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $55,325,137. At June 30,
1998 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation............................................................. $ 36,822,354
Unrealized depreciation............................................................ (1,113,762)
-------------
Net unrealized appreciation ................................................... $ 35,708,592
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
=========================================================================================================================
<S> <C> <C>
MORTGAGES - (43.89%)
FANNIE MAE POOLS - (5.78%)
$ 2,814 10.00%, 07/01/05, Pool No. 98835...................................................... $ 2,960
10,762 10.00%, 08/01/05, Pool No. 99903...................................................... 11,389
11,254 8.50%, 07/01/17, Pool No. 51539...................................................... 11,810
6,937 8.50%, 04/01/21, Pool No. 117725..................................................... 7,275
302,877 7.50%, 01/01/27, Pool No. 356381..................................................... 310,636
-------------
Total Fannie Mae - (identified cost $334,155)................................ 344,070
-------------
FREDDIE MAC POOLS - (13.49%)
318,634 6.50%, 01/01/04, Pool No. 97289...................................................... 320,676
135,260 8.00%, 09/01/21, Pool No. D2-7906.................................................... 140,670
230,118 8.00%, 10/01/21, Pool No. D2-7334.................................................... 238,602
99,126 8.00%, 06/01/22, Pool No. D2-0670.................................................... 102,843
-------------
Total Freddie Mac - (identified cost $786,033).............................. 802,791
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION POOLS - (6.93%)
28,327 10.00%, 09/15/01, Pool No. 265854..................................................... 29,810
16,642 7.00%, 09/20/23, Pool No. 008299 (Adjustable Rate)................................... 17,017
18,785 7.00%, 01/20/24, Pool No. 008360 (Adjustable Rate)................................. 19,226
348,148 6.50%, 02/20/28, Pool No. 002547..................................................... 346,299
-------------
Total GNMA - (identified cost $404,144)...................................... 412,352
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS & REAL ESTATE MORTGAGE
INVESTMENT CONDUITS - (17.69%)
500,000 Federal National Mortgage Association, 92-152M, 7.75%, 08/25/07....................... 536,560
500,000 United States Department of Veteran Affairs, Mortgage Trust 1992-1,
7.75%, 07/15/17................................................................... 516,715
-------------
Total CMOs & REMICs - (identified cost $983,362)............................. 1,053,275
-------------
Total Mortgages - (identified cost $2,507,694)............................... 2,612,488
-------------
MEDIUM TERM NOTES - (50.18%)
300,000 Fannie Mae, 6.23%, 07/18/02........................................................... 305,673
250,000 Fannie Mae, 6.39%, 09/24/07........................................................... 259,688
350,000 Fannie Mae, 6.00%, 05/15/08........................................................... 354,813
500,000 Fannie Mae, 6.42%, 12/01/08........................................................... 492,580
350,000 Federal Farm Credit Bank, 5.79%, 06/23/08............................................. 347,648
200,000 Federal Home Loan Bank, 7.24%, 11/09/10............................................... 200,000
500,000 Freddie Mac, 6.615%, 03/03/04......................................................... 498,830
500,000 Freddie Mac, 8.00%, 06/20/11.......................................................... 527,735
-------------
Total Medium Term Notes - (identified cost $2,906,023)....................... 2,986,967
-------------
17
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND - CONTINUED
VALUE
PRINCIPAL (NOTE 1)
========================================================================================================================
SHORT TERM - (4.53%)
$ 270,000 State Street Corporation Repurchase Agreement, 5.58%, 07/02/98,
dated 06/29/98, repurchase value of $270,126 (collateralized by $260,000 par
value U.S. Treasury Notes, 6.50%, 07/16/07, market value $278,734) -
(identified cost $270,000).......................................................... $ 270,000
-------------
TOTAL INVESTMENTS - (98.60%) - (identified cost $5,683,717) - (a)..................... 5,869,455
OTHER ASSETS LESS LIABILITIES - (1.40%)............................................... 83,548
-------------
NET ASSETS - (100%) ........................................................ $ 5,953,003
=============
</TABLE>
(a) Aggregate cost for Federal Income Tax purposes is $5,683,717. At June 30,
