Selected Funds
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
=============================================================================
Dear Shareholder:
Selected American Shares
The past year was marked by considerable short-term volatility in
the markets but ultimately proved to be very favorable to stocks and
below average for bonds. The markets' results were due in large part to
mixed signals about the health of the U.S. economy. Certain economic
indicators argued for an acceleration of growth and a step-up in inflation
that could hurt corporate profits. Others suggested that the economy was
stable and that profits would remain strong. In the end, we saw full
employment with low inflation, steady growth and a shrinking budget
deficit. The net result was a so-called "Goldilocks" economy - neither too
fast nor too slow.
The final quarter of 1996 was exceptionally strong for U.S. stocks.
The Dow Jones Industrial Average of blue-chip stocks, which had achieved
record highs in the second quarter, did so again in the fourth quarter and
ended the year with a gain of 28.86%, including reinvested dividends.
However, as happened generally throughout 1996, investors
continued to punish the stock of any company that reported disappointing
earnings, creating considerable volatility and a dichotomous market of
substantial winners and losers. The uncertainty in the marketplace also
drove investors to favor large-capitalization stocks, which faired better
than smaller-capitalization issues. The Standard & Poor's 500 Index of
large-company common stocks advanced 22.94%, compared to a rise of
14.76% for the Russell 2000 Index of small-company stocks.
Despite the markets' gyrations, we steadfastly held to our
investment approach, which stresses long-term investments and creating
wealth over time. As a result, Selected American Shares generated a
total return of 30.74% for the twelve months ended December 31, 1996,
well ahead of the 20.69% total return for the Lipper Growth and Income
Fund Index. We are proud that the fund ranked in the top 3% of the 520
growth and income funds tracked by Lipper Analytical Services for the
year, and the top 4% of the 329 tracked for the past three years. The
Lipper Growth and Income Fund Index comprises 30 growth and income
funds. An investor may not invest in this index, nor in the unmanaged S&P
500 Index. The fund ranked 11th of 520 growth and income funds for the
12-month period; 12th of 329 similar funds for the three-year period;
90th out of 212 funds for five years; and 16th of 123 funds for the 10
years ended December 31, 1996.
Investing for the Long Run
- --------------------------
Since assuming the investment management of Selected American
Shares in 1993, we have applied our distinctive investment approach to
the fund. Over many years and three generations of experience in the
markets, we have come to believe that the keys to successful investing,
particularly in larger-capitalization stocks, include in-depth,
old-fashioned research to find overlooked, undervalued companies with
superior management teams; actively managing risk throughout the
process; and personal commitment. The members and associates of Davis
Selected Advisers are among the largest shareholders in the Selected
Funds. This is one reason we ask, "How much can you lose?" before we
even consider "How much can you make?" on a particular stock.
A correlation of our long-term perspective on investing is that we
do not chase the quarter's fastest-rising (and often priciest) stocks and
sectors. We have always been wary of such fads. Although certain
industries may be more attractive than others, we believe that many great
companies have come out of industries not generally considered attractive
at the time of purchase. So we focus most on the company and the
underlying economics and basic characteristics that will drive its price in
the long run.
We also believe that great companies are created by great managers.
We are less interested in quarter-to-quarter minutiae and more concerned
about the fundamental dynamics of the business and the vision, drive and
discipline of its management team.
Once we identify a good company, the question is: "At what price
does it make sense to own this stock?" Only if the valuation makes sense
will we add it to the portfolio. For Selected American Shares, we
generally focus on businesses growing moderately -- between 10% and
15% per year -- that can be purchased at a price/earnings ratio of 8 to 15.
Sticking to this price discipline may prevent us from buying some
"hot" stocks that may do very well. On the other hand, it should help us
avoid the type of calamitous losses that, in a bear market, can wipe out an
investor's hard-won gains. Our investment record has been built as much
by avoiding big losses as by picking big long-term winners.
Investment Themes for This Decade and Beyond
- --------------------------------------------
One way we find such companies to buy is by identifying long-term
investment themes that will drive the price of a stock for not just weeks
or months, but many years. In 1996, our emphasis on one of these themes
- - the growth of financial services - contributed greatly to the fund's
outstanding results.
Financial stocks have been a major investment theme at Davis
Selected Advisers for most of this decade, though in truth we have been
developing our competency and knowledge of this sector for decades. We
view financial companies as "growth stocks in disguise" because of their
potential for growth and relatively low price/earnings multiples.
Financial companies are the beneficiaries of two long-term trends:
the aging of America's baby-boomers and the expansion of financial
services around the world. The 76 million baby-boomers in this country
have entered their peak earnings and savings years. As they prepare for
retirement, this huge group is changing from consumers to savers.
One result of this turbulence in the financial sector was that the
strong companies have grown stronger. We particularly like financial
companies that have succeeded in establishing strong brand identities,
such as American Express, the fund's largest holding at year-end; and
Travelers Inc. In addition to the strong brand name of its Smith Barney
brokerage subsidiary and the well-known "red umbrella" identity of its
insurance operations, Travelers has an exceptionally strong management
team led by entrepreneur Sanford Weill.
Elsewhere, we think the spread of capitalism and a burgeoning
middle-class are creating and will continue to create new markets and
growth opportunities for financial and other companies. Among our top
ten holdings at year-end was Morgan Stanley, a leading international
investment banking and brokerage firm with 37 principal offices around
the world.
We also own McDonald's Corp., which generates 57% of its earnings
from international operations and is positioned to increase overseas
business 15% to 20% per year.
In addition to financial services, we have positioned the fund to take
advantage of two other areas of opportunity in underpriced stocks. The
first is technology. We added several high-quality growth stocks - such
as semiconductor manufacturer Intel.
The second is the resurgence of energy-related companies. After
declining for more than a decade, worldwide demand and prices for oil
have returned to levels that make additional exploration worthwhile.
Americans are trading their compact cars for sport utility vehicles while
Chinese are exchanging their bicycles for mopeds.
During the past year, we have invested about 8% of the fund's assets
in energy and oil and gas stocks, stressing those of companies that
survived and grew stronger during the downturn. One of our largest energy
holdings is the world-class firm of Schlumberger, a provider of oil rigs
and other energy exploration and development equipment. While
exploration itself is a high-risk business, providing equipment and
services for exploration can be a fairly stable enterprise with significant
cash flows.
We remain confident that our "all-weather" investment approach
will continue to serve the fund well. As shareholders of the fund
ourselves, we look forward to the future with optimism, albeit tempered
with the realization that the markets will rarely be as generous as they
have been in the last several years.
Selected Special Shares
- -----------------------
Large capitalization stocks outperformed smaller capitalization
stocks in 1996, particularly the largest twenty-five stocks in the S & P
500 Index. With an unweighted median market capitalization of $1.0
billion at the end of the year, Selected Special's comparative performance
lagged. Fourth quarter tax selling also impacted less liquid small- and
mid-cap stocks over the short-term; several have already bounced back in
January. Positive contributions to the fund's performance during the year
came from companies benefiting from outsourcing (Computer Sciences,
Robert Half), differentiated consumer (Tiffany) and
productivity-enhancing (Seachange) products, and financial services
(Northern Trust, Washington Mutual). Backup in demand for electronics
hurt the first half but helped the second half. Disappointing sales of
satellite-delivered direct broadcasting services and a preannounced
shortfall in European sales by Computer Associates in late December hurt
performance in the fourth quarter. On the positive side, the fund
benefitted from gains in selected initial public offerings (IPOs) such as
Acceler8 Technology, Biacore, Ingram Micro and Seachange and
acquisitions of Continuum by Computer Sciences, Red Lion Hotels by
Doubletree, Eckerd by J.C. Penney and MFS Communications by WorldCom.
Outlook
- -------
During the fourth quarter of 1996, we laid the groundwork for
positioning the portfolio for 1997. In general, we expect the overall
market strength to expand to mid- and small-cap stocks as large growth
companies are beginning to sell at historically high premium P/E ratios of
1.8 to 2.0 times that of both the S & P 500 Index and their own future
growth rates. At the end of December, we had 82% of the dollar value of
the portfolio invested in market capitalizations below $5 billion (36%
below $1 billion). We try to buy companies at attractive valuations
relative to individual company growth rates and to the overall market.
Over time, we expect stock prices to move with earnings growth and we
aim to structure the portfolio to have potential multiple expansion as
well.
Going forward, we are focusing on companies that can benefit from
globalization and brand identity. We have continued to increase our
exposure to financial services and technology and are on the hunt across
industries for effective users of technology. The financial services
industry is an example of an industry where technology encourages
economies of scale by facilitating cross-selling across massive databases
which reduce processing costs. Product upgrades are driving demand for
richer and faster forms of computing and new methods of communications
such as the Internet are creating new operating procedures, distribution
channels and businesses. Updating databases for the year 2000 is
stimulating job creation as well as improved information systems. We
live in an age of accelerating change which should provide numerous
investment opportunities.
We look for moderate 2 to 3% economic growth in the United States
in 1997 with expanding employment and continued corporate profit gains
as new products and markets come on stream and companies benefit from
streamlined cost structures. We expect inflation to stay in the 2 to 3%
range as technology drives costs down and competition restrains price
increases. Even global inflation has come down to low single digits as
countries around the world move to noninflationary government policies
and privatizations and benefit from the same technology- and
communications- driven productivity advances and restructurings that
have been occurring in the United States. With little inflation, the
quality of earnings is historically high and arguably should be valued at a
higher multiple. We anticipate interest rates staying in a narrow band
with the 3-month U.S. Treasury bill yielding some 5%. U.S. interest rates
are high compared to Germany and Japan where the economies are
persistently sluggish and we expect reluctance to widen the interest
spread further by raising U.S. rates.
Investment Approach
- -------------------
Selected Special Shares seeks to achieve long-term capital
appreciation by investing in companies with above-average growth
potential as the result of such factors as growth in existing and new
products and markets and opportunities for improving returns on sales
and capital. Favorable fundamentals from investment spending may not be
efficiently reflected in stock prices in a given one-year period, creating
potentially enhanced returns. The fund invests in a diversified portfolio
of companies in various industries and with various market
capitalizations but with a focus on small and medium companies so that
the median unweighted market capitalization of the portfolio
approximates $1 billion. Up to 25% of the fund's assets may be invested in
foreign securities and, although the fund will normally be invested in
equities, it may hold short-term money market or United States
Government securities if market conditions warrant. Portfolio selection
is largely based on primary research and is company-specific within the
context of a macroeconomic and political framework.
Selected U.S. Government Income Fund
- ------------------------------------
At Davis Selected Advisers, we take a middle-of-the-road,
long-term approach to managing fixed-income funds that stresses
risk-adjusted performance. Put another way, we look to deliver
competitive results with less risk or volatility than our competitors.
During the past year we continued to work to bring the Selected U.S.
Government Income Fund in line with this philosophy. In the tough bond
environment of 1996 it proved to be a good move. A more defensive
positioning of the fund helped to generate a one-year total return of 2.85%
(see page 17), well ahead of the 1.72% average total return for the 170
government bond funds tracked by Lipper Analytical Services.
