<PAGE>
THE
SELECTED FUNDS
ANNUAL REPORT
DECEMBER 31, 1999
[LEAF]
SELECTED
FUNDS
Selecting Quality Companies for the Long Term (Trademark)
<PAGE>
SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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Dear Fellow Shareholder,
As we enter the new millennium, we must recognize that the market has come a
long way and is starting from a high base. We are unlikely to continue enjoying
the twin benefits of steeply falling interest rates and rising corporate profits
as a percentage of gross domestic product that propelled stock prices and
price/earnings ratios sharply higher in the last two decades or so of the 20th
century. Corporate profits have been inflated by various accounting practices.
In addition, while the Internet holds great possibilities for many businesses,
it is disrupting profitability for others.
Throughout modern times, we have seen the development of different networks that
linked people and businesses together and changed history. Examples include the
railroad, automobile/highway, electricity, air travel and telephone networks.
Today, the Internet is transforming the world through an electronic network that
transmits video, voice and data at ever-increasing speeds and ever-reducing
costs.
For many companies, the "net net" conclusion is that they must convert their
businesses to e-businesses or they will have no business. As a result, the
Internet revolution, like other revolutions before it, has spawned enormous
investment spending--creating a high degree of optimism and speculation, perhaps
even a financial bubble. Yet this speculation has also facilitated the raising
of low-cost capital and given the United States a first-mover advantage in
developing the Internet and driving it forward.
A recession or high interest rates would reduce the availability of capital and
spending on the Internet. We think policymakers have been willing to live with
some froth in the market because they believe the good of the Internet outweighs
the bad. The Internet should have a huge positive impact on productivity and
cost structures, and maintaining our leadership position is worth the risk of
not taking actions that could lead to recession. Continued investment in the
Internet is necessary for the good of the country and our competitive health.
At the same time, many business models will have to change and there definitely
will be losers as well as winners, as there have always been with any
technological advance. For example, as more business is done directly via the
Internet, middleman industries like distributors are particularly vulnerable.
Many established companies are going to have to provide greater value-added with
their services or their customers will turn to the Internet. The impact of these
businesses modernizing and taking restructuring charges will not necessarily be
bullish for corporate profits in the early stages.
Moreover, it is impossible to predict which of the new dot.com companies will
thrive or even survive over time. When you look at other industries that
transformed the country like autos and airplanes, you see that most of the
pioneering companies in those industries are no longer in business today.
We think we may be closing another chapter in the market's history and facing a
future that does not hold as many favorable macro factors. The Internet is both
a driver and a destroyer. Companies old and new are caught up in a Darwinian
struggle, trying to anticipate which business models will work and which will
not work. Hopefully, this will be a process of creative destruction and the
economy overall will emerge the better for it. But struggles are not necessarily
good for corporate profits, and we don't think it will be as easy--if, indeed,
it has ever been easy--to make money in stocks. As a result, stock selection
will be more crucial than ever.
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
Because we are in a time of ferment and change, we think a premium will be paid
for company managements that "get it" and invest their shareholders' money
correctly to position the company for the future. In addition, with the U.S.
market unlikely to enjoy the big tailwind of expanding P/E ratios that it did
over the past 15 or 20 years, we think having a global perspective may be
increasingly important. Multinational companies have an advantage in that they
can allocate their capital around the world to areas where GDP growth is
expected to be the fastest.
Some foreign economies such as Germany and Japan appear to be behind us in their
evolution, and they may offer greater opportunities as more and more of their
businesses streamline and restructure. On the other hand, the United States is a
moving target, and it will not be easy for other countries to catch us because
we are driving our Internet development so rapidly.
If the Dow were to increase at the same pace over the next two decades as it did
over the past two, it would stand at roughly 100,000 in 2020. We are certain
that will not happen. However, if the Dow were to compound at a rate of 7% or 8%
a year, it could reach 40,000 or 50,000 over that time frame--meaning the market
still offers considerable opportunities for long-term wealth building.1 As
always, we will focus on buying growing companies at reasonable prices that are
led by management teams who respond dynamically to change. We are on a long
voyage with our shareholders and our money is invested shoulder-to-shoulder with
theirs. We are not overly optimistic. We are not pessimistic. We are trying to
be realistic.
Sincerely,
/s/ James J. McMonagle /s/ Shelby M.C. Davis
James J. McMonagle Shelby M.C. Davis
Chairman Senior Research Adviser
February 4, 2000
2
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
SELECTED AMERICAN SHARES, INC.
PERFORMANCE OVERVIEW
Selected American Shares generated a total return of 20.32% for the one-year
period ended December 31, 19992, roughly in line with the 21.04% return for the
Standard & Poor's 500 Index3 and far outpacing the average return of 11.28% for
the 281 large-cap value funds tracked by Lipper Analytical Services.4 From May
1, 1993 through December 31, 1999, the approximate period that Davis Selected
Advisers has managed Selected American Shares, the Fund provided an average
annual total return of 21.33%, ranking the Fund seventh out of 74 funds in the
Lipper Large-Cap Value Fund category. According to Morningstar, "This fund's
managers have quietly outmaneuvered their peers too. By picking good stocks and
then letting them ride, they've trounced most large-value funds.... In short,
this fund remains a keeper."5
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS
Q. How would you describe the performance of the Fund in 1999?
A. Investors often speak of stock market performance in terms of breadth or
narrowness. By this they are describing whether a move in the market was enjoyed
by a broad range of companies or by only a select few. Like 1998, 1999 was a
year of extraordinary narrowness in the market. The handsome gains enjoyed by
the S&P 500 Index, which were comparable to the gains enjoyed by Selected
American Shares, were produced by the exceptionally strong performance of a very
few stocks.
The vast majority of stocks posted weak performance.
As even the most casual market observer knows, 1999 was a year of extraordinary
performance in the technology sector. While many of the gains in this sector
were reaped by companies with virtually no earnings and no clear path to
developing significant earnings, the performance of more old-fashioned
technology companies--if that is not an oxymoron--was also exceptional.
Importantly, the shares of technology companies that the Fund owns--such as IBM,
Hewlett-Packard and Texas Instruments6-- did not just reflect changes in
psychology or a new-era mania, but instead reflected substantial gains in their
core businesses.
Corporate customers continue to flock to IBM to seek advice and solutions for
addressing the Internet. Hewlett-Packard's wonderful printing business continues
to benefit from the rise of e-mail and digital photography. Texas Instruments,
the Fund's star performer of the year, is beginning to reap the rewards of its
prescient commitment to the world of digital signal processors--a fancy word for
describing the computer chips that lie at the heart of everything from cellular
phones and digital cameras to new generation automobiles.
Q. What about the performance of financial stocks in 1999?
A. Most market observers would describe 1999 as a terrible year for financial
stocks. The PHLX/KBW Bank Index, for example, fell 2.12% in 1999 while the
threat of increasing interest rates spooked investors throughout the sector.3
Although the Fund owns a number of financial stocks whose value declined and
whose earnings outlook deteriorated somewhat last year, it is notable that four
of our five largest holdings in the financial area achieved exceptional gains,
handily outperforming the S&P 500.
3
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
American Express, the Fund's largest holding, rose more than 60%, perhaps
reflecting the fact that the Internet does not accept cash. The international
powerhouse, American International Group, also one of the Fund's top 10
holdings, advanced almost 40%. AIG enjoyed a remarkable expansion in its
price/earnings (P/E) ratio to almost unprecedented levels. Despite this dramatic
appreciation, this outstanding international growth company still trades at only
a slight premium to the valuation of the S&P Index.
Two other large holdings in the financial sector--Citigroup and Morgan Stanley
Dean Witter--remain great beneficiaries of worldwide privatization, the
globalization of trade and finance, unprecedented mergers and acquisitions
activity, and strong capital markets. We continue to think that these companies
are two of only a handful of American powerhouses that make up a global
oligopoly in the investment banking business.
Q. What holdings performed unsatisfactorily last year?
A. As always, the Fund owned some companies whose stocks performed poorly. Among
these were Wells Fargo, Berkshire Hathaway, McDonald's, Household International,
and Martin Marietta Materials. Significantly, the poor performance of these
stocks was not a reflection of poor performance in their underlying businesses.
It is important to distinguish these types of stocks from stocks where poor
returns reflected a substantial decline in the operating performance of those
businesses. It is this latter group that Ken and I categorize as mistakes, and
we certainly had our share of these in 1999.
Chief among these mistakes must be our mis-assessment of Waste Management. While
the Fund's holdings in this company were never among our largest, it was
certainly our largest mistake. It now appears that the company's financial
statements were inaccurate and that senior management knowingly covered up
deteriorating operating results. Ken and I feel we were slow to pick up on the
warning signs of weakening operations and strained financials.
To this list, we must also add Philip Morris where we failed to anticipate
material setbacks for the company in the legal arena. In analyzing our holding
in Progressive Corp., still one of the best companies in the auto insurance
business, we were slow to recognize the huge impact that greater price
competition would have on earnings. In the case of another insurer, UNUM, we
were mistaken in our assessment of the profitability of the company's core
business.
Nevertheless, we know that we are in a batting average business, and we must be
willing to swing at the ball to improve. But we must also remember that the only
value of mistakes lies in the lessons that we learn from them. As my grandfather
Shelby Cullom Davis once said, "If you do not admit you make mistakes, you do
not learn from them."
Q. What is your outlook as we move into the next century?
A. In his commentary at the beginning of this annual report, my father Shelby
M.C. Davis has clearly described the challenges that in all likelihood lie ahead
and the issues on which Ken and I must always remain focused. A wag once
famously said that the four most expensive words on Wall Street are, "This time
is different." But clearly as we look out at this new economy, some things are
different. Venerable companies with stable businesses are under attack from this
new juggernaut called the Internet. Business plans that once could have been
carved in stone must be completely reassessed.
4
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
In addition to these changes in technology, other powerful forces are at work
creating an environment of uncertainty. For example, investors have been lulled
into a sense of complacency by the seemingly routine predictability of quarterly
earnings gains that may have been more the result of elastic accounting than a
true reflection of the underlying businesses. In many industries there is also
the specter of increased government regulation, from price controls in the
pharmaceutical industry to regulatory intervention in the development of the
broadband Internet.
Finally, without making economic predictions, we must always remember that the
level of interest rates plays a vital role in our evaluation of companies for
one simple reason: no company is worth more or less than the present value of
its future cash flows. In determining that present value, one must do two
things: first, make predictions about the future cash flows generated by the
business in question and, second, discount those cash flows to the present using
an interest rate that reflects the available risk-free alternatives. The higher
this interest rate, the lower the present value of those future earnings streams
and, therefore, the lower the valuation for the stock in question. Warren
Buffett once said that interest rates act like gravity in the financial markets.
Higher rates would certainly weigh down stock valuations.
I would like to end with an interesting quotation from an interview given by my
father that appeared in Business Week magazine. In it he says, we guarantee that
we "will never be number one in a roaring speculative bull market. [We] eschew
the go-go philosophy that made instant winners [last year] of funds that favored
letter stock, new issues and hotshot over-the-counter securities." What makes
this observation so interesting is that it appeared in the February 7th issue of
Business Week in the year 1970, not long before the onset of the worst bear
market since the depression.
But lest we become too pessimistic, it is notable that in the same interview my
father states, "In a bull market, all you need is a great stock. In a bear
market, you need a great company." Ken and I feel that in Selected American
Shares we own many great companies run by great executives. While we think that
the next five years may be difficult ones for the overall market, we believe
that, at today's prices, the valuations for the companies we own are not
excessive and that patient, long-term investors will be rewarded for riding
through the inevitable financial storms that are likely to follow the smooth
sailing of the last decade.(7)
SELECTED SPECIAL SHARES
PERFORMANCE OVERVIEW
Selected Special Shares generated a return of 16.83% for the 12 months ended
December 31, 1999,(2) outpacing the 14.72% return posted by the S&P MidCap 400
Index.3 The Fund's fourth-quarter return of 19.39% also exceeded the 17.19%
return of the S&P MidCap 400 Index. Unlike more aggressive small-cap and mid-cap
funds, Selected Special Shares seeks to deliver less volatile returns while
building long-term wealth for shareholders. The Fund's three-year and five-year
results--average annual returns of 22.67% and 22.61%, respectively--reflect this
objective.