1998 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation............................................................... $ 186,423
Unrealized depreciation............................................................... (685)
-------------
Net unrealized appreciation.................................................. $ 185,738
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At June 30, 1998 (Unaudited)
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
========================================================================================================================
<S> <C> <C>
FANNIE MAE - (37.75%)
$ 1,300,000 5.43%, 07/08/98 Discount Note......................................................... $ 1,298,627
5,895,000 5.45%, 07/09/98 Discount Note......................................................... 5,887,861
5,420,000 5.40%, 07/10/98 Discount Note......................................................... 5,412,683
3,325,000 5.47%, 07/13/98 Discount Note......................................................... 3,318,937
2,420,000 5.40%, 07/16/98 Discount Note......................................................... 2,414,555
4,655,000 5.40%, 07/17/98 Discount Note......................................................... 4,643,828
2,000,000 5.19%, 07/20/98 Medium Term Note...................................................... 1,999,516
1,950,000 5.40%, 07/24/98 Discount Note......................................................... 1,943,273
5,335,000 5.40%, 07/27/98 Discount Note......................................................... 5,314,194
5,215,000 5.463%, 08/13/98 Discount Note........................................................ 5,180,971
5,255,000 5.45%, 08/14/98 Discount Note......................................................... 5,219,996
1,355,000 5.435%, 09/23/98 Discount Note........................................................ 1,337,816
2,200,000 5.38%, 10/23/98 Medium Term Note...................................................... 2,198,052
-------------
Total Fannie Mae - (identified cost $46,170,309) ................................. 46,170,309
-------------
FEDERAL HOME LOAN BANK - (2.65%)
3,250,000 5.40%, 07/06/98 Discount Note- (identified cost $3,247,562)........................... 3,247,562
-------------
FREDDIE MAC - (59.78%)
1,950,000 5.41%, 07/01/98 Discount Note......................................................... 1,950,000
6,775,000 5.42%, 07/02/98 Discount Note......................................................... 6,773,980
2,530,000 5.40%, 07/07/98 Discount Note......................................................... 2,527,723
2,080,000 5.44%, 07/14/98 Discount Note......................................................... 2,075,914
2,365,000 5.42%, 07/15/98 Discount Note......................................................... 2,360,015
2,735,000 5.45%, 07/23/98 Discount Note......................................................... 2,725,891
2,320,000 5.40%, 07/28/98 Discount Note......................................................... 2,310,604
6,525,000 5.42%, 07/29/98 Discount Note......................................................... 6,497,494
3,785,000 5.42%, 07/30/98 Discount Note......................................................... 3,768,474
3,615,000 5.40%, 07/31/98 Discount Note......................................................... 3,598,733
3,800,000 5.40%, 08/06/98 Discount Note......................................................... 3,779,480
4,755,000 5.45%, 08/07/98 Discount Note......................................................... 4,728,365
750,000 5.42%, 08/21/98 Discount Note......................................................... 744,241
10,600,000 5.44%, 08/24/98 Discount Note......................................................... 10,513,504
2,065,000 5.43%, 08/27/98 Discount Note......................................................... 2,047,246
2,605,000 5.42%, 08/28/98 Discount Note......................................................... 2,582,253
9,600,000 5.44%, 08/31/98 Discount Note......................................................... 9,511,509
4,675,000 5.43%, 09/04/98 Discount Note......................................................... 4,629,165
-------------
Total Freddie Mac - (identified cost $73,124,591)................................. 73,124,591
-------------
TOTAL INVESTMENTS - (100.18%) - (identified cost $122,542,462) - (a).................. 122,542,462
LIABILITIES LESS OTHER ASSETS - (0.18%)............................................... (225,851)
-------------
NET ASSETS - (100%).......................................................... $122,316,611
============
</TABLE>
(a) Aggregate cost for Federal income tax purposes is $122,542,462.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
<TABLE>
SELECTED FUNDS
STATEMENT OF ASSETS AND LIABILITIES
At June 30, 1998 (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 (including