Our cautious approach, which may underperform in a bull market for
bonds, also offers downside protection in periods of volatility, such as the
year just past. During the first half of 1996, fears of an accelerated rate
of inflation drove interest rates up, forcing down bond prices. Yields on
the benchmark 30-year U.S. Treasury bond rose from 5.9% to a high of 7.2%
in July. During the second half, rates for long-term Treasury bonds
subsided, ending the year at 6.6% as investors embraced a more benign
picture of the economy and inflation.
In light of the persistent volatility in the market, we made a
concerted effort to increase the variety of securities in the fund's
portfolio and limit changes in the fund's net asset value. In particular, we
reduced the fund's proportion of collateralized mortgage obligations
(CMOs) to 28% of assets. Using CMOs served the fund well in the first
half of the year. However, some CMOs are more volatile than other
government bonds and may not participate in bond market rallies.
We bought callable U.S. agency notes, which accounted for 24% of net
assets at the end of the period. These securities offer substantial income
and may capture a greater share of the gains in a rising bond market. We
also purchased a variety of mortgage pass-through certificates which
tend to be more price-stable. At year-end, these represented 32% of the
portfolio. This move in the long run should result in the portfolio being
better insulated against bond market fluctuations and may provide more
stable, predictable results.
Looking forward, we do not anticipate any major changes to the
composition of the portfolio, provided the economy maintains the delicate
balance of the past year or so. Absent an extraordinarily positive event
(such as progress toward a balanced budget) or a negative one (perhaps a
change in foreign activities that affect the purchase of U.S. bonds), we
look for steady results and a continuation of our defensive posture.
Sincerely,
Robert J. Greenebaum Shelby M. C. Davis
Chairman President
February 10, 1997
SELECTED AMERICAN SHARES, INC.
Portfolio Holdings - At December 31, 1996
============================================================================
Chart omitted. Details of chart are as follows:
Portfolio Makeup % of Fund Assets
---------------- ----------------
Common Stocks 95.9%
Preferred Stocks 2.2%
Bonds 0.7%
Cash & Cash Equivalents 1.2%
Chart omitted. Details of chart are as follows:
Sector Weightings % of Portfolio
----------------- --------------
Manufacturing 6.2%
Transportation 3.4%
Insurance 15.1%
Real Estate 7.6%
Diversified Financial Services 15.9%
Banking 12.8%
Pharmaceuticals 4.1%
Consumer Products 4.8%
Technology 10.4%
Retail 2.8%
Energy 8.8%
Other 8.1%
<TABLE>
<CAPTION>
Top 10 Holdings
Stock Sector % of Fund Assets
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
American Express Co. Financial 3.51%
Intel Corp. Technology 3.18%
Travelers Group Inc. Financial 2.90%
Wells Fargo & Co. Bank & Savings & Loans 2.78%
Centerpoint Properties Corporation Real Estate 2.53%
SunAmerica, Inc. Insurance 2.51%
Philip Morris Companies Consumer Products 2.49%
The Allstate Corp. Insurance 2.48%
Morgan Stanley Group, Inc. Financial 2.46%
First Bank Systems, Inc. Bank & Savings & Loans 2.45%
</TABLE>
<TABLE>
SELECTED AMERICAN SHARES, INC.
Portfolio Activity - January 1, 1996 through December 31, 1996
===================================================================================================================================
New Positions Added (1/1/96-12/31/96)
(Highlighted Positions are those greater than 0.99% of Total Assets)
<CAPTION>
Date of 1st % of 12/31/96
Security Sector Purchase Fund Assets
- -------- ------ ----------- -------------
<S> <C> <C> <C>
360 (Degree) Communications Company Telecommunications 12/96/96 0.08%
Adobe Systems, Inc. Technology 4/12/96 -
Airtouch Pfd C 4.25% Telecommunications 9/12/96 0.07%
Alliance Capital Financial 1/29/96 -
Applied Materials, Inc. Technology 1/19/96 0.81%
Archer-Daniels-Midland Co. Agriculture 4/30/96 0.94%
Avalon Properties, Inc. Real Estate 1/12/96 0.20%
Bankamerica Corp. Banks and Savings and Loans 9/12/96 1.88%
Barnett Banks, Inc. Banks and Savings and Loans 4/15/96 0.56%
Boeing Co. Aerospace 6/16/96 1.85%
Burlington Northern Railroad 8/15/96 1.25%
Cali Realty Corp. Real Estate 8/7/96 0.25%
Citicorp Banks and Savings and Loans 1/9/96 2.28%
Cooper Cameron Corp. Energy 10/17/96 0.97%
Delta Air Lines, Inc. Airlines 7/11/96 -
Devon Financing Trust Oil & Gas 12/2/96 0.71%
Eli Lilly & Co. Pharmaceutical and Health Care 10/14/96 0.55%
Falcon Drilling Company Energy 12/10/96 0.13%
General Motors Class H Automobiles 9/20/96 0.61%
Guinness PLC Beverages 3/6/96 -
Halliburton Co. Energy 7/2/96 1.72%
Host Marriott Services Corp. Real Estate 1/2/96 -
International Business Machines Technology 10/2/96 2.29%
Kimberly-Clark Corporation Paper Products 4/16/96 0.48%
Komag Inc. Technology 8/27/96 0.82%
Martin Marietta Material Building Materials 10/7/96 1.18%
Masco Corporation Building Materials 11/20/96 0.86%
Merck & Co., Inc. Pharmaceutical and Health Care 2/22/96 0.46%
NAC Re Corp. Insurance 4/22/96 -
Noble Affilates, Inc. Energy 1/19/96 0.71%
Noble Affilates, Inc., Conv. Sub.
Note, 4.25%, 11/1/03 Energy 2/5/96 -
Noble DrillingEnergy6/26/960.54%
Novellus Systems, Inc. Technology 3/25/96 0.84%
NUI Corp. Utilities 5/20/96 -
Patriot American Hospitality Real Estate 7/23/96 0.09%
Philip Morris Companies Consumer Products 10/28/96 2.44%
Schlumberger Ltd. Energy 2/29/96 1.52%
Signet Banking Corp. Banks and Savings and Loans 3/21/96 -
Sizeler Property Investors Inc. Real Estate 3/20/96 0.19%
Smith International Energy 9/12/96 0.32%
</TABLE>
<TABLE>
SELECTED AMERICAN SHARES, INC.
Portfolio Activity - January 1, 1996 through December 31, 1996
===================================================================================================================================
New Positions Added (1/1/96-12/31/96) - Continued
(Highlighted Positions are those greater than 0.99% of Total Assets)
<CAPTION>
Date of 1st % of 12/31/96
Security Sector Purchase Fund Assets
- -------- ------ ----------- -------------
<S> <C> <C> <C>
State Street Boston Corp. Banks and Savings and Loans 7/17/96 0.84%
Transatlantic Holdings Insurance 10/28/96 0.76%
Travelers/Aetna Property Casualtty Corp.
Class A Insurance 4/22/96 -
Union Pacific Corp. RailRoad 2/6/96 0.83%
Union Pacific Resources Energy 10/16/96 0.18%
Unocal Corp. Energy 5/16/96 -
</TABLE>
<TABLE>
Positions Closed (1/1/96-12/31/96) (Gains and losses greater than $3 million are highlighted)
<CAPTION>
Security Sector Date of Final Sale Gain/(Loss)
- -------- ------ ------------------ ----------
<S> <C> <C> <C>
Adobe Systems, Inc. Technology 7/24/96 (2,038,617)
Alliance Capital Financial 5/15/96 71,893
Amerada Hess Corp. Energy 7/11/96 712,074
Amoco Corp. Energy 3/1/96 137,843
AMR Corp. Airlines 6/25/96 733,658
Coca Cola Company Food/Beverage & Restaurant 12/20/96 15,497,027
Delta Air Lines, Inc., Depository
Shares, $3.50, Ser. C Conv. Pfd. Airlines 9/11/96 280,507
Equifax, Inc. Financial 4/16/96 1,323,083
Guinness PLC ORD Beverages 12/16/96 10,328
Home Depot, Inc. Retail 10/2/96 998,775
Host Marriott Corp. Real Estate 11/20/96 4,912,314
Host Marriott Services Corp. Real Estate 3/21/96 31,663
MCI Communications Corp. Telecommunications 11/12/96 5,125,935
Merry Land & Investment Co., Inc. Real Estate 6/24/96 31,776
Mid-America Apartment Communities, Inc. Real Estate 9/16/96 (37,330)
MidAmerica Energy Co. Utilities 3/14/96 1,051,413
Mitsubishi Bank Ltd., 3.00%, 11/30/02 Banks and Savings and Loans 12/16/96 48,875
NAC Re Corp. Insurance 10/7/96 124,726
National Re Corp. Insurance 9/20/96 8,647,625
Northern Trust Corp. Banks and Savings and Loans 5/8/96 2,295,292
Norwest Corp. Banks and Savings and Loans 1/15/96 122,885
NUI Corp. Utilities 8/8/96 (10,705)
Panenergy Corp. Energy 11/27/96 5,678,444
Risk Captial Holdings, Inc. Insurance 11/19/96 (1,235,000)
Salomon Inc. - Hewlett-Packard Company,
ELK, 5.25%, 01/01/97 Electronics 5/1/96 2,091,737
The Segrams Co. Ltd. Consumer Products 12/2/96 489,525
Security Capital Industrial Trust, 7.00%,
Ser. B Cum. Conv. Pfd. Real Estate 11/20/96 11,785
SELECTED AMERICAN SHARES, INC.
Portfolio Activity - January 1, 1996 through December 31, 1996
===================================================================================================================================
Positions Closed (1/1/96-12/31/96) (Gains and losses greater than $3 million are highlighted) - Continued
Security Sector Date of Final Sale Gain/(Loss)
- -------- ------ ------------------ ----------
Signet Banking Corp. Banks and Savings and Loans 6/27/96 (100,822)
Sovran Self Storage Inc. Real Estate 7/26/96 80,995
Storage USA, Inc. Real Estate 8/16/96 283,859
Tandy Corp. Retail 4/17/96 5,849
Texaco Inc. Energy 3/1/96 811,201
Texas Instruments, Inc. Electronics 6/5/96 4,802,496
Transport Holdings, Inc., Class A Insurance 11/20/96 101,596
Travelers/Aetna Property Casualtty
Corp. Class A Insurance 5/7/96 62,020
Tyson Foods, Inc., Class A Food/Beverage & Restaurant 11/15/96 2,009,336
Union Camp Corp. Paper Products 3/18/96 (1,991,067)
Unocal Corp. Energy 10/22/96 169,524
Unocal Corp., 3.50%, Conv. Pfd. Energy 10/22/96 199,600
UNUM Corp. Insurance 12/16/96 1,418,632
Weyerhaeuser Co. Timber Products 3/4/96 (18,137)
</TABLE>
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, 1996.