5
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, PORTFOLIO MANAGER
Q. Could you summarize the performance of small and mid-cap stocks in 1999?
A. The first half of 1999 was dominated by large-cap stocks. Small and mid-cap
stocks started to do better in the second half because of strong fundamentals
and relatively attractive valuations. Their better performance is reflected in
the Fund's solid fourth quarter gains of 19.39%. The companies that performed
particularly well for us in 1999 include Tiffany, Teradyne, Computer Sciences,
Legato Systems (sold in early January 2000), Lexmark, Charles Schwab,
Flextronics, Jabil Circuit, Home Depot and Heidrick & Struggles.6 Many of these
companies also were top contributors to performance in the fourth quarter.
However, three of these companies--Lexmark, Charles Schwab and Heidrick &
Struggles--did not make the list of top performers in the fourth quarter and
were replaced by Kansas City Southern, KLA-Tencor and WinStar Communications.
Many of these stocks have been held for some time and some of them did not
really move until the fourth quarter. As committed long-term investors, we
recognize that stock prices do not progress in straight lines. We may ride
through quarters when stocks of companies we own may be dormant despite their
future growth potential, and perhaps even add to our positions if share prices
drop. Computer Sciences is an example. The stock was a lackluster performer
throughout much of 1999 despite the accelerating earnings growth we projected
for this computer services outsourcing company. Then, early in December, two
major brokerage firms recommended the stock and the shares advanced 45% during
the month. We believe being early and doing one's own research are always best.
So while Computer Sciences held the Fund's performance back early in the year,
the stock recovered strongly by year-end.
Another longtime holding that soared in the fourth quarter was Tiffany (+49%).
The company has been hitting on all cylinders, both productwise and
geographically, including Japan. Tiffany enjoyed a tremendous Christmas season
thanks to a strong economy and a focus on lasting gifts in keeping with the
millennium. Tiffany's outlook remains bright in terms of product lines and
geographic locations. The company should benefit going forward from its new
propriety diamond ring setting, Lucida, which has been enthusiastically
received.
Technology was a strong area all year and particularly so in the fourth quarter.
That is reflected in the performance of Fund holdings such as Teradyne,
Flextronics and KLA-Tencor.
Two stocks that did not perform well last year, in part in sympathy with certain
competitors that had fundamental problems, were drugstore chain CVS and drug
distributor Cardinal Health. Fundamentals for these two companies have remained
strong. We remain positive about the outlook for both companies and anticipate
them bouncing back off fourth quarter tax selling and appreciating at least in
line with their approximate 20% earnings growth rates.
Q. What are some of your other favorite investment themes?
A. Outsourcing continues to be one of the major themes. One area of particular
opportunity results from the tremendous technological change in communications
relating to the move to fiber optics networking. The amount of information
transmitted over a strand of glass is doubling every 9-12 months--even faster
than the doubling every 18 months in the number of transistors squeezed on a
silicon chip as described by Moore's law. This rapid growth is creating enormous
pressures on manufacturers, and companies such as Lucent and Nortel are
increasingly reducing time to market by outsourcing. Contract manufacturers that
we like include Flextronics and Jabil Circuit. Outsourcing is a strong trend
that we believe will only get stronger.
6
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ELIZABETH R. BRAMWELL, PORTFOLIO MANAGER - CONTINUED
Wireless communications are booming, and new generations of video game machines
and Internet phones are about to be introduced. Investments we like include
WinStar in the field of fixed wireless phones and Molex, a longtime Fund holding
and a component manufacturer for various communication, computer and
entertainment products.
In addition, the Internet is driving huge change, just as the advent of
electricity and the automobile did a century ago. We continue to hunt for ways
to capitalize on the Internet revolution, although the Fund focuses less on pure
Internet companies than on traditional companies that use the Internet
effectively.
A number of the Fund's holdings are beneficiaries of the new economy. These
range from Computer Sciences, which helps companies with systems integration and
Internet-enabling capabilities, to Paychex, a data processing company that is
benefiting from business applications of the Internet, to Sepracor in the
biotech and pharmaceutical field. It is also good news that we began the year
2000 without any significant Y2K computer problems worldwide. This should
accelerate the ramp up of projects that may have been deferred because of Y2K
concerns.
Charles Schwab is a company that we have owned for some time that we believe is
positioning itself well for the new economy. Schwab recently announced that it
is acquiring U.S. Trust--a significant strategic move that we see as
Web-enabling high net worth wealth management.
A tangential example of an Internet beneficiary is Heidrick & Struggles, a
company in the high-level executive recruiting business that is filling a need
in a tight market for executives that is related in part to the explosion of new
dot.com companies as well as to demand from existing companies that are
expanding rapidly in this period of global growth. An interesting aspect of
Heidrick & Struggles is the "hidden" assets that it has accumulated through
various venture capital investments in dot.com companies.
Q. What is your current outlook and how is the Fund positioned for that
environment?
A. We anticipate that interest rates will trend upwards from current levels,
which is likely to be somewhat of a dampener on old economy companies. New
economy companies should be less affected by interest rate moves because the new
economy is driven more by intellectual capital than physical capital. The
competitive impetus to increase productivity and offset labor constraints is so
great that it drives capital spending over and beyond interest rate trends. The
new Internet-based economy is a global phenomenon that represents an enormous
sea change. Companies must adapt to survive, and sometimes newness has
advantages such as agility. There is some logic to new economy companies having
very different valuations from old economy companies.
The speed of change is accelerating and creating numerous opportunities in fiber
optics, wireless communications and business-to-business (B2B) commerce. The
Internet is producing numerous discontinuities and first-mover advantage can
result in tremendous market opportunities.
As always, the Fund invests on a stock-by-stock basis--looking at such factors
as strength of management and consistency of earnings as well as valuations,
such as the price/earnings to growth [(P/E)/G] ratio. A continuing strategy is
to invest in stocks at favorable P/E ratios to their projected earnings growth
rates or to the overall market. We estimate that the year 2000 earnings growth
rate on the Fund's portfolio is around 25%, for which we are currently paying a
P/E multiple of about 28 times earnings. This works out to a P/E to growth ratio
of 1.12. We think that this is attractive relative to the S&P 500, which we
estimate has a growth rate of about 10%--less than half the estimated growth
rate of the Fund--and a P/E ratio approximately the same as the Fund's.(7)
7
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
SELECTED U.S. GOVERNMENT INCOME FUND
PERFORMANCE OVERVIEW
The Selected U.S. Government Income Fund declined 1.97% for the one-year period
ended December 31, 1999.2 The Fund's benchmark, the Lehman Brothers Intermediate
Term U.S. Treasury Securities Index,3 rose 0.44% over the same period while the
124 funds included in Lipper Analytical Services' Intermediate U.S.
Government Fund category decreased an average of 1.68%.4
AN INTERVIEW WITH CRESTON A. KING, PORTFOLIO MANAGER
Q. What key factors influenced the Fund's performance in 1999?
A. The year 1999 was the worst year for the bond market since 1994 and the
second worst year since 1973. Between August 1, the date that I became portfolio
manager of the Fund, and the end of the year, the market was in a fairly
continuous downtrend with only a few up days recorded. The primary reason for
the market's sell off was the fear that inflationary forces could resurface as
the nation continued to enjoy robust economic growth. The Federal Reserve raised
interest rates three times in 1999 and is likely to raise rates further in 2000
in an effort to moderate the economy and keep inflation in check.
The Fund underperformed its peer group last year for two key reasons. First, the
overall maturity of the Fund's investments was somewhat longer than it should
have been because longer term securities tend to be more volatile and fall
further than shorter term securities in a rising interest rate environment.
Second, the Fund was invested fairly heavily in mortgage-backed securities
through the first seven months of 1999, and these securities tend to decline
even more than other bonds during periods of increasing interest rates because
mortgage refinancings drop off. With fewer homeowners paying off their mortgages
ahead of schedule, the mortgage-backed securities remain outstanding longer than
originally expected and that money is not available to reinvest at higher
current interest rates.
Q. How is the Fund positioned today?
A. In August, we began a restructuring of the Fund's portfolio that was
completed by the middle of October. Currently the portfolio is invested
approximately one-third in highly liquid, actively traded U.S. government agency
securities; one-third in U.S. Treasury securities, where the Fund essentially
had no exposure before; and one-third in the mortgage sector, but in issues
backed by 15-year mortgages rather than 30-year mortgages.6
As we restructured the portfolio, our focus was on liquidity, liquidity,
liquidity in order to maintain a high degree of flexibility given the uncertain
interest rate climate. We also shortened the weighted average effective maturity
of the portfolio (taking into account bond call features and the average life of
mortgage-backed securities) to around 5 years. Once the economy shows signs of
slowing and interest rates begin to peak, we anticipate lengthening maturities
within the intermediate-term range (three to 10 years) in order to take
advantage of the higher yields and price appreciation potential of longer term
securities in a declining interest rate environment.
8
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CRESTON A. KING, PORTFOLIO MANAGER - CONTINUED
Q. What is your general strategy in managing the Fund?
A. Our goal is to provide investors with a well diversified portfolio that
allows them to participate in the returns and security of U.S. government bonds.
We employ a research process focused on evaluating U.S. economic and interest
rate trends, which essentially drive bond market performance. We are also
committed to a long-term, buy-and-hold approach designed to reduce portfolio
turnover. However, we do anticipate making slight adjustments among the
percentages allocated to the three major sectors of the government
market--Treasuries, government agencies and mortgage-backed securities--as
relative values and opportunities change.
The Selected U.S. Government Income Fund is intended to help create a strong
foundation for any long-term investment plan. The Fund provides potentially
higher monthly income than most short-term investments and can offer investors
an excellent means of balancing equity holdings with fixed-income securities of
the highest credit quality.(7)
- ------------------------------
This annual report is authorized for distribution only when accompanied or
preceded by a current prospectus of the Selected Funds which contains more
information about risks, fees and expenses. Please read the prospectus carefully
before investing or sending money.
(1) This example illustrates the power of compounding over a 20-year period, and
is not intended to be indicative of future investment results which may be
higher or lower than the assumed rate.
(2) Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results. Investment
return and principal value will vary so that, when redeemed, an investor's
shares may be worth more or less than when purchased. The following table lists
the average annual total returns for the periods ending December 31, 1999.
- -------------------------------------------------------------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR 10 YEAR
- -------------------------------------------------------------------------
Selected American Shares 20.32% 24.29% 28.21% 18.05%
- -------------------------------------------------------------------------
Selected Special Shares 16.83% 22.67% 22.61% 14.26%
- -------------------------------------------------------------------------
Selected U.S. Government Income (1.97%) 3.67% 5.85% 6.11%
- -------------------------------------------------------------------------
(3) The definitions of indices quoted in this annual report appear below.
Investments cannot be made directly in any of these indices.
I. The S&P 500 Index is an unmanaged index of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The index is adjusted for
dividends, weighted towards stocks with large market capitalizations, and
represents approximately two-thirds of the total market value of all domestic
common stocks.
II. The PHLX/KBW Bank Index is a capitalization-weighted index consisting of
24 exchange-listed and National Market System stocks, representing national
money center banks and leading regional institutions. The index is intended to
reflect the evolving financial sector and was developed with a base value of 195
as of October 21, 1991.
9
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SELECTED FUNDS
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
III. The S&P Midcap 400 Index is a capitalization-weighted index that measures
the performance of the mid-range sector of the U.S. stock market. The index was
developed with a base level of 100 as of December 31, 1990.
IV. The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is a
recognized unmanaged index of U.S. Government Securities performance.
(4) Lipper Analytical Services' rankings and comparisons are based on total
returns unadjusted for commissions.
For the one, five and ten-year period ended 12/31/99, Selected American Shares
was ranked as follows: 33 out of 281 funds, 5 out of 119 funds, and 4 out of 46
funds, respectively, in the Lipper "Large Cap Value Funds" category.
(5) Source: Morningstar Mutual Funds, April 22, 1999.
(6) Portfolio holdings and portfolio manager opinions cited in this material are
current as of the date of this report, but are subject to change. See each
Fund's Schedule of Investments for a detailed list of portfolio holdings.