repurchase agreements of $4,100,000 and
$270,000 for Selected Special Shares and
Selected U.S. Government Income Fund,
respectively) see accompanying Schedules
of Investments).............................. $ 2,726,821,678 $ 91,033,729 $ 5,869,455 $ 122,542,462
Cash........................................... 18,087 17,473 43,331 23,310
Receivables:
Dividends and interest....................... 2,715,007 17,754 48,659 68,809
Capital stock sold........................... 3,800,392 26,055 - 10,705
Investment securities sold................... - 17,500 - -
Due from adviser............................. - - 6,858 -
Total assets............................. 2,733,355,164 91,112,511 5,968,303 122,645,286
--------------- -------------- -------------- --------------
LIABILITIES:
Payables:
Capital stock reacquired....................... 1,069,255 44,727 2,131 38,525
Accrued expenses............................... 2,098,851 77,816 675 35,221
Distributions payable.......................... - - 12,494 254,929
--------------- -------------- -------------- --------------
Total liabilities........................ 3,168,106 122,543 15,300 328,675
--------------- -------------- -------------- --------------
NET ASSETS ....................................... $ 2,730,187,058 $ 90,989,968 $ 5,953,003 $ 122,316,611
=============== ============== ============== ==============
SHARES OUTSTANDING (NOTE 5)....................... 90,637,528 6,050,928 660,961 122,316,611
=============== ============== ============== ==============
NET ASSET VALUE, offering and
redemption price per share (Net
Assets / shares outstanding)................. $ 30.12 $ 15.04 $ 9.01 $ 1.00
=========== ========== ========== ==========
NET ASSETS CONSIST OF:
Deficit in undistributed net investment income. $ (2,228,802) - - -
Paid-in capital................................ 1,628,940,431 50,648,894 5,763,441 122,316,611
Accumulated net realized gain (loss)........... (1,122,129) 4,632,482 3,824 -
Net unrealized appreciation on investments..... 1,104,597,558 35,708,592 185,738 -
--------------- -------------- -------------- --------------
$ 2,730,187,058 $ 90,989,968 $ 5,953,003 $ 122,316,611
=============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
<TABLE>
SELECTED FUNDS
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998 (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...................................... $ 16,374,603 $ 150,698 $ - $ -
Interest....................................... 1,830,873 97,362 202,105 3,285,824
--------------- --------------- --------------- ------------
Total income............................... 18,205,476 248,060 202,105 3,285,824
--------------- --------------- --------------- ------------
Expenses:
Management fees (Note 2)....................... 7,168,064 283,868 14,660 176,988
Custodian fees................................. 128,886 9,059 4,776 4,720
Transfer agent fees............................ 754,703 86,164 7,782 39,133
Audit fees..................................... 15,507 8,007 455 9,058
Legal fees..................................... 64,820 10,934 136 10,037
Reports to shareholders........................ 145,450 6,552 1,172 10,657
Directors fees and expenses.................... 87,941 3,388 335 6,646
Registration and filing fees................... 103,715 11,637 12,966 5,117
Miscellaneous.................................. 39,303 5,310 2,205 5,459
Payments under distribution plan (Note 3)...... 3,090,091 102,853 7,330 147,490
--------------- --------------- --------------- ------------
Total expenses............................. 11,598,480 527,772 51,817 415,305
Fee Reduction (Note 6)......................... (7,023) (4,262) (734) (147)
Reimbursement of expenses by
adviser (Note 2)............................. - - (6,858) -
--------------- --------------- -------------- ------------
Net expenses............................... 11,591,457 523,510 44,225 415,158
--------------- --------------- --------------- ------------
Investment income (loss) - net............. 6,614,019 (275,450) 157,880 2,870,666
--------------- -------------- --------------- ------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) from
investment transactions...................... (630,465) 4,672,113 57,164 -
Net increase (decrease) in unrealized
appreciation of investments
during the period............................ 266,316,236 9,763,081 (57,646) -
--------------- --------------- -------------- ------------
Net realized and unrealized
gain (loss) on investments............... 265,685,771 14,435,194 (482) -
--------------- --------------- -------------- ------------
Net increase in net
assets resulting from
operations................................. $ 272,299,790 $ 14,159,744 $ 157,398 $ 2,870,666
=============== =============== =============== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
<TABLE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998
