<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholder
Select Asset Fund, Series 1, Inc.:
We have audited the accompanying statement of assets and liabilities of
Select Asset Fund, Series 1, Inc. including the portfolio of invest-
ments, as of December 31, 1995, and the related statements of operations
for the year then ended, and the statement of changes in net assets for
each of the years in the two-year period then ended and the financial
highlights for each of the years in the two year period ended December
31, 1995 and the period from March 4, 1993 (commencement of operations)
through December 31, 1993. These financial statements and financial
highlights are the responsibility of the Company's 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 con-
firmation of securities owned as of December 31, 1995, 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 re-
ferred to above present fairly, in all material respects, the financial
position of Select Asset Fund, Series 1, Inc. as of December 31, 1995,
the results of its operations for the year then ended, its changes in
net assets for each of the years in the two-year period then ended and
its financial highlights for each of the years in the two year period
ended December 31, 1995 and the period from March 4, 1993 (commencement
of operations) through December 31, 1993, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick, LLP
February 16, 1996
New York, New York
<PAGE>
SELECT ASSET FUND, SERIES 1, INC.
Statement of Assets and Liabilities
December 31, 1995
Assets
Investments, at value (cost $477,309,065) $660,866,022
Cash 2,862
Dividends receivable 1,028,056
Interest receivable 25,720
Total Assets 661,922,660
Liabilities
Common stock dividend payable 18,424,735
Accrued expenses 57,357
Notes payable (note 6) 97,900
Accrued interest expense (note 6) 2,586
Total Liabilities 18,582,578
Net Assets $643,340,082
Net assets are represented by:
Common stock at par value, $.01 per share,
199,995,500 shares authorized,
48,873,302.5 issued and outstanding (note 5) 488,733
Additional paid-in capital 459,294,392
Net unrealized appreciation of investments 183,556,957
Net Assets $643,340,082
Net asset value per common shares outs $13.16
See accompanying notes to the financial statements.
<PAGE>
SELECT ASSET FUND, SERIES 1, INC.
Statement of Operations
For the year ended December 31, 1995
Investment income:
Dividend income $15,109,996
Interest income 268,942
Total investment income 15,378,938
Expenses:
Broker dealer fee 493,435
Independent accountants 55,225
Auction agent fee 12,084
Custody / administration fees (note 2) 121,790
Directors fees and expenses 14,526
Interest expense 8,483
Insurance 12,175
Ratings agencies fees 19,921
Legal fees 141,647
Investment management fee (note 2) 56,273
Miscellaneous expense 761
Total expenses 936,320
Net investment income 14,442,618
Net realized and unrealized gain (loss) on investments:
Net realized loss on investments
Proceeds from sales $180,359,033
Cost of securities sold (185,792,418)
(5,433,385)
Change in unrealized appreciation (depreciation) of investments:
Beginning of year (124,935)
End of year 183,556,957
Increase in net unrealized appreciation
of investments 183,681,892
Net increase in net assets resulting from operations $192,691,125
See accompanying notes to the financial statements.
<PAGE>
SELECT ASSET FUND, SERIES 1, INC.
Statement of Changes in Net Assets
For the years ended December 31, 1995 and 1994
1995 1994
From operations:
Net investment income $14,442,618 $15,041,883
Net realized gain (loss) on investments (5,433,385) 849,883
Increase (decrease) in net unrealized 183,681,892 (11,943,751)
appreciation(depreciation) of Investments
Increase in net assets from operations 192,691,125 3,948,015
Dividends to stockholders from net investment income:
Auction market preferred stock (11,969,899) (7,567,612)
Common stock (2,472,719) (11,443,458)
(14,442,618) (19,011,070)
Dividends to stockholders from net realized gains:
Auction market preferred stock 0 (1,407,669)
Common stock (15,952,016) (1,544,490)
(15,952,016) (2,952,159)
Decrease in net assets resulting from
dividends to stockholders (30,394,634) (21,963,229)
Increase (decrease) from capital share transactions:
Return of capital dividend (75,412,488) 0
Issuance of common stock 250,400,000 0
Decrease in net assets from redemption (250,000,000) 0
of preferred stock
Decrease in net assets from
capital share transactions (75,012,488) 0
Total increase (decrease) in net assets 87,284,003 (18,015,214)
Net assets:
Beginning of year 556,056,079 574,071,293
End of year $643,340,082 $556,056,079
See accompanying notes to the financial statements.