(7) This report reflects the professional opinions of the Funds' portfolio
managers. All investments involve some degree of risk. There can be no assurance
that the Fund's investment strategies will be successful. Prices of shares will
vary, so that when redeemed, an investor's shares could be worth more or less
than their original cost.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
10
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SELECTED AMERICAN SHARES, INC.
PORTFOLIO HOLDINGS - AT DECEMBER 31, 1999
================================================================================
PORTFOLIO MAKEUP (% OF FUND NET ASSETS) SECTOR WEIGHTINGS (% OF STOCK HOLDINGS)
Common Stocks 98.3% Banks and Savings and Loan 6.6%
Preferred Stocks 1.1% Real Estate 2.4%
Short Term Investments, Building Material 3.8%
Other Assets & Liabilities 0.6% Financial 23.8%
Food/Beverage 3.8%
Other 5.9%
Insurance 8.4%
Pharmaceutical and Health Care 5.0%
Electronics 8.8%
Publishing 2.6%
Telecommunications 5.5%
Technology 18.9%
Diversified 4.5%
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
STOCK SECTOR % OF FUND NET ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
American Express Co. Financial 6.69%
Hewlett-Packard Co. Technology 5.80%
Texas Instruments Inc. Electronics 5.05%
Morgan Stanley Dean Witter & Co. Investment Firms 4.96%
American International Group, Inc. Property/Casualty Insurance 4.75%
Citigroup, Inc. Financial 4.73%
Wells Fargo Co. Banks and Savings & Loan Associations 4.26%
International Business Machines Corp. Technology 4.17%
McDonald's Corp. Food/Beverage & Restaurant 3.75%
Household International, Inc. Financial 3.23%
</TABLE>
11
<PAGE>
SELECTED AMERICAN SHARES, INC.
PORTFOLIO ACTIVITY - JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
================================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99)
(Highlighted Positions are those greater than 0.99% of Net Assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Agilent Technologies, Inc. Telecommunications 11/17/99 0.21%
AT&T Corp. Telecommunications 02/01/99 0.11%
Colgate-Palmolive Co. Consumer Products 02/03/99 0.47%
Dow Jones & Co., Inc. Publishing 01/07/99 0.32%
Globalstar Telecommunications Ltd. Telecommunications 04/08/99 0.54%
Koninklijke Philips Electronics N.V. Electronics 02/08/99 0.46%
Lexmark International Group, Inc., Class A Technology 11/01/99 1.46%
Loral Space & Communications, Ltd. Telecommunications 04/06/99 0.78%
Marriott International, Inc. Hotels & Motels 01/29/99 0.84%
MediaOne Group, Inc. Telecommunications 12/01/99 1.39%
Monsanto Co. Agricultural 05/10/99 0.22%
Novell, Inc. Technology 10/05/99 1.30%
Oracle Corp. Technology 04/29/99 2.39%
Providian Financial Corp. Financial 05/21/99 1.82%
SAP AG-ADR Technology 02/25/99 0.39%
SAP AG, Pfd Technology 02/26/99 0.81%
UBS AG Banks & Savings & Loan Associations 04/13/99 --
Unisys Corp. Technology 06/11/99 0.21%
United Parcel Service, Inc. Transportation - Services 11/09/99 --
UnumProvident Corp. Life Insurance 02/03/99 0.44%
Waste Management, Inc. Waste Management Services 01/13/99 0.13%
WPP Group PLC Advertising Agencies 01/06/99 0.09%
POSITIONS CLOSED (1/1/99-12/31/99) (Gains and losses greater than $3 million are highlighted)
<CAPTION>
DATE OF FINAL
SECURITY SECTOR SALE GAIN/(LOSS)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AirTouch Communications, Inc.
4.25%, Ser. C Conv. Pfd Telecommunications 02/19/99 1,611,142
AirTouch Communications, Inc. Telecommunications 02/23/99 44,236,733
The Allstate Corp. Property/Casualty Insurance 09/14/99 23,104,876
Banc One Corp. Banks & Savings & Loan
Associations 10/20/99 (4,733,328)
Bank of America Corp. Banks & Savings & Loan
Associations 11/01/99 10,014,983
British Petroleum Company PLC - ADR Energy 02/25/99 1,347,310
Burlington Northern Santa Fe Railroad 02/22/99 2,787,243
Canadian National Railway Co. Railroad 02/16/99 (286,605)
Cooper Cameron Corp. Energy 08/18/99 3,889,492
</TABLE>
12
<PAGE>
SELECTED AMERICAN SHARES, INC.
PORTFOLIO ACTIVITY - JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
================================================================================
POSITIONS CLOSED (1/1/99-12/31/99) - CONTINUED
<TABLE>
<CAPTION>
SECURITY SECTOR DATE OF FINAL SALE GAIN/(LOSS)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Halliburton Co. Energy 06/03/99 9,236,397
Johnson & Johnson Pharmaceutical &
Health Care 05/25/99 12,085,467
Mack-Cali Realty Corp. Real Estate 08/24/99 (455,036)
Micron Technology , Inc. Electronics 01/15/99 4,492,722
The News Corporation Ltd., Sponsored ADR Publishing 01/20/99 477,752
Noble Affiliates, Inc. Energy 03/05/99 (3,198,689)
Novartis AG - ADR Pharmaceutical &
Health Care 05/14/99 2,509,603
Patriot American Hospitality, Inc. Real Estate 02/05/99 (397,794)
Schlumberger Ltd. Energy 04/16/99 6,223,347
Smith International, Inc. Energy 04/15/99 (263,120)
UBS AG Banks & Savings & Loan
Associations 11/03/99 (7,428,773)
United Parcel Service, Inc. Transportation - Services 11/10/99 728,049
</TABLE>
13
<PAGE>
SELECTED AMERICAN SHARES, INC.
COMPARISON OF SELECTED AMERICAN SHARES, INC. AND STANDARD & POOR'S 500
STOCK INDEX
================================================================================
Average Annual Total Return For the Periods ended December 31, 1999.
One Year ....................................... 20.32%
Five Years...................................... 28.21%
Ten Years....................................... 18.05%
$10,000 INVESTED OVER TEN YEARS. Let's say you invested $10,000 in Selected
American Shares ("SAS") on December 31, 1989. As the chart below shows, by
December 31, 1999 the value of your investment would have grown to $52,595 - a
425.95% increase on your initial investment. For comparison, the Standard &
Poor's 500 Stock Index is also presented on the chart below.
S&P 500 SAS
------- ---
1989 10,000.00 10,000.00
1990 9,689.00 9,609.70
1991 12,635.00 14,054.72
1992 13,596.00 14,869.18
1993 14,963.00 15,675.48
1994 15,160.00 15,174.37
1995 20,850.00 20,954.95
1996 25,634.00 27,395.48
1997 34,183.00 37,596.16
1998 43,951.00 43,713.99
1999 53,198.00 52,594.75
Standard & Poor's is an unmanaged index which has no specific investment
objective. Investments cannot be made directly into the index. The index used
includes net dividends reinvested.
The performance data for Selected American Shares contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
14
<PAGE>
SELECTED SPECIAL SHARES, INC.
PORTFOLIO HOLDINGS - AT DECEMBER 31, 1999
================================================================================
PORTFOLIO MAKEUP (% OF FUND NET ASSETS) SECTOR WEIGHTINGS (% OF STOCK HOLDINGS)
Common Stocks 99.4% Industrial Products 5.1%
Other Assets & Liabilities 0.6% Healthcare 3.7%
Electronics 12.9%
Retailing 19.0%
Entertainment/Leisure 5.7%
Financial Services 9.8%
Energy 2.9%
Home/Office Furniture 2.9%
Information Processing 18.4%
Transportation 2.8%
Communications 4.3%
Employee Staffing 7.1%
Other 5.4%
<TABLE>
<CAPTION>
TOP 10 HOLDINGS STOCK SECTOR % OF FUND NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tiffany & Co. Retailing 7.47%
Computer Sciences Corp. Information Processing - Services 6.16%
Teradyne, Inc. Electronics 3.68%
Legato Systems, Inc. Information Processing - Software 3.19%
Lexmark International Group, Inc. Class A Information Processing - Office Equipment 2.94%
Molex Inc., Class A Industrial Products 2.92%
Home Depot, Inc. (The) Retailing 2.87%
Kansas City Southern Industries, Inc. Transportation 2.77%
Jabil Circuit, Inc. Electronics 2.71%
Kohl's Corp. Retailing 2.71%
</TABLE>
15
<PAGE>
SELECTED SPECIAL SHARES, INC.
PORTFOLIO ACTIVITY - JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99)
(Highlighted Positions are those greater than 0.99% of Net Assets)
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ann Taylor Stores Corp. Apparel 11/24/99 1.28%
Baker Hughes Inc. Energy 10/05/99 --
Bausch & Lomb, Inc. Healthcare 06/16/99 --
Blackrock, Inc. Financial Services 10/01/99 0.72%
Buca, Inc. Restaurant & Food 04/21/99 --
Cheap Tickets, Inc. Retailing 03/19/99 0.38%
Dell Computer Corp. Call Option Information Processing -
Office Equipment 02/25/99 --
FreeMarkets, Inc. Retailing 12/09/99 0.03%
Grainger, W.W., Inc. Industrial Products 09/23/99 0.67%
H&R Block, Inc. Financial Services 03/04/99 1.42%
Heidrick & Struggles International, Inc. Employee Staffing 04/28/99 1.44%
internet.com LLC Information Processing - Services 06/25/99 --
iVillage Inc. Internet Content 03/18/99 --
Jabil Circuit. Inc. Electronics 03/04/99 2.71%
Juniper Networks, Inc. Information Processing - Services 06/24/99 --
KLA-Tencor Corp. Electronics 07/08/99 2.07%
Knight/Trimark Group, Inc. Class A Financial Services 06/09/99 --
Legato Systems, Inc. Information Processing - Software 06/09/99 3.19%
Linear Technology Corp. Electronics 12/06/99 1.80%
Nabors Industries, Inc. Energy 08/16/99 1.45%
OneSource Information Services, Inc. Information Processing - Services 05/19/99 0.31%
Penton Media, Inc. Communications 06/23/99 --
Pepsi-Cola Puerto Rico Bottling Co. Food/Beverage 02/18/99 --
Phelps Dodge Corp. Chemicals/Metals 08/12/99 0.15%
ProBusiness Services, Inc. Information Processing - Services 10/29/99 0.20%
Red Hat, Inc. Information Processing - Software 08/11/99 0.02%
Sealed Air Corp. Industrial Products 12/22/99 0.48%
ServiceMaster Co. (The) Employee Staffing 04/16/99 0.46%
SFX Entertainment, Inc. Entertainment/Leisure Time 08/17/99 0.84%
Tandy Corp. Retailing 03/11/99 2.29%
TD Waterhouse Group, Inc. Financial Services 12/08/99 0.46%
Telephone and Data Systems, Inc. Communications 10/11/99 0.35%
Teradyne, Inc. Electronics 03/19/99 3.68%
TranSwitch Corp. Communications 10/13/99 0.34%
Univision Communications, Inc. Class A Entertainment/Leisure Time 06/16/99 1.90%
U.S.A. Floral Products, Inc. Distribution/Wholesale 01/05/99 --
VerticalNet, Inc. Internet Content 02/11/99 --
WinStar Communications, Inc. Communications 07/07/99 1.75%
Yankee Candle Company, Inc. (The) Retailing 10/05/99 0.91%
Young & Rubicam Inc. Advertising 07/06/99 --
</TABLE>
16
<PAGE>
SELECTED SPECIAL SHARES, INC.