(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............. $ 6,614,019 $ (275,450) $ 157,880 $ 2,870,666
Net realized gain (loss) from 57,164
investment transactions.................. (630,465) 4,672,113 -
Net increase (decrease) in unrealized
appreciation of investments.............. 266,316,236 9,763,081 (57,646) -
---------------- --------------- ---------------- ----------------
Net increase in net
assets resulting from operations......... 272,299,790 14,159,744 157,398 2,870,666
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income...................... (8,842,821) - (157,880) (2,870,666)
Realized gains from investment
transactions............................. (10,396,034) (2,484,228) - -
CAPITAL SHARE
TRANSACTIONS
(NOTE 5)................................... 255,471,339 4,383,994 (8,101) 4,845,780
---------------- --------------- ---------------- ---------------
Total increase (decrease)
in net assets....................... 508,532,274 16,059,510 (8,583) 4,845,780
NET ASSETS:
Beginning of period........................ 2,221,654,784 74,930,458 5,961,586 117,470,831
---------------- --------------- ---------------- ---------------
End of period (including deficit in
undistributed net income of $2,228,802 $ 2,730,187,058 $ 90,989,968 $ 5,953,003 $ 122,316,611
for Selected American Shares)........... ================ =============== ================ ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
<TABLE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1997
<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............. $ 11,399,273 $ (400,259) $ 346,481 $ 5,537,055
Net realized gain from
investment transactions.................. 141,428,955 2,882,984 21,776 -
Net increase in unrealized
appreciation of investments.............. 399,055,976 13,446,850 44,190 -
---------------- -------------- ---------------- --------------
Net increase in net
assets resulting from operations......... 551,884,204 15,929,575 412,447 5,537,055
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income...................... (11,399,273) - (346,481) (5,537,055)
Realized gains from investment
transactions............................. (153,472,089) (3,472,560) - -
Paid in capital............................ (1,360,646) - - -
CAPITAL SHARE
TRANSACTIONS
(NOTE 5)................................... 459,536,450 37,950 (1,038,054) 4,796,597
---------------- -------------- ---------------- --------------
Total increase (decrease)
in net assets....................... 845,188,646 12,494,965 (972,088) 4,796,597
NET ASSETS:
Beginning of period........................ 1,376,466,138 62,435,493 6,933,674 112,674,234
---------------- -------------- ---------------- --------------
End of period.............................. $ 2,221,654,784 $ 74,930,458 $ 5,961,586 $ 117,470,831
================ ============== ================ ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (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. 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. 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, 1998 the U.S. Government Income Fund had capital loss
carryovers of $53,339 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 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.
24
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 1998 (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. 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 the investment adviser. The rate for
American Shares, Inc. is .65% on the first $500 million of average net assets,
..60% on the next $500 million and .55% of average net assets in excess of $1
billion. The rate for Special Shares, Inc. is .70% on the first $50 million of
average net assets, .675% on the next $100 million, .65% on the next $100
million and .60% of average net assets in excess of $250 million. The rate for
the U.S. Government Income Fund is .50% of average net assets. The rate for the
Daily Government Fund is based upon average 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.
Boston Financial Data Services is the Funds' primary transfer agent. Davis
Selected Advisers, L.P. (the "Adviser") is also paid for certain transfer agent
services. The fee for the six months ended June 30, 1998 was $79,790, $9,565,
$588 and $3,305 for American Shares, Special Shares, U.S. Government Income and
Daily Government Funds, respectively. Certain directors and officers of the
Funds are also directors and officers of the general partner of the Adviser.
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.
With respect to Special Shares, Bramwell Capital Management, Inc.
("Bramwell") also acts as sub-adviser. Bramwell manages the day-to-day
investment operations for the Fund. The Fund pays no fees directly to Bramwell.
Bramwell 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. SCD received $21,900 in commissions on the
purchases/sales of portfolio securities.