<PAGE>
SELECT ASSET FUND, SERIES 1, INC.
Notes to the Financial Statements
December 31, 1995 and 1994
(1) Organization and Significant Accounting Policies
The Select Asset Fund, Series 1, Inc. (the "Fund") is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended. The Fund commenced investment operations
on March 4, 1993.
The Fund's objective is long-term capital appreciation with income as a
secondary objective. The Fund's investments consist primarily of common
stocks of large and medium capitalization U.S. companies.
The following is a summary of significant accounting policies
consistently followed by the Fund in preparation of its financial
statements:
(a) Security Valuation
Investments in securities traded on a national securities
exchange (or reported on the Nasdaq national market) are valued
at the last reported sales price on the primary exchange.
Temporary investments are valued at amortized cost which
approximates fair value.
(b) Security Transactions
Security transactions are accounted for on a trade date basis.
The cost of securities sold is determined using the identified
cost method. Dividend income is recorded on ex-dividend date.
(c) Federal Income Taxes
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment
companies and distribute its taxable income to shareholders.
Therefore, no provision for Federal income tax is required.
(d) Distribution of Income and Gains
The Fund distributes substantially all of its taxable income in
excess of the dividends paid to the preferred stockholders to
the common stockholder. Dividends to the common stockholder
are declared and paid at least annually. Net capital gains,
if any, are distributed annually.
(e) Reclassification Policy
It is the Funds' policy to reclassify certain amounts to
conform to the current years presentation when necessary.
<PAGE>
(f) Use of Estimates
Estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in
the economic environment, financial markets and any other
parameters used in determining these estimates could cause
actual results to differ from these amounts.
(2) Related Party Transactions
A collective trust fund for employee benefit plans is the sole common
stockholder of the Fund. Certain officers and directors of the Fund
are affiliated with the common stockholder. No fees or expenses were
paid to the affiliated officers and directors.
During the years ended December 31, 1995 and 1994, dividends paid to
the common stockholder were $18,424,735 and $12,987,948,
respectively. During the year ended December 31, 1995, the Fund made
a return of capital distribution to the common stockholder in the
amount of $75,412,488, of which approximately $18,600,000 is
considered taxable for IRS purposes. During 1995, additional paid-in
capital was reduced by $22,117,606 in connection with related party
loss disallowances required for IRS purposes.
Comerica Bank serves as both custodian and administrator for the
Fund. An affiliate of Comerica Bank serves as investment advisor to
the Fund. The annual investment management fee is 0.01% of average
equity investments. The management fee is calculated and accrued on
a monthly basis.
(3) Investment Transactions
The aggregate cost of securities purchased and the aggregate proceeds
of securities sold, for the year ended December 31, 1995 were
$98,128,379 and $180,359,033, respectively.
As of December 31, 1995 based on cost for Federal income tax
purposes, the aggregate gross unrealized appreciation and
depreciation for all securities were $192,180,183 and $8,623,226,
respectively.
(4) Auction Market Preferred Stock
The Fund is structured to issue Auction Market Preferred Stock
("AMPS"). The liquidation value of the AMPS is $100,000 per share.
Dividends are cumulative from the date of original issue and are paid
every 49 days at a rate set through a Dutch Auction. Each Series of
AMPS is redeemable at the option of the Fund in whole, but not in
part, at a price of $100,000 per share plus accumulated and unpaid
dividends. The Fund is subject to certain asset coverage tests, and
the AMPS are subject to mandatory redemption if the tests are not
met.
In addition, the AMPS are subject to mandatory redemption if the Fund
ceases to qualify as a regulated investment company or if Merrill
Lynch, Pierce, Fenner & Smith Incorporated ceases to be the broker
dealer. The liquidation value under mandatory redemption of the AMPS
is $100,000 per share plus accumulated and unpaid dividends.
<PAGE>
The Fund had no Auction Market Preferred Stock, ("AMPS") outstanding
on December 31, 1995. During the year, 1000 shares of Series A1,
1000 shares of Series D1 and 500 shares of F AMPS were redeemed. The
aggregate liquidation value was $250 million plus accrued dividends
of $2,039,437 at redemption. The series D1 AMPS holders received a
$400,000 redemption premium.