PORTFOLIO ACTIVITY - JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
================================================================================================================
POSITIONS CLOSED (1/1/99-12/31/99)
(Gains and losses greater than $500,000 are highlighted)
SECURITY SECTOR DATE OF FINAL SALE GAIN/(LOSS)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Abercrombie & Fitch Co. Retailing 09/10/99 228,795
Amazon.com, Inc. Retailing 07/27/99 520,465
Baker Hughes Inc. Energy 12/09/99 (163,639)
Bausch & Lomb, Inc. Healthcare 10/29/99 (331,615)
BioChem Pharmaceuticals Inc., - ADR Healthcare 02/11/99 159,139
Buca, Inc. Restaurant & Food 05/04/99 72,369
Closure Medical Corp. Healthcare 04/20/99 222,988
DA Consulting Group, Inc. Employee Staffing 11/15/99 (187,977)
Data Processing Resources Corp. Employee Staffing 02/24/99 (30,010)
Dell Computer Corp. Call Option Information Processing -
Office Equipment 03/20/99 30,480
Elan Corp., PLC ADR Healthcare 07/07/99 191,216
Friede Goldman International, Inc. Energy 03/12/99 (401,979)
Furniture Brands International, Inc. Home/Office Furniture 10/20/99 (352,986)
Hays Lemmerz International, Inc. Automotive/Heavy Equipment 12/20/99 (528,610)
Herman Miller, Inc. Home/Office Furniture 06/28/99 109,822
HON Industries, Inc. Home/Office Furniture 06/18/99 (35,954)
Horace Mann Educators Corp. Insurance 06/28/99 513,121
Interim Services, Inc. Employee Staffing 08/18/99 159,692
internet.com LLC Information Processing - Services 07/22/99 18,623
iVillage Inc. Internet Content 04/01/99 8,000
Juniper Networks, Inc. Information Processing - Services 11/04/99 18,017
Keebler Foods Co. Food/Beverage 06/15/99 270,470
Knight/Trimark Group, Inc. Class A Financial Services 11/04/99 (359,474)
Knoll, Inc. Home/Office Furniture 03/24/99 29,717
Lear Corp. Automotive/Heavy Equipment 08/12/99 263,698
North Fork Bancorporation, Inc. Financial Services 09/08/99 (196,110)
Orbital Sciences Corp. Communications 03/12/99 (494,242)
PAREXEL International Corp. Healthcare 06/07/99 (381,806)
Penton Media, Inc. Communications 09/30/99 (68,267)
Pepsi-Cola Puerto Rico Bottling Co. Food/Beverage 03/29/99 4,148
Premier Parks, Inc. Entertainment/Leisure Time 08/10/99 456,470
Quintiles Transnational Corp. Healthcare 06/29/99 (87,636)
Saks Inc. Retailing 08/03/99 (506,871)
Schlumberger Ltd. Industrial Products 12/10/99 253,340
SPR, Inc. Information Processing - Services 03/15/99 (227,880)
Sterling Commerce, Inc. Information Processing - Services 08/18/99 (920,509)
Teleglobe, Inc. Communications 06/28/99 140,197
U.S.A. Floral Products, Inc. Distribution/Wholesale 06/03/99 (146,631)
VerticalNet, Inc. Internet Content 03/01/99 6,575
Washington Mutual, Inc. Financial Services 08/04/99 1,156,648
Young & Rubicam Inc. Advertising 11/22/99 118,454
Zions Bancorporation Financial Services 08/13/99 654,353
</TABLE>
17
<PAGE>
SELECTED SPECIAL SHARES, INC.
COMPARISON OF SELECTED SPECIAL SHARES, INC. AND STANDARD & POOR'S 500
STOCK INDEX
================================================================================
Average Annual Total Return For the Periods ended December 31, 1999.
One Year ....................................... 16.83%
Five Years...................................... 22.61%
Ten Years....................................... 14.26%
$10,000 INVESTED OVER TEN YEARS. Let's say you invested $10,000 in Selected
Special Shares ("SSS") on December 31, 1989. As the chart below shows, by
December 31, 1999 the value of your investment would have grown to $37,961 - a
279.61% increase on your initial investment. For comparison, the Standard &
Poor's 500 Stock Index is also presented on the chart below.
S&P 500 SSS
------- ---
1989 10,000.00 10,000.00
1990 9,689.00 9,313.32
1991 12,635.00 11,685.33
1992 13,596.00 12,676.23
1993 14,963.00 14,039.51
1994 15,160.00 13,693.54
1995 20,850.00 18,381.98
1996 25,634.00 20,562.77
1997 34,183.00 26,095.17
1998 43,951.00 32,493.15
1999 53,198.00 37,960.76
Standard & Poor's is an unmanaged index which has no specific investment
objective. Investments cannot be made directly into the index. The index used
includes net dividends reinvested.
The performance data for Selected Special Shares contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
18
<PAGE>
SELECTED U.S. GOVERNMENT INCOME FUND
COMPARISON OF U.S. GOVERNMENT INCOME FUND AND THE LEHMAN BROTHERS INTERMEDIATE
TERM U.S. TREASURY SECURITIES INDEX
================================================================================
Average Annual Total Return For the Periods ended December 31, 1999.
One Year ....................................... (1.97%)
Five Years...................................... 5.85%
Ten Years....................................... 6.11%
$10,000 INVESTED OVER TEN YEARS. Let's say you invested $10,000 in U.S.
Government Income Fund ("SUSGIF") on December 31, 1989. As the chart below
shows, by December 31, 1999 the value of your investment would have grown to
$18,094 - an 80.94% increase on your initial investment. For comparison, the
Lehman Brothers Intermediate Term U.S. Treasury Securities Index is also
presented on the chart below.
1904 Lehman Index SUSGIF
- ---- ------------ ------
1989 10,000.00 10,000.00
1990 10,956.00 10,853.36
1991 12,505.58 12,327.00
1992 13,377.32 12,965.66
1993 14,481.65 13,991.67
1994 14,185.18 13,612.71
1995 16,239.52 15,792.23
1996 16,883.76 16,242.07
1997 18,178.09 17,617.43
1998 19,749.45 17,429.07
1999 19,837.22 18,094.43
The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is an
unmanaged index which has no specific investment objective. Investments cannot
be made directly into the index.
The performance data for Selected U.S. Government Income Fund contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
19
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC.
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==================================================================================================================
<S> <C> <C>
COMMON STOCK - (98.28%)
ADVERTISING AGENCIES - (0.09%)
220,000 WPP Group PLC................................................................... $ 3,447,050
--------------
AGRICULTURAL - (0.22%)
228,900 Monsanto Co..................................................................... 8,154,562
--------------
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (6.53%)
1,596,800 Golden West Financial Corp. .................................................... 53,492,800
1,275,302 U.S. Bancorp.................................................................... 30,368,129
3,906,560 Wells Fargo Co. ................................................................ 157,971,520
--------------
241,832,449
--------------
BUILDING MATERIALS - (3.81%)
930,600 Martin Marietta Materials, Inc.................................................. 38,154,600
2,602,400 Masco Corp. .................................................................... 66,035,900
924,100 Vulcan Materials Co. ........................................................... 36,906,244
--------------
141,096,744
--------------
CONSUMER PRODUCTS - (1.68%)
266,400 Colgate-Palmolive Co. .......................................................... 17,316,000
370,000 Gillette Co. ................................................................... 15,239,375
1,287,500 Philip Morris Cos., Inc. ....................................................... 29,853,906
--------------
62,409,281
--------------
DIVERSIFIED - (2.66%)
1,754 Berkshire Hathaway Inc., Class A*............................................... 98,399,400
16 Berkshire Hathaway Inc., Class B *.............................................. 29,280
--------------
98,428,680
--------------
DIVERSIFIED MANUFACTURING - (1.84%)
1,750,000 Tyco International Ltd. ........................................................ 68,031,250
--------------
ELECTRONICS - (8.78%)
708,000 Applied Materials, Inc.*........................................................ 89,650,500
126,960 Koninklijke Philips Electronics N.V............................................. 17,139,600
558,750 Molex Inc. ..................................................................... 31,639,219
1,930,000 Texas Instruments Inc. ......................................................... 186,968,750
--------------
325,398,069
--------------
ENERGY - (1.79%)
418,021 Devon Energy Corp. ............................................................. 13,742,440
1,158,200 Dover Corp. .................................................................... 52,553,325
--------------
66,295,765
--------------
FINANCIAL - (18.38%)
1,491,500 American Express Co. ........................................................... 247,956,875
3,153,142 Citigroup, Inc. ................................................................ 175,196,452
1,505,000 Freddie Mac..................................................................... 70,829,062
3,213,100 Household International, Inc. .................................................. 119,687,975
</TABLE>
20
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC. - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==================================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
FINANCIAL - CONTINUED
738,700 Providian Financial Corp........................................................ $ 67,267,869
--------------
680,938,233
--------------
FOOD/BEVERAGE & RESTAURANT - (3.75%)
3,450,000 McDonald's Corp. ............................................................... 139,073,125
--------------
HOTELS & MOTELS - (0.84%)
988,700 Marriott International, Inc. ................................................... 31,205,844
--------------
INDUSTRIAL - (1.15%)
824,700 Sealed Air Corp.*............................................................... 42,729,769
--------------
LIFE INSURANCE - (0.44%)
510,700 UnumProvident Corp. ............................................................ 16,374,319
--------------
INVESTMENT FIRMS - (5.30%)
244,000 Donaldson, Lufkin & Jenrette, Inc. ............................................. 11,803,500
1,287,432 Morgan Stanley Dean Witter & Co. ............................................... 183,779,554
--------------
195,583,054
--------------
PHARMACEUTICAL AND HEALTH CARE - (4.94%)
1,826,900 American Home Products Corp. ................................................... 72,048,369
166,000 Bristol-Myers Squibb Co. ....................................................... 10,655,125
200,000 Merck & Co., Inc. .............................................................. 13,412,500
900,000 Pfizer Inc...................................................................... 29,193,750
895,600 SmithKline Beecham PLC - ADR.................................................... 57,710,225
--------------
183,019,969
--------------
PROPERTY/CASUALTY INSURANCE - (7.83%)
1,628,217 American International Group, Inc. ............................................. 176,050,963
288,400 Chubb Corp. (b)................................................................. 16,240,525
556,700 Progressive Corp. (Ohio) (b).................................................... 40,708,687
732,200 Transatlantic Holdings, Inc. (b)................................................ 57,157,363
--------------
290,157,538
--------------
PUBLISHING - (2.54%)
173,400 Dow Jones & Co., Inc. .......................................................... 11,791,200
483,300 Gannett Co., Inc. .............................................................. 39,419,156
50,000 Harcourt General, Inc. ......................................................... 2,012,500
740,000 Tribune Co. .................................................................... 40,746,250
--------------
93,969,106
--------------
REAL ESTATE - (2.10%)
77,000 Avalonbay Communities, Inc. .................................................... 2,642,062
1,451,194 Centerpoint Properties Corp. (d)................................................ 52,061,585
70,000 Centerpoint Properties Corp. Private (c)(d)..................................... 2,448,469
411,000 Crescent Real Estate Equities Co. .............................................. 7,552,125
400,400 Vornado Realty Trust............................................................ 13,013,000
--------------
77,717,241
--------------
</TABLE>
21
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC. - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==================================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
RETAIL - (0.06%)
86,171 The Neiman Marcus Group, Inc., Class B*......................................... $ 2,321,231
--------------
TECHNOLOGY - (17.93%)
1,885,975 Hewlett-Packard Co. ............................................................ 214,883,276
995,000 Intel Corp. .................................................................... 81,838,750
1,430,000 International Business Machines Corp............................................ 154,440,000
597,300 Lexmark International Group, Inc., Class A*..................................... 54,055,650
1,211,900 Novell, Inc.*................................................................... 48,324,513
790,000 Oracle Corp.*................................................................... 88,480,000
276,400 SAP AG-ADR (b).................................................................. 14,390,075
243,000 Unisys Corp.*................................................................... 7,760,813
--------------
664,173,077
--------------
TELECOMMUNICATIONS - (5.49%)
100,000 Agilent Technologies, Inc.*..................................................... 7,731,250
80,000 AT&T Corp. ..................................................................... 4,060,000
450,500 Globalstar Telecommunications Ltd.* (b)......................................... 19,822,000
1,186,200 Loral Space & Communications, Ltd.* (b)......................................... 28,839,488
672,300 MediaOne Group, Inc.*........................................................... 51,641,044
620,000 Motorola, Inc. ................................................................. 91,295,000
--------------
203,388,782
--------------
WASTE MANAGEMENT SERVICES - (0.13%)
290,000 Waste Management, Inc........................................................... 4,984,375
--------------
Total Common Stock - (identified cost $2,008,124,807)........................ 3,640,729,513
--------------
CONVERTIBLE PREFERRED STOCK - (0.24%)
271,600 Rouse Co., $3.00, Series B, Conv. Pfd. - (identified cost $13,421,189).......... 8,860,950
--------------
PREFERRED STOCK - (0.81%)
49,700 SAP AG, Pfd (b) - (identified cost $17,126,155)................................. 29,939,035
--------------
SHORT TERM INVESTMENTS - (0.62%)
$23,050,000 Lehman Brothers Repurchase Agreement, 2.80%, 01/03/00, dated 12/31/99,
repurchase value $23,055,378 (collateralized by $ 23,559,000 par value
U.S. Treasury Nts., 5.625%-7.125%, 01/15/00-05/15/08, market value
$23,513,784) - (identified cost $23,050,000).................................. 23,050,000
--------------
</TABLE>
22
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED AMERICAN SHARES, INC. - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
==================================================================================================================
<S> <C> <C>
Total Investments - ( 99.95%) - (identified cost $2,061,722,151) - (a).......... $3,702,579,498
Other Assets Less Liabilities - (0.05%)......................................... 1,790,031
--------------
Net Assets - (100%).......................................................... $3,704,369,529
==============
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $2,061,722,151. At
December 31, 1999, unrealized appreciation (depreciation) of securities for
Federal Income Tax purposes is as follows:
Unrealized appreciation......................................................... $1,712,668,966
Unrealized depreciation......................................................... (71,811,619)
--------------
Net unrealized appreciation ................................................. $1,640,857,347
==============
</TABLE>
(b) Loaned security - See Note 7 of Notes to Financial Statements
(c) Restricted security - See Note 8 of Notes to Financial Statements.