25
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 1998 (Unaudited)
==============================================================================
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, 1998, for
American Shares, Special Shares, U.S. Government Income and Daily Government
Funds, the Funds incurred distribution services fees totaling $3,090,091,
$102,853, $7,330 and $147,490, 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, 1998 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........................ $ 312,262,544 $ 23,800,958 $ 1,041,558
Proceeds of sales........................ $ 86,120,749 $ 18,900,542 $ 796,841
</TABLE>
NOTE 5 - CAPITAL STOCK
At June 30, 1998, there were 300 million shares of capital stock of
Selected American Shares ($1.25 par value per share) authorized. At June 30,
1998, there were 50 million shares of capital stock of Selected Special Shares
($0.25 par value per share) authorized. At June 30, 1998, 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, 1998 (UNAUDITED)
--------------------------------------------------------
U.S.
AMERICAN SPECIAL GOVERNMENT DAILY
SHARES SHARES INCOME GOVERNMENT
INC. INC. FUND FUND
----------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................... 15,491,883 996,081 75,068 12,593,411
Shares issued in reinvestment
of distributions...................................... 629,804 157,712 14,244 2,867,423
------- ------- ------ ---------
16,121,687 1,153,793 89,312 15,460,834
Shares redeemed........................................... (7,211,374) (854,835) (90,253) (10,615,054)
---------- -------- ------- -----------
Net increase (decrease)............................. 8,910,313 298,958 (941) 4,845,780
========= ======= ==== =========
Proceeds from shares sold................................. 443,497,959 $14,197,928 $678,037 $12,593,411
Proceeds from shares issued in
reinvestment of distributions......................... 18,422,577 2,271,050 128,690 2,867,423
---------- --------- ------- ---------
461,920,536 16,468,978 806,727 15,460,834
Cost of shares redeemed................................... (206,449,197) (12,084,984) (814,828) (10,615,054)
------------ ----------- --------- -----------
Net increase (decrease).......................... $255,471,339 $4,383,994 $(8,101) $4,845,780
============ ========== ======= ==========
</TABLE>
26
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 1998 (Unaudited)
==============================================================================
NOTE 5 - CAPITAL STOCK- (Continued)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-------------------------------------------------------
U.S.
AMERICAN SPECIAL GOVERNMENT DAILY
SHARES SHARES INCOME GOVERNMENT
INC. INC. FUND FUND
----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Shares sold............................................... 25,462,064 617,322 39,980 14,694,975
Shares issued in reinvestment
of distributions...................................... 5,681,154 313,915 31,978 3,596,735
----------- ---------- ------------ -----------
31,143,218 931,237 71,958 18,291,710
Shares redeemed........................................... (13,357,448) (911,431) (188,979) (13,495,113)
----------- ---------- ------------ -----------
Net increase (decrease)............................. 17,785,770 19,806 (117,021) 4,796,597
=========== ========== ============ ===========
Proceeds from shares sold................................. $640,917,425 $7,637,165 $356,629 $14,694,975
Proceeds from shares issued in
reinvestment of distributions......................... 148,002,730 3,227,796 284,113 3,596,735
----------- ---------- ------------ -----------
788,920,155 10,864,961 640,742 18,291,710
Cost of shares redeemed................................... (329,383,705) (10,827,011) (1,678,796) (13,495,113)
------------ ---------- ------------ -----------
Net increase (decrease).......................... $459,536,450 $ 37,950 $ (1,038,054) $ 4,796,597
============ ========== ============ ===========
</TABLE>
NOTE 6 - CUSTODY FEES
Under an agreement with the custodian bank, custody fees are reduced by
credits for cash balances. Such reductions amounted to $7,023, $4,262, $734 and
$147 for American Shares, Special Shares, U.S. Government Income Fund and Daily
Government Fund, respectively.