One Year.................................. 30.74%
Five Years................................ 14.26%
Ten Years................................. 14.92%
$10,000 invested over ten years. Let's say you invested $10,000 in
Selected American Shares ("SAS") on December 31, 1986. As the chart
below shows, by December 31, 1996 the value of your investment would
have grown to $40,229 - a 302.29% increase on your initial investment.
For comparison, the Standard & Poor's 500 Stock Index is also presented
on the chart below.
Graph omitted- details of graph are as follows:
Measurement period Selected American S&P 500
Shares, Inc. Index
------------------ ------------------- -------
FYE 12/31/86 10,000 10,000
FYE 12/31/87 10,023 10,518
FYE 12/31/88 12,230 12,254
FYE 12/31/89 14,685 16,123
FYE 12/31/90 14,112 15,622
FYE 12/31/91 20,640 20,361
FYE 12/31/92 21,835 21,910
FYE 12/31/93 23,019 24,104
FYE 12/31/94 22,283 24,431
FYE 12/31/95 30,771 33,580
FYE 12/31/96 40,229 41,269
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 of 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.
SELECTED SPECIAL SHARES, INC.
Portfolio Holdings - At December 31, 1996
==============================================================================
Chart omitted. Details of chart are as follows:
Portfolio Makeup % of Fund Assets
---------------- ----------------
Common Stocks 98.0%
Cash & Cash Equivalents 2.0%
Chart omitted. Details of chart are as follows:
Sector Weightings % of Portfolio
----------------- --------------
Electronics 6.7%
Insurance 4.2%
Communications 6.0%
Healthcare 5.4%
Diversified Financial Services 13.9%
Industrial Products 6.9%
Services 10.9%
Energy 3.6%
Information Processing 16.8%
Entertainment/Leisure Time 4.8%
Retail 11.9%
Other 8.9%
<TABLE>
<CAPTION>
Top 10 Holdings
Stock Sector % of Fund Assets
- ----- ------ ----------------
<S> <C> <C>
Computer Sciences Corporation Information Processing - Services 3.95%
Washington Mutual, Inc. Financial Services 3.12%
Regal Cinemas, Inc. Entertainment/Leisure Time 2.98%
Tiffany & Co. Retailing 2.93%
Northern Trust Company Financial Services 2.90%
Interim Services, Inc. Services - Temporary Help 2.56%
Robert Half International, Inc. Services - Temporary Help 2.53%
W.R. Berkley Corporation Insurance 2.48%
Computer Associates International, Inc. Information Processing -Software 2.39%
MFS Communications Company, Inc. Communications 2.18%
</TABLE>
<TABLE>
SELECTED SPECIAL SHARES, INC.
Portfolio Activity - January 1, 1996 through December 31, 1996
==================================================================================================================================
New Positions Added (1/1/96-12/31/96)
(Highlighted Positions are those greater than 0.99% of Total Assets)
<CAPTION>
Date of 1st % of 12/31/96
Security Sector Purchase Fund Assets
- -------- ------ ----------- -------------
<S> <C> <C> <C>
Acceler8 Technology Information
Processing -Software11/19/960.33%
Affinity Technology Group, Inc. Information Processing -Software 4/25/96 0.22%
Alkermes, Inc. Healthcare 10/30/96 0.74%
Allstate Corporation Insurance 1/18/96 -
America Online, Inc. Technology 1/23/96 -
American Express Co. Financial Services 11/6/96 1.81%
APAC Teleservices, Inc. Information Processing -Services 12/13/96 1.23%
Automatic Data Processing, Inc. Information Processing -Services 3/14/96 0.69%
Barnett Business Systems, Inc. Services - Temporary Help 7/2/96 0.98%
Biacore International, AB - ADS Healthcare 11/26/96 1.25%
Billing Information Concepts Corporation Information Processing -Services 9/24/96 0.92%
BioChem Pharmaceuticals, Inc. Healthcare 5/21/96 1.21%
Black Box Corporation Electronics 12/12/96 0.99%
C-Cube Microsystems, Inc. Technology 5/13/96 -
Carbo Ceramics, Inc. Energy 4/22/96 0.50%
Cardiothoractic Systems, Inc. Healthcare 4/18/96 0.44%
Children's Comprehensive Services, Inc. Services -Education 8/15/96 0.53%
Claremont Technology Group, Inc. Information Processing -Services 11/12/96 1.26%
Computer Associates International, Inc. Information Processing -Software 10/10/96 2.39%
Computer Sciences Corporation Information Processing -Services 7/23/96 3.95%
Conducuts, Inc. Communications 5/3/96 0.10%
Continuum Company, Inc. Information Processing -Services 1/11/96 -
CYTYC Corporation Healthcare 12/16/96 0.65%
Data Processing Information Technology Specialty
Staffing Services 3/5/96 -
Dell Computer Corporation Information Processing - Office
Equipment 12/20/96 1.11%
Diamond Offshore Drilling, Inc. Energy 5/20/96 1.42%
Donna Karan International, Inc. Apparel 7/1/96 -
Doubletree Corp. Lodging 11/11/96 -
Employee Solutions, Inc. Services - Temporary Help 7/9/96 0.66%
Engineering Animation Technology 2/28/96 -
Fastenal Company Industrial Products 10/16/96 1.10%
Garden Botanika, Inc. Retailing 5/21/96 -
Gargoyles, Inc. Apparel 9/26/96 -
Global Marine, Inc. Energy 12/20/96 0.66%
Guidant Corp. Healthcare 10/14/96 -
Harmen International Industries Entertainment 5/15/96 -
Hyperion Software Corp. Information Processing -Services 2/7/96 -
Informix Corp. Information Processing - Software 1/30/96 -
Ingram Micro, Inc. Electronics 10/31/96 0.92%
SELECTED SPECIAL SHARES, INC.
Portfolio Activity - January 1, 1996 through December 31, 1996
==================================================================================================================================
New Positions Added (1/1/96-12/31/96) - Continued
(Highlighted Positions are those greater than 0.99% of Total Assets)
Date of 1st % of 12/31/96
Security Sector Purchase Fund Assets
- -------- ------ ----------- -------------
Input/Output, Inc. Energy 7/23/96 0.44%
Intel Corporation Electronics 10/24/96 2.10%
International Business Machines Information Processing -
Office Equipment 11/12/96 1.69%
Kent Electronics Corporation Electronics 12/10/96 1.24%
Labor Ready, Inc. Services - Temporary Help 6/13/96 0.76%
Landry's Seafood Restaurants, Inc. Restaurants 5/29/96 1.03%
Lear Corporation Automotive/Heavy Equipment 7/9/96 1.64%
Loehmann's, Inc. Retailing 9/12/96 1.11%
Loral Space & Communications Ltd. Communications 4/25/96 1.18%
Lucent Technologies, Inc. Communications 11/14/96 0.74%
Manpower, Inc. Services - Temporary Help 7/10/96 -
MFS Communications Company, Inc. Communications 4/29/96 2.18%
MSB Bancorp, Inc. Financial Services 1/5/96 0.47%
Mycogen Corporation Biotechnology 2/12/96 -
Neurex Corporation Healthcare 4/30/96 0.97%
Nike Inc. Apparel 11/1/96 0.48%
Office Depot Inc. Retailing 1/24/96 -
OzEmail Ltd. - ADS Communications 5/28/96 0.61%
Park Electrochemical Corp. Industrial Products 4/12/96 -
Paychex, Inc. Information Processing - Services 6/27/96 1.24%
PETsMart, Inc. Retailing 6/27/96 1.23%
Premier Parks Inc. Resorts/Theme parks 5/29/96 -
Quality Dining, Inc. Restaurants 6/21/96 -
The Registry, Inc. Services - Temporary Help 6/5/96 0.78%
RMH Teleservices Outbound Teleservices 9/18/96 -
Rockshox, Inc. Entertainment/Leisure Time 12/2/96 0.81%
Rowan Companies, Inc. Energy 12/24/96 0.54%
Sak's Holdings, Inc. Retailing 7/8/96 0.86%
SAP AG Information Processing 8/9/96 -
Seachange International, Inc. Information Processing -Software 11/4/96 1.02%
Solectron Corporation Electronics 12/10/96 1.32%
Staples, Inc. Retailing 9/5/96 -
Steinway Musical Instruments Household Products 8/1/96 -
Studio Plus Hotels, Inc. Lodging 11/5/96 0.25%
Suburban Lodges of America Lodging 5/22/96 -
ThermoLase Corporation Technology 3/15/96 -
ThermoQuest Corporation Industrial Products 3/19/96 1.05%
U.S. Satelite Broadcasting Company Communications 1/31/96 -
UroCor, Inc. Healthcare 5/16/96 -
USCS International, Inc. Information Processing -Services 6/20/96 0.41%
Viking Office Products, Inc. Retailing 9/11/96 0.43%
</TABLE>
<TABLE>
SELECTED SPECIAL SHARES, INC.
Portfolio Activity - January 1, 1996 through December 31, 1996
==================================================================================================================================
Positions Closed (1/1/96-12/31/96)
(Gains and losses greater than $500,000 are highlighted)
<CAPTION>
Security Sector Date of Final Sale Gain/(Loss)
- -------- ------ ------------------ ----------
<S> <C> <C> <C>
Alex Brown, Inc. Financial Services 2/29/96 465,419
Allstate Corporation Insurance 3/28/96 27,420
America Online, Inc. Technology 2/27/96 85,236
Analog Devices, Inc. Technology -Semiconductors/Equipment 3/25/96 220,925
Applied Materials, Inc. Technology -Semiconductors/Equipment 3/28/96 280,438
AVX Corp. Industrial Products 6/17/96 (543,057)
Ballard Medical Products Healthcare Products 7/31/96 61,459
C-Cube Microsystems, Inc. Technology 10/22/96 (452,444)
C.P. Clare Corporation Industrial Products 9/10/96 (192,244)
Case Corporation Automotive/Heavy Equipment 6/27/96 (23,426)
Ciber, Inc. Information Processing - Services 1/23/96 83
Danka Business Systems PLC - ADR Information Processing - Office
Equipment 1/3/96 15,885
Data Processing Information Technology Specialty
Staffing Services 3/8/96 6,250
Donna Karan International, Inc. Apparel 9/19/96 (216,959)
Doubletree Corp. Lodging 12/3/96 5,808
Dow Jones & Company, Inc. Financial Services 5/16/96 (8,663)
DST Systems, Inc. Information Processing - Services 11/7/96 121,301
Engineering Animation Technology 2/29/96 3,750
First Data Corporation Information Processing - Services 3/28/96 154,928
Fritz Companies, Inc. Transportation 2/6/96 875,756
Fusion Systems Corporation Technology -Semiconductors/Equipment 7/29/96 (350,833)
Garden Botanika, Inc. Retailing 5/22/96 12,000
Gargoyles, Inc. Apparel 10/8/96 2,188
Gaylord Entertainment Company Entertainment 11/29/96 59,715
General Motors Corporation, Class E Information Processing -Services 3/28/96 120,031
Guidant Corp. Healthcare 11/12/96 56,534
Harmen International Industries Entertainment 12/19/96 122,852
Heathsource, Inc. Healthcare Services 1/15/96 116,102
Hyperion Software Corp. Information Processing - Services 3/1/96 17,344
Infinity Broadcasting Corporation Communications 6/10/96 160,036
Informix Corp. Information Processing - Software 10/18/96 (112,344)
Kansas City Southern Industries, Inc. Transportation 7/17/96 (46,812)
KEMET Corporation Industrial Products 6/13/96 (347,793)
Kennametal, Inc. Industrial Products 11/4/96 1,219
KLA Instruments Corporation Technology -Semiconductors/Equipment 1/3/96 (33,750)
Lam Research Corporation Technology -Semiconductors/Equipment 6/12/96 (89,199)
Loral Corporation Technology - Other 4/25/96 1,293,713
LSI Logic Corporation Technology -Semiconductors/Equipment 3/7/96 (83,132)
Manpower, Inc. Services - Temporary Help 10/23/96 (150,153)
Markel Corporation Insurance 2/5/96 360,813
Merck & Company, Inc. Healthcare Products 3/28/96 236,469
</TABLE>
<TABLE>
SELECTED SPECIAL SHARES, INC.