(d) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is an affiliate, as defined in the Investment
Company Act of 1940, at or during the year ended December 31, 1999. The
aggregate fair value of the securities of affiliated companies held by the Fund
as of December 31, 1999 amounts to $54,510,054. Transactions during the period
in which the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1998 Additions Reductions December 31, 1999 Income
- -------- ----------------- --------- ---------- ----------------- ------
<S> <C> <C> <C> <C> <C>
Centerpoint Properties
Corporation 1,451,194 - - 1,451,194 2,178,518
Centerpoint Properties
Corporation Private 70,000 - - 70,000 105,083
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED SPECIAL SHARES, INC.
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==================================================================================================================
<S> <C> <C>
COMMON STOCK - (99.37%)
APPAREL - (2.12%)
40,000 Ann Taylor Stores Corp.*........................................................ $ 1,377,500
60,000 Cutter & Buck, Inc.*............................................................ 907,500
--------------
2,285,000
--------------
CHEMICALS/METALS - (2.68%)
25,000 Minerals Technologies, Inc...................................................... 1,001,563
50,000 OM Group, Inc................................................................... 1,721,875
2,403 Phelps Dodge Corp............................................................... 161,301
--------------
2,884,739
--------------
COMMUNICATIONS - (4.31%)
10,000 Earthlink Network, Inc.*........................................................ 425,000
30,000 MCI Worldcom, Inc.*............................................................. 1,590,000
3,000 Telephone and Data Systems, Inc................................................. 378,000
5,000 TranSwitch Corp.*............................................................... 362,500
25,000 WinStar Communications, Inc.*................................................... 1,878,125
--------------
4,633,625
--------------
ELECTRONICS - (12.83%)
60,000 Flextronics International Ltd.*................................................. 2,760,000
40,000 Jabil Circuit, Inc.*............................................................ 2,920,000
20,000 KLA - Tencor Corp.*............................................................. 2,226,250
27,000 Linear Technology Corp.......................................................... 1,932,187
60,000 Teradyne, Inc.*................................................................. 3,960,000
--------------
13,798,437
--------------
EMPLOYEE STAFFING - (7.07%)
38,000 Heidrick & Struggles International, Inc.*....................................... 1,550,875
39,000 Keane, Inc.*.................................................................... 1,238,250
91,180 Labor Ready, Inc.*.............................................................. 1,105,558
70,000 On Assignment, Inc.*............................................................ 2,073,750
40,000 Robert Half International, Inc.*................................................ 1,142,500
40,000 ServiceMaster Co. (The)......................................................... 492,500
--------------
7,603,433
--------------
ENERGY - (2.87%)
50,000 Diamond Offshore Drilling, Inc. ................................................ 1,528,125
50,500 Nabors Industries, Inc.*........................................................ 1,562,344
--------------
3,090,469
--------------
ENTERTAINMENT/LEISURE TIME - (5.64%)
49,000 Cinar Corp., Class B*........................................................... 1,212,750
70,000 Imax Corp.*..................................................................... 1,916,250
25,000 SFX Entertainment, Inc.*........................................................ 904,688
20,000 Univision Communications, Inc. Class A*......................................... 2,043,750
--------------
6,077,438
--------------
</TABLE>
24
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED SPECIAL SHARES, INC. - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==================================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
FINANCIAL SERVICES - (9.74%)
45,000 Blackrock, Inc.*................................................................ $ 773,438
72,000 Charles Schwab Corp. (The)...................................................... 2,763,000
15,100 Federated Investors, Inc. Class B............................................... 302,944
60,000 Firstar Corp.................................................................... 1,267,500
35,000 H&R Block, Inc.................................................................. 1,531,250
44,000 Northern Trust Corp............................................................. 2,348,500
40,000 TCF Financial Corp.............................................................. 995,000
30,000 TD Waterhouse Group, Inc.*...................................................... 493,125
--------------
10,474,757
--------------
HEALTHCARE - (3.71%)
50,000 Cardinal Health, Inc............................................................ 2,393,750
30,000 Focal, Inc.*.................................................................... 116,250
15,000 Sepracor, Inc.*................................................................. 1,487,813
--------------
3,997,813
--------------
HOME/OFFICE FURNITURE - (2.89%)
45,000 Ethan Allen Interiors, Inc...................................................... 1,442,812
77,600 Leggett & Platt, Inc............................................................ 1,663,550
--------------
3,106,362
--------------
INDUSTRIAL PRODUCTS - (5.05%)
15,000 Grainger, W.W., Inc.*........................................................... 717,188
15,600 Illinois Tool Works, Inc........................................................ 1,053,975
70,156 Molex Inc., Class A............................................................. 3,139,481
10,000 Sealed Air Corp.*............................................................... 518,125
--------------
5,428,769
--------------
INFORMATION PROCESSING - OFFICE EQUIPMENT - (4.13%)
25,000 Dell Computer Corp.*............................................................ 1,273,437
35,000 Lexmark International Group, Inc. Class A*...................................... 3,167,500
--------------
4,440,937
--------------
INFORMATION PROCESSING - SERVICES - (10.90%)
70,000 Computer Sciences Corp.*........................................................ 6,623,750
30,000 DST Systems, Inc.*.............................................................. 2,289,375
25,000 OneSource Information Services, Inc.*........................................... 335,938
56,625 Paychex, Inc.................................................................... 2,261,461
6,000 ProBusiness Services, Inc.*..................................................... 215,250
--------------
11,725,774
--------------
INFORMATION PROCESSING - SOFTWARE - (3.21%)
50,000 Legato Systems, Inc.*........................................................... 3,437,500
100 Red Hat, Inc.*.................................................................. 21,106
--------------
3,458,606
--------------
</TABLE>
25
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED SPECIAL SHARES, INC. - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==================================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
REAL ESTATE SERVICES - (0.55%)
50,000 Jones Lang LaSalle, Inc.*....................................................... $ 593,750
--------------
RETAILING - (18.90%)
30,000 Cheap Tickets, Inc.*............................................................ 410,625
55,000 CVS Corp........................................................................ 2,196,562
100 FreeMarkets, Inc.*.............................................................. 34,131
45,000 Home Depot, Inc. (The).......................................................... 3,085,311
40,400 Kohl's Corp.*................................................................... 2,916,375
20,000 Office Depot, Inc.*............................................................. 218,750
50,000 Tandy Corp...................................................................... 2,459,375
90,000 Tiffany & Co.................................................................... 8,032,500
60,000 Yankee Candle Company, Inc. (The)*.............................................. 978,750
--------------
20,332,379
--------------
TRANSPORTATION - (2.77%)
40,000 Kansas City Southern Industries, Inc............................................ 2,985,000
--------------
Total Common Stock - (identified cost $58,492,093)........................... 106,917,288
--------------
Total Investments - (99.37%) - (identified cost $58,492,093) - (a).............. 106,917,288
Other Assets Less Liabilities - (0.63%)......................................... 674,475
--------------
Net Assets - (100%).......................................................... $ 107,591,763
==============
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $58,595,734. At December
31, 1999, unrealized appreciation (depreciation) of securities for Federal
Income Tax purposes is as follows:
Unrealized appreciation......................................................... $ 51,019,290
Unrealized depreciation......................................................... (2,697,736)
--------------
Net unrealized appreciation ................................................. $ 48,321,554
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
PRINCIPAL SECURITY (NOTE 1)
==================================================================================================================
<S> <C> <C>
MORTGAGES - (33.53%)
FREDDIE MAC POOLS - (10.59%)
$ 478,991 7.00%, 12/01/15, Pool No. D9-1178 - (identified cost $481,236).................. $ 467,562
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION POOLS - (22.94%)
10,175 6.34%, 09/20/23, Pool No. 008299 (b)............................................ 10,270
13,174 6.375%, 01/20/24, Pool No. 008360 (b)........................................... 13,389
1,016,418 7.00%, 10/15/24, Pool No. 780385................................................ 988,467
--------------
Total GNMA - (identified cost $1,026,431) 1,012,126
--------------
Total Mortgages - (identified cost $1,507,667)............................... 1,479,688
--------------
U.S. TREASURY NOTES - (22.37%)
500,000 United States Treasury Notes, 5.625%, 09/30/01.................................. 495,000
500,000 United States Treasury Notes, 6.25%, 02/15/07................................... 491,955
--------------
Total U.S. Treasury Notes - (identified cost $1,002,989) 986,955
--------------
GOVERNMENT AGENCY NOTES - (33.23%)
1,500,000 Freddie Mac, 6.25%, 07/15/04 - (identified cost $1,491,833)..................... 1,466,490
--------------
SHORT TERM INVESTMENTS - (9.45%)
417,000 State Street Corporation Repurchase Agreement, 2.75%, 01/03/00, dated 12/31/99,
repurchase value of $417,096 (collateralized by $450,000 par value
Fannie Mae DN, Zero Cpn., 08/17/00, market value $433,125) -
(identified cost $417,000).................................................... 417,000
--------------
Total Investments - (98.58%) - (identified cost $4,419,489) - (a)............... 4,350,133
Other Assets Less Liabilities- (1.42%).......................................... 62,665
--------------
Net Assets - (100%).......................................................... $ 4,412,798
==============
(a) Aggregate cost for Federal Income Tax purposes is $4,419,489. At December 31, 1999, unrealized appreciation
(depreciation) of securities for Federal Income Tax purposes is as follows:
Unrealized appreciation......................................................... $ 2,177
Unrealized depreciation......................................................... (71,533)
--------------
Net unrealized depreciation.................................................. $ (69,356)
==============
(b) The interest rates on floating rate securities, shown as of December 31, 1999, may change monthly or less
frequently and are based on indices of market interest rates.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==================================================================================================================
<S> <C> <C>
FANNIE MAE - (16.97%)
$ 2,000,000 5.65%, 01/11/00 Discount Note................................................... $ 1,996,861
3,000,000 5.54%, 01/18/00 (b)............................................................. 2,999,420
100,000 6.10%, 02/10/00................................................................. 100,000
1,000,000 5.91%, 02/25/00................................................................. 1,000,050
2,120,000 5.04%, 04/06/00................................................................. 2,115,722
2,800,000 9.05%, 04/10/00................................................................. 2,824,662
1,000,000 6.59%, 04/17/00 ................................................................ 1,002,456
1,500,000 4.98%, 04/20/00 ................................................................ 1,496,708
2,500,000 5.12%, 05/12/00 ................................................................ 2,494,583
200,000 5.72%, 05/22/00 ................................................................ 199,892
1,000,000 6.41%, 05/22/00 ................................................................ 1,002,736
1,055,000 5.67%, 05/26/00 ................................................................ 1,054,164
2,000,000 5.934%, 09/06/00 (b)............................................................ 1,998,862
2,000,000 6.269%, 12/08/00 (b)............................................................ 1,998,169
--------------
Total Fannie Mae - (identified cost $22,284,285)............................. 22,284,285
--------------
FEDERAL FARM CREDIT BANK - (4.98%)
1,000,000 6.286%, 03/01/00 (b)............................................................ 999,867
1,000,000 6.279%, 03/10/00 (b)............................................................ 999,844
300,000 6.09%, 04/03/00 ................................................................ 300,053
250,000 6.17%, 06/07/00 ................................................................ 250,175
2,000,000 5.755%, 07/03/00 (b)............................................................ 1,997,004
2,000,000 6.316%, 09/01/00 (b)............................................................ 1,999,600
--------------
Total Federal Farm Credit Bank - (identified cost $6,546,543)................ 6,546,543
--------------
FEDERAL HOME LOAN BANK - (41.48%)
4,000,000 5.893%, 01/21/00 (b)............................................................ 3,999,554
1,000,000 5.61%, 01/26/00 (b)............................................................. 999,874
15,000,000 5.00%, 01/28/00 Discount Note................................................... 14,943,750
1,500,000 5.57%, 02/02/00 Discount Note................................................... 1,492,573
1,000,000 6.124%, 02/18/00 ............................................................... 1,000,413