27
<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
JUNE 30, 1998 YEAR ENDED DECEMBER 31,
----------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(3)
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 27.18 $ 21.53 $ 17.68 $ 13.09 $ 14.59 $ 17.13
---------- --------- --------- --------- --------- ---------
Income From Investment Operations
Net Investment Income.................. .08 .16 .18 .22 .20 .24
Net Gains or Losses on Securities
(both realized and unrealized)...... 3.08 7.72 5.15 4.74 (.66) .70
---------- --------- --------- --------- --------- ---------
Total From Investment Operations.... 3.16 7.88 5.33 4.96 (.46) .94
Less Distributions
Dividends (from net investment
income)............................. (.10) (.17) (.17) (.22) (.20) (.24)
Distributions (from capital gains)..... (.12) (2.05) (1.31) (.15) (.83) (3.24)
Distributions in Excess of Net
Investment Income................... - (.01) - - (.01) -
---------- --------- --------- --------- --------- -------
Total Distributions................. (.22) (2.23) (1.48) (.37) (1.04) (3.48)
---------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period.......... $ 30.12 $ 27.18 $ 21.53 $ 17.68 $ 13.09 $ 14.59
========== ========= ========= ========= ========= =========
Total Return(1)......................... 11.65% 37.25% 30.74% 38.09% (3.20)% 5.42%
- -------------
Ratios/Supplemental Data
Net Assets, End of Period
(000,000 omitted)................... $2,730 $2,222 $1,376 $926 $529 $451
Ratio of Expenses to Average
Net Assets.......................... .94%* .96% 1.03% 1.09% 1.26% 1.01%(2)
Ratio of Net Income to Average
Net Assets.......................... .54%* .62% .87% 1.42% 1.42% 1.37%
Portfolio Turnover Rate(4)............. 4% 26% 29% 27% 23% 79%
Average Commission Rate per Share(5)... $.0600 $.0600 $.0580 - - -
</TABLE>
1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period.
2 Had the Adviser not absorbed certain expenses, the ratio of expenses for
the year ended December 31, 1993 would have been 1.22%.
3 Effective May 1, 1993, Davis Selected Advisers, became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
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.
5 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
* Annualized
28
<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, 1998 ---------------------------------------------------------
UNAUDITED 1997 1996 1995 1994(4) 1993(3,4)
------------- ---------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 13.03 $ 10.89 $ 10.80 $ 9.02 $ 10.20 $ 10.40
---------- --------- --------- --------- --------- ---------
Income From Investment Operations
Net Investment Income....................... (.05) (.07) - - (.03) -
Net Gains or Losses on Securities
(both realized and unrealized)........... 2.49 2.83 1.27 3.04 (.22) 1.10
---------- --------- --------- --------- --------- ----
Total From Investment Operations......... 2.44 2.76 1.27 3.04 (.25) 1.10
Less Distributions
Distributions (from capital gains).......... (.43) (.62) (1.18) (1.26) (.93) (1.30)
---------- --------- --------- --------- --------- ---------
Total Distributions...................... (.43) (.62) (1.18) (1.26) (.93) (1.30)
---------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period............... $ 15.04 $ 13.03 $ 10.89 $ 10.80 $ 9.02 $ 10.20
========== ========= ========= ========= ========= =========
Total Return(1).............................. 18.83% 26.91% 11.86% 34.24% (2.56)% 10.81%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)............................ $90,990 $74,930 $62,435 $58,975 $47,275 $53,257
Ratio of Expenses to Average
Net Assets............................... 1.28%*(5) 1.28% 1.33% 1.48% 1.41%(2) 1.24%(2)
Ratio of Net Income to Average
Net Assets............................... (.67)%* (.60)% (.66)% (.58)% (.27)% (.07)%
Portfolio Turnover Rate(6).................. 24% 51% 98% 127% 99% 100%
Average Commission Rate per Share(7)........ $.0600 $.0600 $.0600 - - -
</TABLE>
1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period.
2 Had the Adviser not absorbed certain expenses, the ratio of expenses
for the year ended December 31, 1993 and 1994 would have been 1.51%
and %1.62, respectively.
3 Effective May 1, 1993, Davis Selected Advisers became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
4 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.
5 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.27% for the period ended
June 30, 1998.
6 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.
7 Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of
related shares purchased and sold.