Portfolio Activity - January 1, 1996 through December 31, 1996
==================================================================================================================================
Positions Closed (1/1/96-12/31/96)
(Gains and losses greater than $500,000 are highlighted)
<CAPTION>
Security Sector Date of Final Sale Gain/(Loss)
- -------- ------ ------------------ ----------
<S> <C> <C> <C>
Micros Systems, Inc. Lodging 12/5/96 (222,809)
Microwave Power Devices, Inc. Communications 2/16/96 1,250
Mineral Technologies, Inc. Industrial Products 3/4/96 (85,488)
Mycogen Corporation Biotechnology 3/25/96 (9,375)
Nokia Corp. - ADR Communications 1/18/96 (11,212)
Oakley, Inc. Apparel 11/18/96 44,064
Office Depot Inc. Retailing 2/13/96 (23,754)
OfficeMax, Inc. Retailing 11/21/96 150,458
PairGain Technologies, Inc. Communications 3/13/96 570,530
Park Electrochemical Corp. Industrial Products 6/18/96 (135,430)
Pepsi Cola Puerto Rico Bottling Company Food & Beverage 5/23/96 (29,767)
Pixar, Inc. Entertainment 11/25/96 (171,460)
Premier Parks Inc. Resorts/Theme parks 6/18/96 7,200
Quality Dining, Inc. Restaurants 7/31/96 1,000
Red Lion Hotels, Inc. Lodging 11/11/96 1,000,983
RMH Teleservices Outbound Teleservices 9/30/96 3,250
SAP AG Information Processing 12/11/96 (33,750)
Sola International, Inc. Apparel 12/5/96 404,257
Sonoco Products Company Packaging 11/5/96 160,388
Staples, Inc. Retailing 10/28/96 4,413
Steinway Musical Instruments Household Products 10/3/96 (25,189)
StrataCom, Inc. Communications 3/13/96 178,374
Suburban Lodges of America Lodging 6/10/96 4,375
Sunglass Hut International Retailing 11/15/96 (414,344)
Talbots, Inc. (The)Retailing 3/13/96 (39,291)
Tencor Instruments Technology-Semiconductors/Equipment 6/12/96 (25,974)
Thermo Electron Corporation Technology - Other 11/26/96 1,006,391
ThermoLase Corporation Technology 10/23/96 (109,817)
U.S. Satelite Broadcasting Company Communications 12/19/96 (736,963)
Universal Stainless & Alloy Products, Inc. Metals 1/29/96 65,125
UroCor, Inc. Healthcare 10/22/96 13,000
Vishay Intertechnology Group, Inc. Industrial Products 3/25/96 (218,120)
Waters Corporation Industrial Products 8/12/96 495,906
Worldcom, Inc. Communications 7/16/96 450,312
</TABLE>
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, 1996.
One Year........................... 11.86%
Five Years......................... 11.95%
Ten Years.......................... 12.27%
$10,000 invested over ten years. Let's say you invested $10,000 in
Selected Special Shares ("SSS") on December 31, 1986. As the chart
below shows, by December 31, 1996 the value of your investment would
have grown to $31,837 - a 218.37% increase on your initial investment.
For comparison, the Standard & Poor's 500 Stock Index is also presented
on the chart below.
Graph omitted- details of graph are as follows:
Measurement period Selected Special S&P 500
Shares, Inc. Index
------------------ ------------------- ---------------
FYE 12/31/86 10,000 10,000
FYE 12/31/87 10,045 10,518
FYE 12/31/88 12,010 12,254
FYE 12/31/89 15,483 16,123
FYE 12/31/90 14,419 15,622
FYE 12/31/91 18,101 20,361
FYE 12/31/92 19,627 21,910
FYE 12/31/93 21,737 24,104
FYE 12/31/94 21,202 24,431
FYE 12/31/95 28,461 33,580
FYE 12/31/96 31,837 41,269
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 of 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.
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, 1996.
One Year...................... 2.85%
Five Years.................... 5.66%
Life of Fund.................. 6.83%
$10,000 invested over the life of the Fund. Let's say you invested $10,000
in U.S. Government Income Fund ("SUSGIF") on November 24, 1987
(inception of the Fund). As the chart below shows, by December 31, 1996
the value of your investment would have grown to $18,218 - an 82.18%
increase on your initial investment. For comparison, the Lehman Brothers
Intermediate Term U.S. Treasury Securities Index is also presented on the
chart below.
Graph omitted- details of graph are as follows:
Lehman Brothers
Intermediate Term U.S.
Measurement period Selected U.S. Government Treasury Securities
Income Fund Index
------------------ ------------------- ---------------
FYE 11/24/87 10,000 10,000
FYE 12/31/87 10,104 10,132
FYE 12/31/88 10,407 10,781
FYE 12/31/89 11,291 12,148
FYE 12/31/90 12,253 13,309
FYE 12/31/91 13,856 15,191
FYE 12/31/92 14,580 16,250
FYE 12/31/93 15,773 17,592
FYE 12/31/94 15,340 17,231
FYE 12/31/95 17,796 19,727
FYE 12/31/96 18,218 20,510
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 of 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.
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED AMERICAN SHARES, INC.
<CAPTION>
VALUE
SHARES (NOTE 1)
==================================================================================================================================
COMMON STOCK - (95.85%)
AEROSPACE - (1.85%)
<S> <C> <C>
240,000 Boeing Co........................................................................................ $ 25,530,000
--------------
AGRICULTURE - (0.95%)
592,500 Archer-Daniels-Midland Co........................................................................ 13,035,000
--------------
AUTOMOBILES - (2.53%)
475,000 General Motors Corp.............................................................................. 26,481,250
150,000 General Motors Class H........................................................................... 8,437,500
--------------
34,918,750
--------------
BANKS AND SAVING AND LOAN ASSOCIATIONS - (12.26%)
217,500 Banc One Corp.................................................................................... 9,352,500
260,000 Bankamerica Corp................................................................................. 25,935,000
188,680 Barnett Banks, Inc............................................................................... 7,759,465
305,465 Citicorp......................................................................................... 31,462,895
488,434 First Bank Systems, Inc.......................................................................... 33,335,621
183,800 Golden West Financial Corp....................................................................... 11,602,375
179,700 State Street Boston Corp......................................................................... 11,590,650
140,000 Wells Fargo & Co................................................................................. 37,765,000
--------------
168,803,506
--------------
BUILDING MATERIALS - (2.06%)
700,600 Martin Marietta Material......................................................................... 16,288,950
330,000 Masco Corporation................................................................................ 11,880,000
--------------
28,168,950
--------------
CONSUMER PRODUCTS - (3.30%)
150,000 The Gillette Co.................................................................................. 11,662,500
300,000 Phillip Morris Companies......................................................................... 33,787,500
--------------
45,450,000
--------------
ENERGY - (8.41%)
625,000 Burlington Resources, Inc........................................................................ 31,484,375
175,000 Cooper Cameron Corp.<F1>......................................................................... 13,387,500
45,900 Falcon Drilling Company<F1>...................................................................... 1,801,575
395,000 Halliburton Co................................................................................... 23,798,750
205,985 Noble Affiliates, Inc............................................................................ 9,861,532
375,000 Noble Drilling Corp.<F1>......................................................................... 7,453,125
210,000 Schlumberger Ltd................................................................................. 20,973,750
100,000 Smith International<F1>.......................................................................... 4,487,500
84,694 Union Pacific Resources.......................................................................... 2,477,300
--------------
115,725,407
--------------
ENTERTAINMENT - (0.89%)
175,000 The Walt Disney Co............................................................................... 12,184,375
--------------
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED AMERICAN SHARES, INC. - Continued
VALUE
SHARES (NOTE 1)
==================================================================================================================================
COMMON STOCK - Continued
FINANCIAL - (15.24%)
845,000 American Express Co.............................................................................. $ 47,742,500
329,831 Dean Witter, Discover & Co....................................................................... 21,851,304
390,700 Donaldson, Lufkin & Jenrette, Inc................................................................ 14,065,200
275,000 Federal Home Loan Mortgage Corp.................................................................. 30,284,375
235,000 J.P. Morgan & Co., Inc........................................................................... 22,941,875
585,800 Morgan Stanley Group Inc......................................................................... 33,463,825
867,889 Travelers Group Inc.............................................................................. 39,380,463
--------------
209,729,542
--------------
FOOD/BEVERAGE & RESTAURANT _ (1.95%)
595,000 McDonald's Corp.................................................................................. 26,923,750
--------------
INSURANCE - (14.45%)
582,514 The Allstate Corp................................................................................ 33,712,998
225,000 American International Group,Inc................................................................. 24,356,250
348,000 W.R. Berkley Corp................................................................................ 17,661,000
450,400 Chubb Corp....................................................................................... 24,209,000
500,000 Equitable Companies Inc.......................................................................... 12,312,500
170,200 General Re Corp.................................................................................. 26,849,050
225,000 Progressive Corp. (Ohio)......................................................................... 15,159,375
769,904 SunAmerica, Inc.................................................................................. 34,164,490
130,000 Transatlantic Holdings........................................................................... 10,465,000
--------------
198,889,663
--------------
PAPER PRODUCTS - (1.63%)
415,200 Fort Howard Corp.<F1>............................................................................ 11,495,850
264,500 Jefferson Smurfit Corporation<F1>................................................................ 4,248,531
70,000 Kimberly-Clark Corp.............................................................................. 6,667,500
--------------
22,411,881
--------------
PHARMACEUTICAL AND HEALTH CARE - (3.91%)
300,000 Johnson & Johnson................................................................................ 14,925,000
105,000 Lilly Eli & Co................................................................................... 7,665,000
80,000 Merck & Co., Inc................................................................................. 6,340,000
300,000 Pfizer Inc....................................................................................... 24,862,500
--------------
53,792,500
--------------
PHOTOGRAPHIC - (1.32%)
227,000 Eastman Kodak Co................................................................................. 18,216,750
--------------
PUBLISHING - (2.72%)
236,200 Gannett Co., Inc................................................................................. 17,685,475
250,000 Tribune Co....................................................................................... 19,718,750
--------------
37,404,225
--------------
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED AMERICAN SHARES, INC. - Continued
VALUE
SHARES (NOTE 1)
==================================================================================================================================
COMMON STOCK - Continued
RAILROAD - (3.24%)
200,000 Burlington Northern.............................................................................. $ 17,275,000
500,400 Illinois Central Corp............................................................................ 16,012,800
190,000 Union Pacific Corp............................................................................... 11,423,750
--------------
44,711,550
--------------
REAL ESTATE - (7.24%)
94,100 Avalon Properties, Inc........................................................................... 2,705,375
77,000 Bay Apartment Communities, Inc................................................................... 2,772,000
110,000 Cali Realty Corp................................................................................. 3,396,250
112,500 Capstead Mortgage Corp........................................................................... 2,700,000
1,051,194 Centerpoint Properties Corporation............................................................... 34,426,604
91,500 Federal Realty Investment Trust.................................................................. 2,481,938
150,000 Kimco Realty Corp................................................................................ 5,231,250
27,300 Patriot American Hospitality..................................................................... 1,177,313
157,500 Public Storage, Inc.............................................................................. 4,882,500
272,500 Saul Centers, Inc................................................................................ 4,325,938
270,500 Sizeler Property Investors Inc................................................................... 2,603,563
406,900 Vornado Realty Trust............................................................................. 21,362,250
287,300 Weingarten Realty Investors...................................................................... 11,671,563
--------------
99,736,544
--------------
RETAIL - (0.69%)
205,000 Harcourt General, Inc............................................................................ 9,455,625
--------------
TECHNOLOGY - (9.93%)
310,000 Applied Materials, Inc.<F1>...................................................................... 11,140,625
548,000 Hewlett-Packard Co............................................................................... 27,537,000
330,000 Intel Corp....................................................................................... 43,209,375
210,000 International Business Machines.................................................................. 31,710,000