450,000 5.15%, 03/08/00 ................................................................ 449,535
1,500,000 5.16%, 03/08/00 ................................................................ 1,498,471
2,500,000 4.81%, 03/22/00 ................................................................ 2,495,425
2,500,000 5.075%, 04/28/00 ............................................................... 2,495,160
1,500,000 6.00%, 04/28/00 (b)............................................................. 1,499,182
2,500,000 5.05%, 05/19/00 ................................................................ 2,492,819
1,000,000 5.26%, 05/26/00 ................................................................ 997,918
</TABLE>
28
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==================================================================================================================
<S> <C> <C>
FEDERAL HOME LOAN BANK - CONTINUED
$ 2,500,000 5.56%, 05/30/00 Discount Note................................................... $ 2,442,083
500,000 5.625%, 06/02/00................................................................ 499,528
2,000,000 5.94%, 06/13/00................................................................. 2,000,719
2.000,000 6.00%, 07/05/00................................................................. 2,002,134
250,000 5.50%, 07/14/00................................................................. 249,385
4,500,000 5.56%, 07/14/00................................................................. 4,493,003
1,030,000 5.89%, 07/24/00................................................................. 1,030,268
150,000 5.62%, 08/10/00................................................................. 149,611
1,000,000 5.47%, 08/17/00................................................................. 996,792
500,000 5.875%, 09/07/00................................................................ 499,748
760,000 5.75%, 09/15/00................................................................. 758,332
2,000,000 5.924%, 10/04/00 (b)............................................................ 1,999,152
3,000,000 5.15%, 10/13/00 (b)............................................................. 3,000,000
--------------
Total Federal Home Loan Bank - (identified cost $54,485,429)................. 54,485,429
--------------
FREDDIE MAC - (26.18%)
2,000,000 5.52%, 01/03/00 Discount Note................................................... 1,999,387
2,000,000 5.50%, 01/04/00 Discount Note................................................... 1,999,083
540,000 6.55%, 01/04/00................................................................. 539,961
2,287,000 5.45%, 01/05/00 Discount Note................................................... 2,285,615
2,000,000 5.244%, 01/06/00 Discount Note.................................................. 1,998,543
2,000,000 5.52%, 01/10/00 Discount Note................................................... 1,997,240
2,000,000 5.60%, 01/11/00 Discount Note................................................... 1,996,889
1,000,000 5.47%, 01/12/00 Discount Note................................................... 998,329
1,000,000 5.51%, 01/13/00 Discount Note................................................... 998,163
5,000,000 5.40%, 02/03/00 Discount Note................................................... 4,975,250
7,285,000 5.395%, 02/25/00 Discount Note.................................................. 7,224,954
2,000,000 5.60%, 02/29/00 Discount Note................................................... 1,981,644
400,000 6.155%, 09/15/00................................................................ 400,342
5,000,000 5.815%, 01/10/01 (b)............................................................ 4,995,250
--------------
Total Freddie Mac - (identified cost $34,390,650)............................ 34,390,650
--------------
SALLIE MAE - (7.71%)
125,000 6.113%, 02/11/00 (b)............................................................ 124,994
5,000,000 6.063%, 06/30/00 (b)............................................................ 4,999,403
5,000,000 6.163%, 11/15/00 (b)............................................................ 4,997,865
--------------
Total Sallie Mae - (identified cost $10,122,262)............................. 10,122,262
--------------
</TABLE>
29
<PAGE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND - CONTINUED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==================================================================================================================
<S> <C> <C>
OTHER SHORT TERM INVESTMENTS - (6.14%)
$ 8,062,000 Lehman Brothers Repurchase Agreement, 2.80%, 01/03/00, dated 12/31/99,
repurchase value 8,063,881 (collateralized by $8,005,000 par value
U.S. Treasury Nts., 7.125%, 02/29/00, market value $8,226,182)
- (identified cost $8,062,000)................................................ $ 8,062,000
--------------
Total Investments - (103.46%) - (identified cost $135,891,169) - (a)............ 135,891,169
Liabilities Less Other Assets - (3.46%)......................................... (4,548,756)
--------------
Net Assets - (100%).......................................................... $ 131,342,413
==============
</TABLE>
(a) Aggregate cost for Federal income tax purposes is $135,891,169.
(b) The interest rates on floating rate securities, shown as of December 31,
1999, may change daily or less frequently and are based on indices of market
rates. For purposes of amortized cost valuation, the maturity dates of these
securities are considered to be the effective maturities, based on the reset
dates of the securities variable rates.
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
SELECTED FUNDS
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 1999
<TABLE>
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value * (see
accompanying Schedules of Investments)
Unaffiliated companies................................ $3,648,069,444 $106,917,288 $4,350,133 $135,891,169
Affiliated companies.................................. 54,510,054 - - -
Collateral for securities loaned (Note 7)................ 61,815,150 - - -
Prepaid expenses......................................... 54,149 421 3,397
Cash..................................................... 100,627 - 3,130 11,390
Receivables:
Dividends and interest................................ 2,644,586 47,861 71,852 887,392
Capital stock sold.................................... 4,245,743 1,037,095 - 11,574
Investment securities sold............................ - 570,293 - -
Due from adviser...................................... - - 4,143 -
-------------- ------------ ---------- ------------
Total assets............................................. 3,771,439,753 108,572,537 4,429,679 136,804,922
-------------- ------------ ---------- ------------
LIABILITIES:
Return of collateral for securities loaned (Note 7)...... 61,815,150 - - -
Payables:
Capital stock reacquired.............................. 1,922,545 50,463 44 28,650
Investment securities purchased....................... - - - 4,995,250
Cash overdraft........................................... - 796,831 - -
Accrued expenses......................................... 3,310,121 133,480 6,938 94,284
Distributions payable.................................... 22,408 - 9,899 344,325
-------------- ------------ ---------- ------------
Total liabilities............................... 67,070,224 980,774 16,881 5,462,509
-------------- ------------ ---------- ------------
NET ASSETS ................................................. $3,704,369,529 $107,591,763 $4,412,798 $131,342,413
============== ============ ========== ============
SHARES OUTSTANDING (NOTE 5)................................. 103,476,373 6,654,711 527,282 131,342,413
============== ============ ========== ============
NET ASSET VALUE, offering and
redemption price per share (Net
Assets ( shares outstanding).......................... $35.80 $16.17 $8.37 $1.00
============== ============ ========== ============
NET ASSETS CONSIST OF:
Par value of shares of capital stock .................... $1,930,660,413 $ 57,634,787 $4,567,798 $118,208,172
Additional paid-in capital............................... 129,345,466 1,663,678 52,728 13,134,241
Overdistributed net investment income.................... (189,015) (7,745) (842) -
Accumulated net realized gain/(loss)..................... 3,695,318 (124,152) (137,530) -
Net unrealized appreciation (depreciation) on
investments........................................... 1,640,857,347 48,425,195 (69,356) -
-------------- ------------ ---------- ------------
$3,704,369,529 $107,591,763 $4,412,798 $131,342,413
============== ============ ========== ============
</TABLE>
* Including repurchase agreements of $23,050,000, $417,000, and $8,062,000 for
Selected American Shares, Selected U.S. Government Income Fund and Selected
Daily Government Fund, respectively, and cost of $2,061,722,151, $58,492,093,
$4,419,489 and $135,891,169 for Selected American Shares, Selected Special
Shares, U.S. Government Income Fund and Daily Government Fund, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
SELECTED FUNDS
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
------------ ----------- --------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Income:
Dividends
Unaffiliated companies...................... $ 33,788,841 $ 395,739 $ - $ -
Affiliated companies........................ 2,283,601 - - -
Interest....................................... 1,765,627 171,011 345,744 6,596,893
Lending fees................................... 206,039 - - -
------------ ----------- ---------- ----------
Total income............................. 38,044,108 566,750 345,744 6,596,893
------------ ----------- ---------- ----------
Expenses:
Management fees (Note 2)....................... 18,609,966 664,862 22,738 386,543
Custodian fees................................. 452,019 24,072 11,590 19,616
Transfer agent fees............................ 1,961,534 126,783 12,563 59,532
Audit fees..................................... 25,828 11,552 6,903 10,417
Legal fees..................................... 103,838 14,788 500 12,289
Reports to shareholders........................ 419,895 12,983 702 19,814
Directors fees and expenses.................... 284,125 7,189 1,118 12,728
Registration and filing fees................... 126,642 27,755 12,417 27,108
Miscellaneous.................................. 80,855 3,691 4,365 6,059
Payments under distribution plan (Note 3)...... 8,130,115 241,616 13,441 322,120
------------ ----------- ---------- ----------
Total expenses........................... 30,194,817 1,135,291 86,337 876,226
Expenses paid indirectly (Note 6)........ (6,692) (615) (124) (256)
Reimbursement of expenses by
adviser (Note 2)...................... - - (17,544) -
------------ ----------- ---------- ----------
Net expenses............................. 30,188,125 1,134,676 68,669 875,970
------------ ----------- ---------- ----------
Net investment income (loss)............. 7,855,983 (567,926) 277,075 5,720,923
------------ ----------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from
investment transactions..................... 135,025,695 4,921,785 (137,530) -
Net increase (decrease) in unrealized
appreciation of investments
during the period........................... 457,447,484 11,104,600 (250,320) -
------------ ----------- ---------- ----------
Net realized and unrealized
gain (loss) on investments............ 592,473,179 16,026,385 (387,850) -
------------ ----------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations............................... $600,329,162 $15,458,459 $ (110,775) $5,720,923
============ =========== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..................... $ 7,855,983 $ (567,926) $ 277,075 $ 5,720,923
Net realized gains/(losses) from
investment transactions....................... 135,025,695 4,921,785 (137,530) -
Net increase (decrease) in unrealized
appreciation of investments................... 457,447,484 11,104,600 (250,320) -
-------------- ------------ ---------- ------------
Net increase (decrease) in net
assets resulting from operations.............. 600,329,162 15,458,459 (110,775) 5,720,923
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income............................ (7,855,983) - (277,075) (5,720,923)
Realized gains from investment
transactions.................................. (148,111,926) (6,184,763) (27,599) -
Return of capital................................ - (1,137) - -
Distribution in excess of net investment
income........................................ - - (840) -
CAPITAL SHARE TRANSACTIONS
(NOTE 5)......................................... 354,101,450 3,675,089 (1,407,546) 5,139,905
-------------- ------------ ---------- ------------
Total increase (decrease) in net assets............... 798,462,703 12,947,648 (1,823,835) 5,139,905
NET ASSETS:
Beginning of period.............................. 2,905,906,826 94,644,115 6,236,633 126,202,508
-------------- ------------ ---------- ------------
End of period.................................... $3,704,369,529 $107,591,763 $4,412,798 $131,342,413
============== ============ ========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............... $ 13,186,512 $ (485,392) $ 312,283 $ 5,765,931
Net realized gains from 97,915
investment transactions................. 29,504,571 7,077,136 -
Net increase (decrease) in unrealized
appreciation of investments............. 345,128,542 11,375,084 (62,420) -
-------------- ----------- ---------- ------------
Net increase in net
assets resulting from operations........ 387,819,625 17,966,828 347,778 5,765,931
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income...................... (13,186,512) - (312,283) (5,765,931)
Realized gains from investment
transactions............................ (23,381,397) (7,866,840) (16,994) -
Dividend in excess of net investment
income.................................. (180,435) - - -
CAPITAL SHARE TRANSACTIONS
(NOTE 5)................................... 333,180,761 9,613,669 256,546 8,731,677
-------------- ----------- ---------- ------------
Total increase in net assets.................... 684,252,042 19,713,657 275,047 8,731,677
NET ASSETS:
Beginning of period........................ 2,221,654,784 74,930,458 5,961,586 117,470,831
-------------- ----------- ---------- ------------
End of period.............................. $2,905,906,826 $94,644,115 $6,236,633 $126,202,508
============== =========== ========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Selected Funds (the Funds) consist of Selected American Shares, Inc.,
(American Shares, Inc.), Selected Special Shares, Inc., (Special Shares, Inc.),
and the Selected Capital Preservation Trust (the Trust). The Trust operates as a
series fund, consisting of the U.S. Government Income Fund and Daily Government
Fund. The Funds and Trust are registered under the Investment Company Act of
1940, as amended, as diversified, open-end management investment companies. The
Trust accounts separately for the assets, liabilities and operations of each
series. The following is a summary of significant accounting policies followed
by the Funds in the preparation of financial statements.