* Annualized
29
<PAGE>
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
JUNE 30, 1998 YEAR ENDED DECEMBER 31,
---------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(3)
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $ 9.01 $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31
---------- ---------- --------- --------- --------- ---------
Income From Investment Operations
Net Investment Income..................... .24 .51 .53 .54 .50 .56
Net Gains or Losses on Securities
(both realized and unrealized)......... - .11 (.28) .78 (.75) .21
----------- --------- --------- --------- --------- ---------
Total From Investment Operations....... .24 .62 .25 1.32 (.25) .77
Less Distributions
Dividends (from net investment
income)................................ (.24) (.51) (.53) (.54) (.50) (.56)
Distributions (from capital gains)........ - - (.02) (.03) - (.32)
----------- --------- --------- --------- --------- ---------
Total Distributions.................... (.24) (.51) (.55) (.57) (.50) (.88)
----------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period............. $ 9.01 $ 9.01 $ 8.90 $ 9.20 $ 8.45 $ 9.20
=========== ========= ========= ========= ========= =========
Total Return(1)............................ 2.61% 7.32% 2.85% 15.97% (2.71)% 7.99%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted).......................... $5,953 $5,962 $6,934 $7,811 $10,263 $10,336
Ratio of Expenses to Average
Net Assets............................. 1.52%(2,4)* 1.50%(2) 1.44%(2) 1.44%(2) 1.42%(2) 1.34%(2)
Ratio of Net Income to Average
Net Assets............................. 5.38%* 5.79% 5.96% 6.09% 5.70% 5.85%
Portfolio Turnover Rate(5)................ 15% 16% 26% 76% 65% 29%
</TABLE>
1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period.
2 Had the Adviser not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1993, 1994, 1995, 1996 and 1997 and the six
months ended June 30, 1998 would have been 1.88%, 1.69%, 1.58%, 1.67%,
1.60% and 1.76%, respectively.
3 Effective May 1, 1993, Davis Selected Advisers, became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
4 Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.50% for the period ended June 30,
1998.
5 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
30
<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
JUNE 30, 1998 YEAR ENDED DECEMBER 31,
----------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(3)
<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.................... .024 .048 .046 .051 .034 .023
Less Distributions
Dividends (from net investment
income)............................... (.024) (.048) (.046) (.051) (.034) (.023)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ========== ==========
Total Return(1)........................... 2.42% 4.91% 4.70% 5.23% 3.51% 2.34%
- ------------
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)......................... $ 122,317 $ 117,471 $ 112,674 $ 184,603 $ 121,886 $ 8,732
Ratio of Expenses to Average
Net Assets............................ .70%* .70% .75% .75%(2) .75%(2) .75%(2)
Ratio of Net Income to Average
Net Assets............................ 4.87%* 4.80% 4.62% 5.13% 3.44% 2.31%
</TABLE>
1 Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period.
2 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.
3 Effective May 1, 1993, Davis Selected Advisers became the investment
adviser. Until May 1, 1993, Selected Financial Services, Inc. was the
investment adviser.
* Annualized
31
<PAGE>
SELECTED
FUNDS
124 East Marcy Street Santa Fe, New Mexico 87501
===================================================
DIRECTORS OFFICERS
William P. Barr James J. McMonagle
Floyd A. Brown Chairman
Andrew A. Davis Shelby M.C. Davis
Christopher C. Davis President
Jerome Hass Kenneth C. Eich
James J. McMonagle Vice President
Katherine L. MacWilliams Sharra L. Reed
Richard O'Brien Vice President, Treasurer
Larry Robinson & Assistant Secretary
Marsha Williams Thomas D. Tays
Vice President
& Secretary
Arthur Don
Assistant Secretary
Sheldon R. Stein
Assistant Secretary
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
DISTRIBUTOR
Davis Distributors, LLC
124 East Marcy Street
Santa Fe, New Mexico 87501
TRANSFER AGENT & CUSTODIAN
State Street Bank Trust Company
c/o The Selected Funds
P.O. Box 8406
Boston, Massachusetts 02266-8406
AUDITORS
KPMG Peat Marwick LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
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.
======================================================
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Davis Selected Advisers, L.P.
Group of Funds
Selected American Shares
Selected Special Shares
Selected U.S. Government Income Fund
Selected Daily Government Fund
Investment Adviser
Davis Selected Advisers, L.P.
124 E. Marcy Street
Santa Fe, NM 87501
Distributor
Davis Distributors, LLC
124 E. March Street
Santa Fe, NM 87301
Transfer Agent and Custodian
State Street Bank & Trust Company
c/o Selected Funds
P.O. Box 8241
Boston, MA 02266-8243
Legal Counsel
D'Ancona & Pflaum
40 North LaSalle Stret
Chicago, IL 60602-2502
Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