420,000 Komag Inc.<F1>................................................................................... 11,392,500
215,000 Novellus Systems, Inc.<F1>....................................................................... 11,650,313
--------------
136,639,813
--------------
TELECOMMUNICATIONS - (1.28%)
653,000 AirTouch Communications, Inc.<F1>................................................................ 16,488,250
50,000 360 (Degree) Communications Company<F1>.......................................................... 1,156,250
--------------
17,644,500
--------------
Total Common Stock - (identified cost $883,379,397).................................... 1,319,372,331
--------------
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31,1996
SELECTED AMERICAN SHARES, INC. - Continued
VALUE
SHARES/PRINCIPAL (NOTE 1)
==================================================================================================================================
CONVERTIBLE PREFERRED STOCK - (2.24%)
20,600 AirTouch Communications, Inc..................................................................... $ 932,150
50,00 0Banc One Pfd., $3.50, Ser. C Conv. Pfd.......................................................... 4,150,000
150,000 Devon Financing Trust............................................................................ 9,881,250
899,000 The News Corp. Ltd., Sponsored ADR Pfd........................................................... 15,844,871
--------------
Total Convertible Preferred Stock - (identified cost $28,900,860)...................... 30,808,271
--------------
CONVERTIBLE BONDS - (0.69%)
$ 4,000,000 Chevron Corp., Exchangeable Sr. Deb., 6.50%, 01/15/03............................................ 6,020,000
3,000,000 Equitable Companies Inc., 6.125%, 12/15/24....................................................... 3,420,000
--------------
Total Convertible Bonds - (identified cost $8,115,000)................................. 9,440,000
--------------
SHORT TERM - (0.91%)
12,605,000 State Street Bank and Trust Company Repurchase Agreement, 5.50%, 01/02/97,
dated 12/31/96, repurchased value of $12,608,852 (collateralized by $12,860,000
par value U.S. Treasury Notes, 4.75%, 08/31/98, market value $12,860,917)
- (identified cost $12,605,000)................................................................ 12,605,000
--------------
TOTAL INVESTMENTS - (99.69%) - (identified cost $933,000,257) - <F2>................... 1,372,225,602
OTHER ASSETS LESS LIABILITIES_ (0.31%)................................................. 4,240,536
--------------
NET ASSETS _ (100%)............................................................... $1,376,466,138
==============
<FN>
<F1> Non-Income Producing Security
<F2> Aggregate cost for Federal Income Tax purposes is $933,000,257. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income Tax purposes
is as follows:
Unrealized appreciation................................................................ $ 442,517,076
Unrealized depreciation................................................................ (3,291,731)
--------------
Net unrealized appreciation............................................................ $ 439,225,345
==============
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED SPECIAL SHARES, INC.
<CAPTION>
VALUE
SHARES (NOTE 1)
==================================================================================================================================
COMMON STOCK - (97.97%)
APPAREL - (1.13%)
<S> <C> <C>
35,000 Cutter & Buck, Inc<F1>........................................................................... $ 406,875
5,000 Nike Inc......................................................................................... 298,750
--------------
705,625
--------------
AUTOMOTIVE/HEAVY EQUIPMENT - (1.64%)
30,000 Lear Corporation<F1>............................................................................. 1,023,750
--------------
CHEMICALS - (2.08%)
48,000 OM Group, Inc.................................................................................... 1,296,000
COMMUNICATIONS - (5.84%)
10,000 Cisco Systems, Inc.<F1>.......................................................................... 636,250
10,000 Conductus, Inc.<F1>.............................................................................. 65,000
40,000 Loral Space & Communications Ltd.<F1>............................................................ 735,000
10,000 Lucent Technologies, Inc......................................................................... 462,500
25,000 MFS Communications Company, Inc.<F1>............................................................. 1,362,500
45,000 OzEmail Ltd. <F1> - ADS.......................................................................... 382,500
--------------
3,643,750
--------------
ELECTRONICS - (6.56%)
15,000 Black Box Corporation<F1>........................................................................ 618,750
25,000 Ingram Micro, Inc.<F1>........................................................................... 575,000
10,000 Intel Corporation................................................................................ 1,309,375
30,000 Kent Electronics Corporation <F1>................................................................ 772,500
15,400 Solectron Corporation<F1>........................................................................ 821,975
--------------
4,097,600
--------------
ENERGY - (3.57%)
15,000 Carbo Ceramics, Inc.............................................................................. 315,000
15,500 Diamond Offshore Drilling, Inc. <F1>............................................................. 883,500
20,000 Global Marine, Inc.<F1>.......................................................................... 412,500
15,000 Input/Output, Inc.<F1>........................................................................... 277,500
15,000 Rowan Companies, Inc.<F1>........................................................................ 339,375
--------------
2,227,875
--------------
ENTERTAINMENT/LEISURE TIME - (4.71%)
22,000 Cinar Films, Inc., Class B<F1>................................................................... 572,000
60,500 Regal Cinemas, Inc.<F1>.......................................................................... 1,860,375
35,000 Rockshox, Inc.<F1>............................................................................... 507,500
--------------
2,939,875
--------------
FINANCIAL SERVICES - (13.60%)
20,000 American Express Co.............................................................................. 1,130,000
35,000 The Charles Schwab Corporation................................................................... 1,120,000
25,000 Collective Bancorp, Inc.......................................................................... 878,125
15,000 MSB Bancorp, Inc.294,375
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED SPECIAL SHARES, INC. - Continued
VALUE
SHARES (NOTE 1)
==================================================================================================================================
COMMON STOCK - Continued
FINANCIAL SERVICES - Continued
50,000 Northern Trust Company........................................................................... $ 1,812,500
30,000 TCF Financial Corporation........................................................................ 1,305,000
45,000 Washington Mutual, Inc........................................................................... 1,949,065
--------------
8,489,065
--------------
HEALTHCARE - (5.26%)
20,000 Alkermes, Inc.<F1>............................................................................... 465,000
35,500 Biacore International, AB - ADS<F1>............................................................. 781,000
15,000 BioChem Pharmacuticals, Inc. <F1> -ADR........................................................... 753,750
15,000 Cardiothoracic Systems, Inc.<F1>................................................................. 277,500
15,000 CYTYC Corporation<F1>............................................................................ 405,000
35,500 Neurex Corporation <F1>.......................................................................... 603,500
--------------
3,285,750
--------------
INDUSTRIAL PRODUCTS - (6.79%)
15,000 Fastenal Company................................................................................. 686,250
10,300 Illinois Tool Works, Inc......................................................................... 822,712
34,500 Methode Electronics, Inc. - A.................................................................... 698,625
22,500 Molex Inc., Class A.............................................................................. 801,562
50,700 ThermoQuest Corporation<F1>...................................................................... 652,762
35,000 X-Rite, Inc...................................................................................... 577,500
4,239,411
INFORMATION PROCESSING - OFFICE EQUIPMENT _ (2.80%)
13,000 Dell Computer Corporation<F1>.................................................................... 690,625
7,000 International Business Machines, Inc............................................................. 1,057,000
--------------
1,747,625
--------------
INFORMATION PROCESSING - SERVICES _ (9.69%)
20,000 APAC TeleServices, Inc.<F1>...................................................................... 767,500
10,000 Automatic Data Processing, Inc................................................................... 428,750
20,000 Billing Information Concepts Corporation<F1>..................................................... 575,000
30,000 Claremont Technology Group, Inc.<F1>............................................................. 787,500
30,000 Computer Sciences Corporation<F1>................................................................ 2,463,750
15,000 Paychex, Inc..................................................................................... 771,562
15,000 USCS International, Inc.<F1>..................................................................... 253,125
--------------
6,047,187
--------------
INFORMATION PROCESSING - SOFTWARE - (3.96%)
10,500 Acceler8 Technology<F1>.......................................................................... 205,406
21,500 Affinity Technology Group, Inc.<F1>.............................................................. 139,750
30,000 Computer Associates International, Inc........................................................... 1,492,500
25,000 Seachange International, Inc.<F1>................................................................ 637,500
--------------
2,475,156
--------------
INSURANCE - (4.10%)
30,500 W.R. Berkley Corporation......................................................................... 1,547,875
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED SPECIAL SHARES, INC. - Continued
VALUE
SHARES (NOTE 1)
==================================================================================================================================
COMMON STOCK - Continued
INSURANCE - Continued
25,000 Horace Mann Educators Corporation................................................................ $ 1,009,375
--------------
2,557,250
--------------
LODGING - (0.25%)
10,000 Studio Plus Hotels, Inc.<F1>..................................................................... 157,500
--------------
PACKAGING - (1.00%)
15,000 Sealed Air Corporation<F1>....................................................................... 624,375
--------------
RESTAURANTS - (2.33%)
30,000 Landry's Seafood Restaurants, Inc.<F1>........................................................... 641,250
30,500 Lone Star Steakhouse and Saloon, Inc.<F1>........................................................ 815,875
--------------
1,457,125
--------------
RETAILING - (11.67%)
39,273 Eckerd Corporation <F1>.......................................................................... 1,256,736
43,500 Just For Feet, Inc.<F1>.......................................................................... 1,141,875
20,200 Kohl's Corporation<F1>........................................................................... 792,850
30,000 Loehmann's, Inc.<F1>............................................................................. 690,000
35,000 PETsMart, Inc. <F1>.............................................................................. 765,625
20,000 Sak's Holding, Inc.<F1>.......................................................................... 540,000
50,000 Tiffany & Co..................................................................................... 1,831,250
10,000 Viking Office Products, Inc.<F1>................................................................. 266,875
--------------
7,285,211
--------------
SERVICES - EDUCATION - (0.52%)
25,000 Children's Comprehensive Services, Inc.<F1>..................................................... 328,125
--------------
SERVICES - TEMPORARY HELP _ (10.18%)
40,000 Barrett Business Services, Inc.<F1>.............................................................. 610,000
20,000 Employee Solutions, Inc.<F1>..................................................................... 410,000
45,000 Interim Services, Inc.<F1>....................................................................... 1,597,500
35,350 Labor Ready, Inc. <F1>........................................................................... 477,225
40,500 On Assignment, Inc.<F1>.......................................................................... 1,194,750
10,500 The Registry, Inc. <F1>.......................................................................... 484,312
46,000 Robert Half International, Inc.<F1>.............................................................. 1,581,250
--------------
6,355,037
--------------
TRANSPORTATION - (0.29%)
10,000 Bombardier, Inc. Class B......................................................................... 183,807
--------------
Total Common Stock - (identified cost $48,668,438)..................................... 61,167,099
--------------
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED SPECIAL SHARES, INC. - Continued
VALUE
PRINCIPAL (NOTE 1)
==================================================================================================================================
SHORT TERM - (1.93%)
$ 1,205,000 State Street Bank and Trust Company Repurchase Agreement, 5.50%, 01/02/97, dated
12/31/96, repurchased value of $1,205,368 (collateralized by $1,230,000 par value
U.S. Treasury Notes, 4.75%, 08/31/98, market value $1,230,088) -
(identified cost $1,205,000)................................................................. $ 1,205,000
--------------
TOTAL INVESTMENTS - (99.90%) - (identified cost $49,873,438) -<F2>................................. 62,372,099
OTHER ASSETS LESS LIABILITIES _ (0.10%).......................................................... 63,394
--------------
NET ASSETS - (100%).............................................................................. $ 62,435,493
==============
<FN>
<F1> Non-Income Producing Security.