American Shares, Inc. and Special Shares, Inc. are diversified,
professionally managed stock-oriented funds.
Selected U.S. Government Income Fund (U.S. Government Income) seeks to
obtain current income consistent with preservation of capital by investing
primarily in debt obligations of the U.S. Government, its agencies or
instrumentalities.
Selected Daily Government Fund (Daily Government) seeks to provide a high
level of current income from short-term money market securities consistent with
prudent investment management, preservation of capital and maintenance of
liquidity. It invests in U.S. Government Securities and repurchase agreements in
respect thereto.
An investment in any of the Funds, as with any mutual fund, includes risks
that vary depending upon the fund's investment objectives and policies. There is
no assurance that the investment objective of any fund will be achieved. A
fund's return and net asset value will fluctuate, although Daily Government
seeks to maintain a net asset value of $1.00 per share.
A. VALUATION OF SECURITIES - Securities listed on national securities exchanges
are valued at the last reported sales price on the day of valuation. Securities
traded in the over the counter market and listed securities for which no sale
was reported on that date are stated at the last quoted bid price. Securities
for which market quotations are not readily available are valued at fair value
as determined by the Boards of Directors/Trustees. The Daily Government Fund
uses the amortized cost method of valuing investment securities which represents
fair value as determined by the Board of Trustees. These valuation procedures
are reviewed and subject to approval by the Board of Directors/Trustees.
B. FEDERAL INCOME TAXES - It is each fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to
shareholders. Therefore, no provision for federal income or excise tax is
required. At December 31, 1999, Selected Special Shares had approximately
$20,510 of post October losses available to offset future capital gains which
expire in 2008. At December 31, 1999, Selected U.S. Government Income had
approximately $137,350 of capital loss carryovers and post October losses
available to offset future capital gains which expire in 2007 and 2008.
C. USE OF ESTIMATES IN FINANCIAL STATEMENTS - In preparing financial statements
in conformity with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of income and expenses
during the reporting period. Actual results may differ from these estimates.
35
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1999
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
D. SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME - Securities
transactions are accounted for on the trade date (date the order to buy or sell
is executed) with realized gain or loss on the sale of securities being
determined based upon identified cost. Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend date. Discounts
and premiums on debt securities (excluding convertible bonds) purchased are
amortized over the lives of the respective securities in accordance with the
requirements of the Internal Revenue Code.
E. DIRECTORS/TRUSTEES FEES AND EXPENSES - The Funds' has adopted a non funded
retirement plan for the Fund's independent directors/trustees. Benefits are
based upon years of service and fees paid to each director/trustee during the
years of service. During the year ended December 31, 1999, for Selected American
Shares, a credit of $169,548 was made for the projected benefit obligations,
resulting in an accumulated liability of $265,987. During the year ended
December 31, 1999, for Selected Special Shares, a credit of $4,124 was made for
the projected benefit obligations, resulting in an accumulated liability of
$7,745. During the year ended December 31, 1999, for Selected U.S. Government
Income, a credit of $94 was made for the projected benefit obligations,
resulting in an accumulated liability of $412. During the year ended December
31, 1999, for Selected Daily Government, a credit of $1,897 was made for the
projected benefit obligations, resulting in an accumulated liability of $8,020.
The Board of Directors/Trustees has adopted a deferred compensation plan for
independent Directors/Trustees that enables Directors/Trustees to elect to defer
receipt of all for a portion of annual fees they are entitled to receive from
Selected American Shares and Selected Special Shares. Under the plan, the
compensation deferred is periodically adjusted as though an equivalent amount
had been invested for the Director/Trustee in shares of one or more Selected
funds selected by the Director/Trustee. The amount paid to the Director/Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Director/Trustees' fees under the plan will not affect the
net assets of the Funds, and will not materially affect the Fund's assets,
liabilities or net income per share.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions to
shareholders are recorded on the ex-dividend date. The character of the
distributions made during the year from net investment income may differ from
its ultimate characterization for federal income tax purposes. Also, due to the
timing of distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which income or gain was recorded by the Funds.
The Funds adjust the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
December 31, 1999, for Selected American Shares, amounts have been reclassified
to reflect an increase in overdistributed net investment loss of $189,015 and a
corresponding increase in accumulated net realized gain; for Selected Special
Shares, amounts have been reclassified to reflect an increase in accumulated net
investment income of $560,181, an increase in accumulated net realized loss of
$115,809 and a decrease in additional paid in capital of $444,372; and for
Selected U.S. Government Income, amounts have been reclassified to reflect a
decrease in accumulated net realized loss of $858, an increase in
overdistributed net investment loss of $842 and a decrease in additional paid in
capital of $16.
NOTE 2 - INVESTMENT ADVISORY FEES
Advisory fees are paid monthly to Davis Selected Advisers, L.P., the Fund's
investment adviser. The rate for Selected American Shares is 0.65% on the first
$500 million of average net assets, 0.60% of the average net assets on the next
$500 million, 0.55% of the average net assets on the next $2 billion, 0.54% of
the average net assets on the next $1 billion, 0.53% of the average net assets
on the next the next $1 billion, 0.52% of the average net assets on the next
36
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1999
================================================================================
NOTE 2 - INVESTMENT ADVISORY FEES - (Continued)
$1 billion, 0.51% of the average net assets on the next $1 billion and 0.50% of
the average net assets in excess of $7 billion. The rate for Special Shares,
Inc. is 0.70% on the first $50 million of average net assets, 0.675% on the next
$100 million, 0.65% on the next $100 million and 0.60% of average net assets in
excess of $250 million. Until August 1, 1999, the rate for U.S. Government
Income Fund was 0.50% of average net assets. Effective August 1, 1999, the
management fee was reduced to 0.30% of average net assets. The rate for the
Daily Government Fund is 0.30% of average net assets.
State Street Bank is the Funds' primary transfer agent. Davis Selected
Advisers, L.P. (the "Adviser") is also paid for certain transfer agent services.
The fee paid to the Adviser for the year ended December 31, 1999 was $128,133,
$13,951, $857 and $4,822 for American Shares, Inc., Special Shares, Inc., U.S.
Government Income and Daily Government Funds, respectively. Certain
directors/trustees and officers of the Funds are also directors/trustees and
officers of the general partner of the Adviser.
The Adviser has agreed to reimburse the U.S. Government Income Fund for any
Fund expenses in excess of 1.30% of average net assets.
Davis Selected Advisers - NY, Inc. ("DSA-NY"), a wholly-owned subsidiary of
the Adviser, acts as sub-adviser to the Funds. The Funds pay no fees directly to
DSA-NY.
NOTE 3 - DISTRIBUTION
With respect to Special Shares, Inc., Bramwell Capital Management, Inc.
("Bramwell") also acts as sub-adviser and manages the day-to-day investment
operations for the fund. The Fund pays no fees directly to Bramwell, who
receives from the Adviser a percentage of the total annual investment advisory
fees paid by the Fund to the Adviser.
Each fund has adopted procedures to treat Shelby Cullom Davis & Co. ("SCD")
as an affiliate of the Adviser. For American Shares, Inc., SCD received $140,159
in commissions on the purchases/sales of portfolio securities.
For services under the distribution agreement, the Funds pay a fee of 0.25%
of average daily net assets. For the year ended December 31, 1999, American
Shares, Inc., Special Shares, Inc., U.S. Government Income and Daily Government
Funds incurred distribution services fees totaling $8,130,115, $241,616, $13,441
and $322,120, respectively.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities) during the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
AMERICAN SPECIAL U.S. GOVERNMENT
SHARES, INC. SHARES, INC. INCOME
------------ ------------ ------
<S> <C> <C> <C>
Cost of purchases................. $1,017,534,563 $ 41,329,317 $ 6,599,891
Proceeds of sales................. $ 676,278,985 $ 41,307,345 $ 7,898,285
</TABLE>
37
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1999
================================================================================
NOTE 5 - CAPITAL STOCK
At December 31, 1999, there were 300 million shares of capital stock of
American Shares, Inc. ($1.25 par value per share) authorized. At December 31,
1999, there were 50 million shares of capital stock of Special Shares, Inc.
($0.25 par value per share) authorized. At December 31, 1999, 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>
YEAR ENDED
DECEMBER 31, 1999
-----------------------------------------------------------------
AMERICAN SPECIAL U.S.
SHARES SHARES GOVERNMENT DAILY
INC. INC. INCOME GOVERNMENT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold......................................... 22,168,838 1,447,351 66,570 15,388,012
Shares issued in reinvestment of distributions...... 4,424,497 384,122 29,508 5,601,074
------------ ------------ ------------ ------------
26,593,335 1,831,473 96,078 20,989,086
Shares redeemed..................................... (16,364,757) (1,586,891) (258,633) (15,849,181)
------------ ------------ ------------ ------------
Net increase (decrease)..................... 10,228,578 244,582 (162,555) 5,139,905
============ ============ ============ ============
Proceeds from shares sold........................... $750,251,715 $21,526,141 $ 584,615 $15,388,012
Proceeds from shares issued in
reinvestment of distributions.................. 150,287,145 5,672,955 255,999 5,601,074
------------ ------------ ------------ ------------
900,538,860 27,199,096 840,614 20,989,086
Cost of shares redeemed............................. (546, 437,410) (23,524,007) (2,248,160) (15,849,181)
------------ ------------ ------------ ------------
Net increase (decrease)..................... $354,101,450 $ 3,675,089 $ (1,407,546) $ 5,139,905
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------------------------------------------------------
AMERICAN SPECIAL U.S.
SHARES SHARES GOVERNMENT DAILY
INC. INC. INCOME GOVERNMENT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold......................................... 29,034,922 2,135,219 192,677 24,255,402
Shares issued in reinvestment of distributions...... 1,213,367 527,262 30,016 5,746,130
------------ ------------ ------------ ------------
30,248,289 2,662,481 222,693 30,001,532
Shares redeemed..................................... (18,727,709) (2,004,322) (194,758) (21,269,855)
------------ ------------ ------------ ------------
Net increase................................ 11,520,580 658,159 27,935 8,731,677
============ ============ ============ ============
Proceeds from shares sold........................... $829,939,241 $ 29,840,446 $ 1,747,977 $ 24,255,402
Proceeds from shares issued in
reinvestment of distributions.................. 35,183,278 7,182,421 271,717 5,746,130
------------ ------------ ------------ ------------
865,122,519 37,022,867 2,019,694 30,001,532
Cost of shares redeemed............................. (531,941,758) (27,409,198) (1,763,148) (21,269,855)
------------ ------------ ------------ ------------
Net increase................................ $333,180,761 $ 9,613,669 $ 256,546 $ 8,731,677
============ ============ ============ ============
</TABLE>
38
<PAGE>
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1999
================================================================================
NOTE 6 - CUSTODIAN FEES
Under an agreement with the custodian bank, each fund's custodian fees are
reduced for earnings on cash balances maintained at the custodian by the Funds.