<F2> Aggregate cost for Federal Income Tax purposes is $49,873,438. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation.......................................................................... $ 14,767,886
Unrealized depreciation.......................................................................... (2,269,225)
--------------
Net unrealized appreciation...................................................................... $ 12,498,661
==============
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==================================================================================================================================
ADJUSTABLE RATE MORTGAGES - (0.75%)
<S> <C> <C> <C>
$ 24,970 Government National Mortgage Association, Pool No. 008299, 7.125%, 09/20/23..................... $ 25,528
26,092 Government National Mortgage Association, Pool No. 008360, 6.50%, 01/20/24...................... 26,626
Total ARM - (identified cost $47,068)...................................................... 52,154
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION _ (15.06%)
404,000 6.50%, 01/01/04, Pool No. 97289................................................................. 400,283
198,561 8.00%, 09/01/21, Pool No. D2-7906............................................................... 204,020
273,925 8.00%, 10/01/21, Pool No. D2-7334............................................................... 281,713
154,208 8.00%, 06/01/22, Pool No. D2-0670............................................................... 158,448
--------------
Total FHLMC - (identified cost $1,034,376)................................................. 1,044,464
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION _ (0.68%)
3,815 10.00%, 07/01/05, Pool No. 98835................................................................. 4,057
15,780 10.00%, 08/01/05, Pool No. 99903................................................................. 16,777
15,104 8.50%, 07/01/17, Pool No. 51539................................................................. 15,808
9,844 8.50%, 04/01/21, Pool No. 117725................................................................ 10,289
--------------
Total FNMA - (identified cost $45,695)..................................................... 46,931
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - (15.21%)
44,593 10.00%, 09/15/01, Pool No. 265854................................................................ 47,079
67,427 9.00%, 04/15/16, Pool No. 147297................................................................ 72,297
70,815 9.00%, 05/15/16, Pool No. 161091................................................................ 75,930
175,636 9.00%, 06/15/16, Pool No. 157698................................................................ 188,423
11,106 9.00%, 07/15/16, Pool No. 162087................................................................ 11,915
121,759 9.00%, 07/15/16, Pool No. 162605................................................................ 130,553
106,493 9.00%, 11/15/16, Pool No. 179412................................................................ 114,247
74,992 9.00%, 08/15/17, Pool No. 209243................................................................ 80,296
32,096 9.00%, 05/15/18, Pool No. 235263................................................................ 34,299
63,216 9.00%, 08/15/18, Pool No. 258776................................................................ 67,687
217,695 9.00%, 08/15/19, Pool No. 227430................................................................ 232,183
--------------
Total GNMA - (identified cost $985,968)................................................... 1,054,909
--------------
MEDIUM TERM NOTES - (24.30%)
200,000 Federal Home Loan Bank, 7.24%, 11/09/10......................................................... 197,151
500,000 Federal Home Loan Mortgage Corporation, 6.615%, 03/03/04........................................ 488,905
500,000 Federal Home Loan Mortgage Corporation, 8.00%, 06/20/11......................................... 514,060
500,000 Federal National Mortgage Association, 6.42%, 12/01/08.......................................... 484,340
--------------
Total Medium Term Notes - (identified cost $1,653,594)..................................... 1,684,456
--------------
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED U.S. GOVERNMENT INCOME FUND - Continued
VALUE
PRINCIPAL (NOTE 1)
==================================================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS & REAL ESTATE MORTGAGE
INVESTMENT CONDUITS - (28.18%)
$ 400,000 Federal Home Loan Mortgage Corporation, FHG-32 E, 7.50%, 03/25/05............................... $ 407,220
500,000 Federal Home Loan Mortgage Corporation, 1992 - 1340 H, 7.50%, 08/15/07.......................... 516,405
500,000 Federal National Mortgage Association, 92-152M, 7.75%, 08/25/07................................. 526,250
500,000 United States Department of Veteran Affairs, Mortgage Trust 1992-1,
7.75%, 07/15/17............................................................................... 504,215
--------------
Total CMOs & REMICs - (identified cost $1,871,109)......................................... 1,954,090
--------------
SHORT TERM - (14.42%)
1,000,000 Federal National Mortgage Association Discount Note, 5.625%, 01/02/97
(identified cost $999,844).................................................................... 999,844
--------------
TOTAL INVESTMENTS - (98.60%) - (identified cost $6,637,654) - <F1>.............................. 6,836,848
OTHER ASSETS LESS LIABILITIES - (1.40%)......................................................... 96,826
--------------
NET ASSETS - (100%)........................................................................ $ 6,933,674
==============
<FN>
<F1> Aggregate cost for Federal Income Tax purposes is $6,637,654. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation............................................................................... $ 205,683
Unrealized depreciation............................................................................... (6,489)
--------------
Net unrealized appreciation........................................................................... $ 199,194
==============
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
SELECTED FUNDS
SCHEDULE OF INVESTMENTS At December 31, 1996
SELECTED CAPITAL PRESERVATION TRUST -
SELECTED DAILY GOVERNMENT FUND
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==================================================================================================================================
FEDERAL FARM CREDIT BANK- (11.96%)
<S> <C> <C> <C>
$ 4,995,000 5.30%, 01/03/97 Discount Note................................................................. $ 4,993,529
8,510,000 5.24%, 01/27/97 Discount Note................................................................. 8,477,794
--------------
Total Federal Farm Credit Bank - (identified cost $13,471,323)........................................ 13,471,323
--------------
FEDERAL HOME LOAN BANK - (7.90%)
4,760,000 5.215%, 01/02/97 Discount Note................................................................ 4,759,311
4,170,000 5.37%, 02/20/97 Discount Note................................................................. 4,138,899
--------------
Total Federal Home Loan Bank - (identified cost $8,898,210)............................. 8,898,210
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION _ (44.75%)
5,640,000 5.27%, 01/14/97 Discount Note................................................................. 5,629,267
4,880,000 5.32%, 01/16/97 Discount Note................................................................. 4,869,183
3,160,000 5.25%, 01/21/97 Discount Note................................................................. 3,150,783
8,375,000 5.42%, 01/22/97 Discount Note................................................................. 8,348,521
5,120,000 5.39%, 01/30/97 Discount Note................................................................. 5,097,769
3,975,000 5.42%, 01/31/97 Discount Note................................................................. 3,957,046
5,175,000 5.285%, 01/31/97 Discount Note................................................................ 5,152,209
2,195,000 5.37%, 02/24/97 Discount Note................................................................. 2,177,319
1,205,000 5.36%, 03/21/97 Discount Note................................................................. 1,190,827
10,985,000 5.37%, 03/25/97 Discount Note................................................................. 10,848,997
--------------
Total Federal Home Loan Mortgage Corporation - (identified cost $50,421,921)............. 50,421,921
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - (35.73%)
6,010,000 5.29%, 01/09/97 Discount Note................................................................. 6,002,935
3,145,000 5.26%, 01/10/97 Discount Note................................................................. 3,140,864
275,000 5.31%, 01/13/97 Discount Note................................................................. 274,513
7,730,000 5.36%, 01/15/97 Discount Note................................................................. 7,713,887
9,265,000 5.22%, 01/22/97 Discount Note................................................................. 9,236,788
5,765,000 5.21%, 01/28/97 Discount Note................................................................. 5,742,473
6,505,000 5.22%, 02/03/97 Discount Note................................................................. 6,473,874
1,695,000 5.38%, 02/27/97 Discount Note................................................................. 1,680,561
--------------
Total Federal National Mortgage Association - (identified cost $40,265,895).............. 40,265,895
--------------
TOTAL INVESTMENTS - (100.34%) - (identified cost $113,057,349) - <F1>.................... 113,057,349
LIABILITIES LESS OTHER ASSETS - (0.34%).................................................. (383,115)
--------------
NET ASSETS - (100%)................................................................. $ 112,674,234
==============
<FN>
<F1> Aggregate cost for Federal income tax purposes is $113,057,349.
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
SELECTED FUNDS
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 1996
=================================================================================================================================
<CAPTION>
SELECTED SELECTED U.S.
AMERICAN SPECIAL GOVERNMENT DAILY
SHARES SHARES, INCOME GOVERNMENT
INC. INC. FUND Fund
-------- ------- ---------- ---------- ____________
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
(see schedules of investments).............. $1,372,225,602 $ 62,372,099 $ 6,836,848 $ 113,057,349
Cash.......................................... 997 2,476 61,477 17,899
Receivables:
Dividends and interest...................... 2,259,320 25,069 44,295 -
Capital stock sold.......................... 7,587,886 12,400 - 54,966
Investment securities sold.................. - 734,500 - _
Due from adviser............................ _ - 16,402 _
-------------- ------------ ----------- -------------
Total assets.............................. 1,382,073,805 63,146,544 6,959,022 113,130,214
-------------- ------------ ----------- -------------
LIABILITIES:
Payables:
Capital stock reacquired.................... 4,310,473 27,583 - 63,731
Investment securities purchased............. - 588,490 _ _
Accrued expenses.............................. 1,297,194 194,978 9,169 93,928
Payable to adviser............................ _ _ - 73,348
Distributions payable......................... - - 16,179 224,973
-------------- ------------ ----------- -------------
Total liabilities......................... 5,607,667 711,051 25,348 455,980
--------------- ------------ ----------- -------------
NET ASSETS:..................................... $1,376,466,138 $ 62,435,493 $ 6,933,674 $ 112,674,234
============== ============ =========== =============
SHARES OUTSTANDING (NOTE 5)..................... 63,941,445 5,732,164 788,923 112,674,234
============== ============ =========== =============
NET ASSET VALUE, offering and
redemption price per share (Net
assets / shares outstanding)................ $ 21.53 $ 10.89 $ 8.90 $ 1.00
========== ========== ========= ==========
NET ASSETS CONSIST OF:
Paid-in capital............................... $ 915,293,288 $ 46,902,659 $ 6,809,596 $ 112,674,234
Accumulated net realized gain(loss)........... 21,947,505 3,034,173 (75,116) _
Unrealized appreciation on investments........ 439,225,345 12,498,661 199,194 _
-------------- ------------ ----------- -------------
$1,376,466,138 $ 62,435,493 $ 6,933,674 $ 112,674,234
============== ============ =========== =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
SELECTED FUNDS
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
=================================================================================================================================
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends.................................... $ 19,864,511 $ 298,751 $ _ $ _
Interest..................................... 919,477 112,212 540,038 7,853,793
------------- ------------- ------------- ------------
Total income............................... 20,783,988 410,963 540,038 7,853,793
------------- ------------- ------------- ------------
Expenses:
Management fees (Note 2)..................... 6,770,841 426,980 36,483 438,932
Custodian fees............................... 329,596 41,209 24,880 63,586
Transfer agent fees.......................... 683,503 106,314 11,375 84,865
Audit fees................................... 28,100 14,006 7,058 11,963
Legal fees................................... 138,570 8,125 615 18,706
Reports to shareholders...................... 118,702 24,123 2,138 7,508
Directors fees and expenses.................. 272,304 18,567 2,053 42,534
Registration and filing fees................. 86,964 23,425 16,535 50,090
Miscellaneous................................ 104,859 2,556 2,137 16,344
Commissions paid under
distribution plan (Note 3)................. 2,738,904 153,511 18,242 363,777
------------- ------------- ------------- ------------
Total expenses........................... 11,272,343 818,816 121,513 1,100,305
Reimbursement of expenses by
adviser (Note 2)............................. _ _ (16,402) -
------------- ------------- ------------- ------------
Net expenses............................. 11,272,343 818,816 105,111 1,100,305
------------- ------------- ------------- ------------
Investment income (loss) - net........... 9,511,645 (407,853) 434,927 6,753,488
------------- ------------- ------------- ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from
investment transactions...................... 83,894,963 7,632,828 (75,100) _
Net increase (decrease) in unrealized
appreciation of investments
during the period............................ 212,458,746 (390,261) (162,807) _
------------- ------------- ------------- ------------
Net realized and unrealized
gain (loss) on investments............... 296,353,709 7,242,567 (237,907) _
------------- ------------- ------------- ------------
Net increase in net
assets resulting from
operations................................... $ 305,865,354 $ 6,834,714 $ 197,020 $ 6,753,488
============= ============= ============= ============
See Notes to Financial Statements
</TABLE>
<TABLE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996
=================================================================================================================================
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 9,511,645 $ (407,853) $ 434,927 $ 6,753,488
Net realized gain (loss) from
investment transactions................. 83,894,963 7,632,828 (75,100) -
Net increase (decrease) in unrealized
appreciation of investments............. 212,458,746 (390,261) (162,807) _
------------- ------------- ------------ -------------
Net increase in net
assets resulting from operations........ 305,865,354 6,834,714 197,020 6,753,488
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income..................... (9,661,781) _ (434,927) (6,753,488)
Realized gains from investment
transactions............................ (77,556,567) (6,390,679) (13,355) _
CAPITAL SHARE
TRANSACTIONS
(NOTE 5).................................... 232,307,432 3,016,674 (626,116) (71,928,943)
------------- ------------- ------------ -------------
Total increase (decrease)
in net assets......................... 450,954,438 3,460,709 (877,378) (71,928,943)
NET ASSETS:
Beginning of period....................... 925,511,700 58,974,784 7,811,052 184,603,177
------------- ------------- ------------ -------------
End of period............................. $ 1,376,466,138 $ 62,435,493 $ 6,933,674 $ 112,674,234
============= ============= ============ =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
SELECTED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1995
=================================================================================================================================
<CAPTION>
U.S.
SELECTED SELECTED GOVERNMENT DAILY
AMERICAN SPECIAL INCOME GOVERNMENT
SHARES SHARES FUND FUND
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income (loss)-net.................. $ 10,611,177 $ (314,261) $ 485,202 $ 6,765,755
Net realized gain from
investment transactions..................... 23,827,346 7,761,984 22,157 _
Net increase in unrealized
appreciation of investments................. 195,166,050 8,178,588 707,952 -
------------- ------------ ----------- -------------
Net increase in net
assets resulting from operations............ 229,604,573 15,626,311 1,215,311 6,765,755
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income......................... 10,461,040 _ (485,202) (6,765,755)
Realized gains from investment
transactions................................ 7,784,550 (6,343,274) (28,252) _
CAPITAL SHARE
TRANSACTIONS
(NOTE 5)...................................... 184,748,738 2,417,083 (3,153,715) 62,717,354
------------- ------------ ----------- -------------
Total increase (decrease)
in net assets............................. 396,107,721 11,700,120 (2,451,858) 62,717,354
NET ASSETS:
Beginning of period........................... 529,403,979 47,274,664 10,262,910 121,885,823
------------- ------------ ----------- -------------
End of period (including
accumulated net
investment income for
American Shares of $150,136................. $ 925,511,700 $ 58,974,784 $ 7,811,052 $ 184,603,177
============= ============ =========== =============
</TABLE>
See Notes to Financial Statements.
SELECTED FUNDS
notes to financial statements
December 31, 1996
==============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Selected Funds consist of Selected American Shares, Inc.,
Selected Special Shares, Inc. and the Selected Capital Preservation Trust.
The Companies and Trust are registered under the Investment Company Act
of 1940, as amended, as diversified, open-end management investment
companies. The Selected Capital Preservation Trust operates as a series
fund, consisting of the U.S. Government Income Fund and Daily Government
Fund. The Trust accounts separately for the assets, liabilities and
operations of each series. Davis Selected Advisers, L.P. (formerly,
Selected/Venture Advisers, L.P.) became investment adviser effective May
1, 1993. Prior to May 1, 1993, Selected Financial Services, Inc. was the
investment manager. The following is a summary of significant
accounting policies followed by the Funds in the preparation of financial
statements.
Selected American Shares, Inc. and Selected Special Shares, Inc. are
diversified, professionally managed stock-oriented funds.
Selected U.S. Government Income Fund seeks to obtain current
income consistent with preservation of capital by investing primarily in
debt obligations of the U.S. Government, its agencies or instrumentalities.
Selected Daily Government Fund seeks to provide a high level of
current income from short-term money market securities consistent with
prudent investment management, preservation of capital and
maintenance of liquidity. It invests in U.S. Government Securities and
repurchase agreements in respect thereto.
An investment in any of the Funds, as with any mutual fund, includes
risks that vary depending upon the Fund's investment objectives and
policies. There is no assurance that the investment objective of any Fund
will be achieved. A Fund's return and net asset value will fluctuate,
although Selected Daily Government seeks to maintain a net asset value of
$1.00 per share.
A. VALUATION OF SECURITIES - Securities listed on national securities
exchanges are valued at the last reported sales price on the day of
valuation. Securities traded in the over the counter market and listed
securities for which no sale was reported on that date are stated at the
last quoted bid price. Securities for which market quotations are not
readily available are valued at fair value as determined by the Boards of
Directors/Trustees. The Daily Government Fund uses the amortized cost
method of valuing investment securities which represents fair value as
determined by the Board of Trustees.
B. FEDERAL INCOME TAXES - It is each Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its income to
shareholders. At December 31, 1996 the U.S. Government Income Fund had
capital loss carryovers of $75,116 available to offset future capital
gains, if any, which expire in 2004.
C. USE OF ESTIMATES IN FINANCIAL STATEMENTS - In preparing financial
statements in conformity with generally accepted accounting principles,
management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements,
as well as the reported amounts of income and expenses during the
reporting period. Actual results may differ from these estimates.
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 - (Continued)
==============================================================================
D. Other - Securities transactions are accounted for on the trade date
(date the order to buy or sell is executed) with gain or loss on the sale of
securities being determined based upon identified cost. Interest income is
recorded on the accrual basis. Dividends and distributions to shareholders
are recorded on the ex-dividend date. Discounts and premiums on
securities (excluding convertible bonds) purchased are amortized over the
life of the respective securities.
Note 2 - Investment Advisory Fees
Advisory fees are paid monthly to the investment adviser. The rate
for American Shares, Inc. is .65% on the first $500 million of average
daily net assets, .60% on the next $500 million and .55% of average daily
net assets in excess of $1 billion. The rate for Special Shares, Inc. is .70%
on the first $50 million of average daily net assets, .675% on the next
$100 million, .65% on the next $100 million and .60% of average daily net
assets in excess of $250 million. The rate for the U.S. Government Income
Fund is .50% of 1% of average daily net assets. The rate for the Daily
Government Fund is based upon daily net assets at an annual rate of .30%.
The Adviser has voluntarily agreed to reimburse the U.S. Government
Income Fund and the Daily Government Fund for any expenses in excess of
1.44% and .75%, respectively, of average net assets.
Each Fund has adopted procedures to treat Shelby Cullom Davis & Co.
("SCD") as an affiliate of the Adviser. SCD received $10,800 in
commissions on the purchases/sales of portfolio securities.
Note 3 - Distribution
For services under the distribution agreement, the Funds pay a fee of
.25% of average daily net assets. For the year ended December 31, 1996,
for American Shares, Special Shares, U.S. Government Income and Daily
Government Funds, the Funds incurred distribution services fees totaling
$2,738,904, $153,511, $18,242, and $365,777, respectively.
Note 4 - Purchases and Sales of Securities
Purchases and sales of investment securities (excluding short-term
securities) during the year ended December 31, 1996 for American Shares,
Special Shares and U.S. Government Income Fund were as follows:
SELECTED SELECTED
AMERICAN SPECIAL U.S. GOVERNMENT
SHARES SHARES INCOME FUND
------ ------ -----------
Cost of purchases....... $ 475,052,597 $ 58,483,022 $ 1,778,324
Proceeds of sales....... $ 322,134,798 $ 61,509,791 $ 2,922,518
SELECTED FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 - (Continued)
Note 5 - Capital Stock
At December 31, 1996, there were 100 million shares of capital
stock of Selected American Shares ($1.25 par value per share) authorized.