During the year ended December 31, 1999, such reductions amounted to $6,692,
$615, $124 and $256 for American Shares, Inc., Special Shares, Inc., U.S.
Government Income and Daily Government, respectively.
NOTE 7 - SECURITIES LOANED
American Shares, Inc. (the "Fund") has entered into a securities lending
arrangement with PaineWebber, Inc. Under the terms of the agreement, the Fund
receives fee income from lending transactions; in exchange for such fees,
PaineWebber, Inc. is authorized to loan securities on behalf of the Fund,
against receipt of collateral at least equal to the value of the securities
loaned. Cash collateral is invested by the Adviser in money market instruments.
As of December 31, 1999, the Fund had on loan securities valued at $60,227,928;
cash of $61,815,150 was received as collateral for the loans and has been
invested in approved instruments. The Fund bears the risk of any deficiency in
the amount of the collateral available for return to a borrower due to a loss in
an approved investment.
NOTE 8 - RESTRICTED SECURITIES
Restricted securities are not registered under the Securities Act of 1933
and may have contractual restrictions on resale. They are valued under methods
approved by the Board of Directors as reflecting fair value. The aggregate value
of restricted securities in American Shares, Inc. was $2,448,469, or 0.07% of
the net assets as of December 31, 1999. Information concerning restricted
securities is as follows:
<TABLE>
<CAPTION>
Number of Valuation per Unit as
Fund Security Acquisition Date Shares Cost per Unit of December 31, 1999
- ---- -------- ---------------- ------ ------------- --------------------
<S> <C> <C> <C> <C> <C>
American Centerpoint Properties
Shares, Inc. Corp. Private 04/02/98 70,000 $33.2595 $34.978125
</TABLE>
39
<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>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 31.16 $ 27.18 $ 21.53 $ 17.68 $ 13.09
-------- -------- -------- -------- --------
Income From Investment Operations
- ---------------------------------
Net Investment Income........................... .15 .15 .16 .18 .22
Net Realized and Unrealized
Gains........................................ 6.08 4.24 7.72 5.15 4.74
-------- -------- -------- -------- --------
Total From Investment Operations............. 6.23 4.39 7.88 5.33 4.96
Dividends and Distributions
- ----------------------------
Dividends from Net Investment Income............ (.15) (.15) (.17) (.17) (.22)
Distributions from Realized Gains............... (1.44) (.26) (2.05) (1.31) (.15)
Dividends in Excess of Net
Investment Income............................ - - (.01) - -
-------- -------- -------- -------- --------
Total Dividends and Distributions............ (1.59) (.41) (2.23) (1.48) (.37)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.................... $ 35.80 $ 31.16 $ 27.18 $ 21.53 $ 17.68
======== ======== ======== ======== ========
Total Return(1)................................... 20.32% 16.27% 37.25% 30.74% 38.09%
- --------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000,000 omitted)............................ $3,704 $2,906 $2,222 $1,376 $926
Ratio of Expenses to Average Net Assets......... .93% .94% .96% 1.03% 1.09%
Ratio of Net Investment Income to
Average Net Assets........................... .24% .52% .62% .87% 1.42%
Portfolio Turnover Rate(2)...................... 21% 20% 26% 29% 27%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period.
(2) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
SEE NOTES TO FINANCIAL STATEMENTS
40
<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>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 14.76 $ 13.03 $ 10.89 $ 10.80 $ 9.02
--------- --------- --------- --------- ---------
Income (Loss) From Investment Operations
- ----------------------------------------
Net Investment Loss............................. (.09) (.08) (.07) - -
Net Realized and Unrealized Gains............... 2.47 3.14 2.83 1.27 3.04
--------- --------- --------- --------- ---------
Total From Investment Operations............. 2.38 3.06 2.76 1.27 3.04
Dividends and Distributions
- ---------------------------
Distributions from Realized Gains............... (.97) (1.33) (.62) (1.18) (1.26)
Return of Capital............................... - (1) - - - -
--------- --------- --------- --------- ---------
Total Dividends and Distributions............ (.97) (1.33) (.62) (1.18) (1.26)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period.................... $ 16.17 $ 14.76 $ 13.03 $ 10.89 $ 10.80
========= ========= ========= ========= =========
Total Return(2)................................... 16.83% 24.52% 26.91% 11.86% 34.24%
- --------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000 omitted)......... $107,592 $94,644 $74,930 $62,435 $58,975
Ratio of Expenses to Average Net Assets ........ 1.17% 1.26%(3) 1.28% 1.33% 1.48%
Ratio of Net Investment Loss to Average
Net Assets................................... (.59)% (.58)% (.60)% (.66)% (.58)%
Portfolio Turnover Rate(4)...................... 44% 41% 51% 98% 127%
</TABLE>
(1) Less than $0.005 per share.
(2) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period.
(3) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.25% for the period ended December 31,
1998.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
SEE NOTES TO FINANCIAL STATEMENTS
41
<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>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 9.04 $ 9.01 $ 8.90 $ 9.20 $ 8.45
------- ------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income........................... .45 .47 .51 .53 .54
Net Realized and Unrealized
Gains (Losses)............................ (.62) .06 .11 (.28) .78
------- ------- ------- ------- -------
Total From Investment Operations............. (.17) .53 .62 .25 1.32
Dividends and Distributions
- ---------------------------
Dividends from Net Investment Income............ (.45) (.47) (.51) (.53) (.54)
Distributions from Realized Gains............... (.05) (.03) - (.02) (.03)
------- ------- ------- ------- -------
Total Dividends and Distributions............ (.50) (.50) (.51) (.55) (.57)
------- ------- ------- ------- -------
Net Asset Value, End of Period.................... $ 8.37 $ 9.04 $ 9.01 $ 8.90 $ 9.20
======= ======= ======= ======= =======
Total Return(1)................................... (1.97)% 5.90% 7.32% 2.85% 15.97%
- ---------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000 omitted)......... $4,413 $6,237 $5,962 $6,934 $7,811
Ratio of Expenses to Average Net Assets ........ 1.28%(2) 1.52%(2),(3) 1.50%(2) 1.44%(2) 1.44%(2)
Ratio of Net Investment Income to
Average Net Assets........................... 5.15% 5.17% 5.79% 5.96% 6.09%
Portfolio Turnover Rate(4)...................... 134% 36% 16% 26% 76%
</TABLE>
(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, 1999, 1998, 1997, 1996 and 1995 would have been
1.61%, 1.62%, 1.60%, 1.67% and 1.58%, respectively.
(3) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.50% for the period ended December 31,
1998.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
42
<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>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income......................... .044 .047 .048 .046 .051
Dividends and Distributions
- ---------------------------
Dividends from Net Investment Income.......... (.044) (.047) (.048) (.046) (.051)
------- ------- ------- ------- -------
Net Asset Value, End of Period.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return(1)................................. 4.48% 4.85% 4.91% 4.70% 5.23%
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000 omitted)....... $131,342 $126,203 $117,471 $112,674 $184,603
Ratio of Expenses to Average Net Assets....... .68% .71% .70% .75% .75%(2)
Ratio of Net Investment Income
to Average Net Assets...................... 4.44% 4.74% 4.80% 4.62% 5.13%
</TABLE>
(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 1995 would have been 0.78%.
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
SELECTED FUNDS
INCOME TAX INFORMATION (UNAUDITED)
December 31, 1999
================================================================================
In early 2000, shareholders will receive information regarding all
dividends and distributions paid to them by the funds during calendar year 1999.
Regulations of the U.S. Treasury Department require the funds to report this
information to the Internal Revenue Service.
SELECTED AMERICAN SHARES, INC.
Distributions of $1.59 per share were paid to shareholders during the
calendar year 1999, of which $1.44 was designated as a "capital gain
distribution" for federal income tax purposes. Whether received in stock or
cash, the capital gain distribution should be treated by shareholders as a gain
from the sale of capital assets held for more than one year (long-term capital
gains).
Dividends paid by the Fund during the calendar year ended 1999 which are
not designated as capital gain distributions should be multiplied by 100% to
arrive at the net amount eligible for the corporate dividend-received deduction.
SELECTED SPECIAL SHARES, INC.
Distributions of $0.97 per share were paid to shareholders during the
calendar year 1999, of which $0.97 was designated as a "capital gain
distribution" for federal income tax purposes. Whether received in stock or
cash, the capital gain distribution should be treated by shareholders as a gain
from the sale of capital assets held for more than one year (long-term capital
gains).
None of the dividends paid by the Fund during the calendar year ended 1999
are eligible for the corporate dividend-received deduction.
SELECTED U.S. GOVERNMENT INCOME FUND
Distributions of $0.498362 per share were paid to shareholders during the
calendar year 1999, of which $0.05 was designated as a "capital gain
distribution" for federal income tax purposes. Whether received in stock or
cash, the capital gain distribution should be treated by shareholders as a gain
from the sale of capital assets held for more than one year (long-term capital
gains).
None of the dividends paid by the Fund during the calendar year ended 1999
are eligible for the corporate dividend-received deduction.
The foregoing information is presented to assists shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local regulations, we recommend that
you consult your tax adviser for specific guidance.
44
<PAGE>
SELECTED FUNDS
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Shareholders and Board of Directors/Trustees of Selected American Shares,
Inc., Selected Special Shares, Inc. and Selected Capital Preservation Trust:
We have audited the accompanying statements of assets and liabilities
of Selected American Shares, Inc., Selected Special Shares, Inc., U.S.
Government Income Fund (a series of Selected Capital Preservation Trust) and
Daily Government Fund (a series of Selected Capital Preservation Trust)
including the schedules of investments as of December 31, 1999 and the related
statements of operations for the year then ended and the statements of changes
in net assets and the financial highlights for each of the years in the two-year
period then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the years in the three-year period
ended December 31, 1997 were audited by other auditors whose report dated
February 13, 1998, expressed an unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
positions of Selected American Shares, Inc., Selected Special Shares, Inc., U.S.
Government Income Fund and Daily Government Fund as of December 31, 1999, the
results of operations for the year then ended, and the changes in net assets and
the financial highlights for each of the years in the two-year period then
ended, in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
February 4, 2000
45
<PAGE>
SELECTED
FUNDS
2949 East Elvira Road, Tucson, Arizona 85706
================================================================================
DIRECTORS OFFICERS
William P. Barr James J. McMonagle
Floyd A. Brown Chairman
Andrew A. Davis Christopher C. Davis
Christopher C. Davis President - Selected American
Jerome Hass Shares & Selected Special
James J. McMonagle Shares
Katherine L. MacWilliams Creston A. King
Richard O'Brien President - Selected U.S.
Larry Robinson Government Income Fund &
Marsha Williams Selected Daily Government
Fund
Kenneth C. Eich
Vice President
Sharra L. Reed
Vice President, Treasurer
& Assistant Secretary
Thomas D. Tays
Vice President
& Secretary
Arthur Don
Assistant Secretary
Sheldon R. Stein
Assistant Secretary
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
(800) 243-1575
DISTRIBUTOR
Davis Distributors, LLC
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
TRANSFER AGENT & CUSTODIAN
State Street Bank and Trust Company
c/o Selected Funds
P.O. Box 8243
Boston, Massachusetts 02266-8243
AUDITORS
KPMG LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
COUNSEL
D'Ancona & Pflaum
111 E. Wacker Drive
Chicago, Illinois 60601-4205
================================================================================
FOR MORE INFORMATION ABOUT THE SELECTED FUNDS, INCLUDING MANAGEMENT FEE, CHARGES
AND EXPENSES, SEE THE CURRENT PROSPECTUS WHICH MUST PRECEDE OR ACCOMPANY THIS
REPORT.
================================================================================
<PAGE>
Davis Selected Advisers, L.P.
Family 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.
2949 East Elvira Road, Suite 101
Tucson, AZ 85706
Distributor
Davis Distributors, LLC
2949 East Elvira Road, Suite 101
Tucson, AZ 85706
Transfer Agent and Custodian
State Street Bank & Trust Company
c/o Selected Funds
P.O. Box 8243
Boston, MA 02266-8243
Legal Counsel
D'Ancona & Pflaum
111 E. Wacker Dr., Suite 2800
Chicago, IL 60601-4205
Auditors
KPMG, LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
800-243-1575
www.selectedfunds.com