At December 31, 1996, there were 100 million shares of capital stock of
Selected Special Shares ($0.25 par value per share) authorized. At
December 31, 1996, 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>
Year ended
December 31, 1996
------------------------------------------------------------------
<CAPTION>
AMERICAN SPECIAL U.S. GOVERNMENT DAILY
SHARES SHARES INCOME GOVERNMENT
INC. INC. FUND FUND
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold......................... 15,567,086 625,367 24,347 124,374,970
Shares issued in reinvestment
of distributions.................. 3,980,585 536,003 42,111 6,823,075
------------- ------------ ------------ -------------
19,547,671 1,161,370 66,458 31,198,045
Shares redeemed..................... (7,951,322) (889,193) (136,618) (103,126,988)
------------- ------------ ------------ -------------
Net increase (decrease)........... 11,596,349 272,177 (70,160) (71,928,943)
============= ============ ============ =============
Proceeds from shares sold........... $ 307,057,971 $ 7,008,830 $ 216,118 $ 24,374,970
Proceeds from shares issued in
reinvestment of distributions..... 81,960,295 5,908,372 373,713 6,823,075
------------- ------------ ------------ -------------
389,018,266 12,917,202 589,831 31,198,045
Cost of shares redeeme.............. (156,710,834) (9,900,528) (1,215,947) (103,126,988)
------------- ------------ ------------ -------------
Net increase (decrease)........... $ 232,307,432 $ 3,016,674 $ (626,116) $ 71,928,943
============= ============ ============ =============
</TABLE>
<TABLE>
Year ended
December 31, 1995
------------------------------------------------------------------
<CAPTION>
AMERICAN SPECIAL U.S. GOVERNMENT DAILY
SHARES SHARES INCOME GOVERNMENT
INC. INC. FUND FUND
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold......................... 16,050,736 652,908 57,950 176,384,445
Shares issued in reinvestment
of distributions.................. 1,007,620 552, 9454 7,783 6,595,015
------------- ------------ ------------ -------------
17,058,356 1,205,853 105,733 182,979,460
Shares redeemed..................... (5,166,217) (988,505) (471,173) (120,262,106)
------------- ------------ ------------ -------------
Net increase (decrease)........... 11,892,139 217,348 (365,440) 62,717,354
============= ============ ============ =============
Proceeds from shares sold........... $ 248,521,260 $ 7,243,689 $ 519,478 $ 176,384,445
Proceeds from shares issued in
reinvestment of distributions..... 16,843,614 5,824,570 424,317 6,595,015
------------- ------------ ------------ -------------
265,364,874 13,068,259 943,795 182,979,460
Cost of shares redeeme.............. (80,616,136) (10,651,176) (4,097,510) (120,262,106)
------------- ------------ ------------ -------------
Net increase (decrease)........... $ 184,748,738 $ 2,417,083 $(3,153,715) $ 62,717,354
============= ============ ============ =============
</TABLE>
<TABLE>
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:
Year ended December 31,
---------------------------------------------------------------
<CAPTION>
1996 1995 1994 1993<F2> 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 17.68 $ 13.09 $ 14.59 $ 17.13 $ 18.43
------- ------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income............................... .18 .22 .20 .24 .19
Net Gains or Losses on Securities
(both realized and unrealized).................... 5.15 4.74 (.66) .70 .89
------- ------- ------- ------- -------
Total From Investment Operations.................. 5.33 4.96 (.46) .94 1.08
Less Distributions
- ------------------
Dividends (from net investment
income)........................................... (.17) (.22) (.20) (.24) (.19)
Distributions (from capital gains).................. (1.31) (.15) (.83) (3.24) (2.19)
Distributions in Excess of Net
Investment Income................................. _ - (.01) _ -
------- ------- ------- ------- -------
Total Distributions............................... (1.48) (.37) (1.04) (3.48) (2.38)
------- ------- ------- ------- -------
Net Asset Value, End of Period........................ $ 21.53 $ 17.68 $ 13.09 $ 14.59 $ 17.13
======= ======= ======= ======= =======
Total Return.......................................... 30.74% 38.09% (3.20)% 5.42% 5.78%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)..................................... 1,376,466 925,512 529,404 451,392 580,889
Ratio of Expenses to Average
Net Assets........................................ 1.03% 1.09% 1.26% 1.01<F1>% 1.17%
Ratio of Net Income to Average
Net Assets........................................ .87% 1.42% 1.42% 1.37% .95%
Portfolio Turnover Rate............................. 29% 27% 23% 79% 50%
Average Commission Rate per Share................... $ .058 - - - -
<FN>
<F1> Had the Adviser not absorbed certain expenses, the ratio of expenses
for the year ended December 31, 1993 would have been 1.22%.
<F2> Effective May 1, 1993, Davis Selected Advisers, became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
</FN>
</TABLE>
<TABLE>
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:
Year ended December 31,
-------------------------------------------------------------------
<CAPTION>
1996 1995 1994<F2><F3> 1993<F3> 1992<F3>
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 10.80 9.02 $ 10.20 $ 10.40 $ 10.16
------- ------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income................................ _ _ (.03) _ .07
Net Gains or Losses on Securities
(both realized and unrealized)..................... 1.27 3.04 (.22) 1.10 .782
------- ------- ------- ------- -------
Total From Investment Operations................... 1.27 3.04 (.25) 1.10 .852
Less Distributions
- ------------------
Dividends (from net investment
income)............................................ - - - - (.07)
Distributions (from capital gains)................... (1.18) (1.26) (.93) (1.30) (.54)
------- ------- ------- ------- -------
Total Distributions................................ (1.18) (1.26) (.93) (1.30) (.61)
------- ------- ------- ------- -------
Net Asset Value, End of Period......................... $ 10.89 $ 10.80 $ 9.02 $ 10.20 $ 10.40
======= ======= ======= ======= =======
Total Return........................................... 11.86% 34.24% (2.56)% 10.81% 8.43%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)...................................... 62,435 58,975 47,275 53,257 57,605
Ratio of Expenses to Average
Net Assets......................................... 1.33% 1.48% 1.41%<F1> 1.24%<F1> 1.41%<F1>
Ratio of Net Income to Average
Net Assets......................................... (.66)% (.58)% (.27)% (.07)% .56%
Portfolio Turnover Rate.............................. 98% 127% 99% 100% 41%
Average Commission Rate per Share.................... $.060 - - - -
<FN>
<F1> Had the former manager not absorbed certain expenses, the ratio of
expenses for the year ended December 31, 1992 would have been 1.47%.
Had the Adviser not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1993 and 1994 would have been 1.51% and
1.62%, respectively.
<F2> Effective May 1, 1993, Davis Selected Advisers became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
<F3> Per share data has been restated to give effect to a 2 for 1 stock
split to shareholders of record as of the close of January 4, 1994.
</FN>
</TABLE>
<TABLE>
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:
Year ended December 31,
---------------------------------------------------------------
<CAPTION>
1996 1995 1994 1993<F2> 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 9.20 $ 8.45 $ 9.20 $ 9.31 $ 9.70
------ ------ ------ ------ ------
Income From Investment Operations
- ---------------------------------
Net Investment Income.................................. .53 .54 .50 .56 .61
Net Gains or Losses on Securities
(both realized and unrealized)....................... (.28) .78 (.75) .21 (.13)
------ ------ ------ ------ ------
Total From Investment Operations..................... .25 1.32 (.25) .77 .48
Less Distributions
- ------------------
Dividends (from net investment
income).............................................. (.53) (.54) (.50) (.56) (.61)
Distributions (from capital gains)..................... (.02) (.03) _ (.32) (.26)
Distributions in Excess of Net
Investment Income.................................... _ _ _ - -
------ ------ ------ ------ ------
Total Distributions.................................. (.55) (.57) (.50) (.88) (.87)
------ ------ ------ ------ ------
Net Asset Value, End of Period........................... $ 8.90 $ 9.20 $ 8.45 $ 9.20 $ 9.31
====== ====== ====== ====== ======
Total Return............................................. 2.85% 15.97% (2.71)% 7.99% 5.11%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)....................................... 6,934 7,811 10,263 10,336 13,945
Ratio of Expenses to Average
Net Assets.......................................... 1.44% 1.44%<F1> 11.42%<F1> 1.34%<F1> 11.44%<F1>
Ratio of Net Income to Average
Net Assets.......................................... 5.96% 6.09% 5.70% 5.85% 6.26%<F1>
Portfolio Turnover Rate............................... 26% 76% 65% 29% 53%
<FN>
<F1> Had the former manager not absorbed certain expenses, the ratio of
expenses would have been 1.72% for the year ended December 31, 1992.
Had the Adviser not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1993, 1994 and 1995 would have been
1.88%, 1.69% and 1.58%, respectively.
<F2> Effective May 1, 1993, Davis Selected Advisers became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
</FN>
</TABLE>
<TABLE>
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:
Year ended December 31,
---------------------------------------------------------------
<CAPTION>
1996 1995 1994 1993<F2> 1992
---- ---- ---- ---- ----
<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................................ .046 .051 .034 .023 .030
Less Distributions
- ------------------
Dividends (from net
investment income)................................... (.046) (.051) (.034) (.023) (.030)
------- ------- ------- ------- -------
Net Asset Value, End of Period......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return........................................... 4.70% 5.23% 3.51% 2.34% 3.07%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)...................................... 112,674 184,603 121,886 8,732 6,626
Ratio of Expenses to Average
Net Assets......................................... .75% .75%<F1> 1.75%<F1> 1.75%<F1> 1.75%<F1>
Ratio of Net Income to Average
Net Assets......................................... 4.62% 5.13% 3.44% 2.31% 3.02%<F1>
<FN>
<F1> Had the former manager not absorbed certain expenses, the ratio of
expenses for the year ended December 31, 1992 would have been 1.23%.
Had the Adviser not absorbed certain expenses, the ratio of expenses for
the years ended December 31, 1993, 1994 and 1995 would have been
2.29%, 1.07% and 0.78%, respectively.
<F2> Effective May 1, 1993, Davis Selected Advisers became the
investment adviser. Until May 1, 1993, Selected Financial Services, Inc.
was the investment adviser.
</FN>
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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 statement of assets and
liabilities of Selected American Shares, Inc., Selected Special Shares, Inc.
and Selected Capital Preservation Trust, (comprising, respectively, the
U.S. Government Income Fund and Daily Government Fund) including the
schedules of portfolio investments as of December 31, 1996 and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years then ended and the
financial highlights for each of the five years 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.
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, 1996, by
correspondence with the custodian and brokers. 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
position of Selected American Shares, Inc., Selected Special Shares, Inc.,
U.S. Government Income Fund and Daily Government Fund as of December
31, 1996, the results of operations for the year then ended, the changes in
net assets for each of the two years then ended and the financial
highlights for each of the five years then ended, in conformity with
generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1997