(5) Capital Share Transactions
During the year the Fund issued 18,478,230.8 shares of common stock
for $250,400,000.
(6) Notes Payable
As of December 31, 1995, the Fund had $97,900 of principal notes
outstanding to investors. The notes due on March 4, 2018, bear
interest at a floating rate. The interest rate, which resets
annually, is set at the one-year U.S. Treasury bill rate plus 2.50%.
As of December 31, 1995, the Fund was paying interest at 8.97% per
annum.
(7) Subsequent Event
The Fund issued $300 million in new series of AMPS on January 31,
1996.
<PAGE>
SELECT ASSET FUND, SERIES 1, INC.
Financial Highlights
For the years ended December 31, 1995 and 1994
and the period March 4, 1993 (commencement of operations)
through December 31, 1993
1995 1994 1993***
For a share of common stock outstanding throughout the year:
Net asset value, beginning of year $10.07 $10.66 $10.00
Net investment income 0.45 0.49 0.37
Net gains (losses) on securities
realized and unrealized 5.58 (0.36) 0.50
Total from investment operations 6.03 0.13 0.87
Less distributions from net investment income and net realized gains:
Common share equivalent of dividends paid
to AMPS holders (0.37) (0.30) (0.17)
Dividends paid to common sharehold (0.51) (0.43) (0.04)
Less distributions from net paid-in capital:
Return of capital dividend paid to (2.06) 0.00 0.00
Total distributions (2.94) (0.72) (0.21)
Net asset value, end of year $13.16 $10.07 $10.66
Total investment return 59.88% 1.22% 6.99%*
Net assets at end of year (000s) $643,340 $556,056 $574,071
Ratio of expenses to average net assets applicable to common
shares 0.16% 0.15% 0.34%**
Ratio of net investment income to average net assets applicable
to common shares + 0.41% 1.08% 2.67%**
Portfolio turnover 16.36% 9.83% 1.00%
Average Net Assets
+Net investment income is adjusted for distributions paid to AMPS holders.
*Total investment returnfor the period; not annualized.
**Annualized
**Net investment income is reduced by distributions to AMPS holders.
***For the period March 4, 1993 (commencement of operations)
through December 31, 1993.
See accompanying notes to the financial statements.
<PAGE>
SELECT ASSET FUND, SERIES I, INC.
Portfolio of Investments
December 31, 1995
No. of
shares Value
Common Stocks
BUILDING AND CONSTRUCTION 2.20%
BUILDING MATERIALS
24,500 CHAMPION INTERNATIONAL CORP $1,029,000
5,000 GEORGIA PACIFIC CORP 343,125
56,500 HOME DEPOT 2,704,938
43,100 LOUISIANA PACIFIC CORP 1,045,175
59,900 MASCO CORPORATION 1,879,363
CONSTRUCTION EQUIPMENT
1,700 GIDDINGS & LEWIS 28,050
PAINT AND FLAT GLASS
55,000 PPG INDUSTRIES INC 2,516,250
3,900 SHERWIN WILLIAMS COMPANY 158,925
INDUSTRIAL CHEMICALS
25,200 GREAT LAKES CHEMICAL CORP 1,814,400
18,400 ROHM & HAAS CO 1,184,500
MISCELLANEOUS
20,700 FLUOR CORP 1,366,200
1,600 FOSTER WHEELER CORP 68,000
700 KAUFMAN & BROAD HOME CORPORATION 10,412
TOTAL BUILDING AND CONSTRUCTION $14,148,338
CHEMICALS AND DRUGS 12.01%
CHEMICALS
30,800 AIR PRODUCTS & CHEMICALS INC $1,624,700
66,400 AMGEN INC COMMON STOCK 3,942,500
20,100 BOSTON SCIENTIFIC CORP 984,900
14,700 DOW CHEMICAL CO 1,034,513
26,500 DUPONT DE NEMOURS & CO. 1,851,688
22,050 EASTMAN CHEMICAL CO 1,380,881
4,200 ENGLEHARD CORP 91,350
1,700 FMC CORP-NEW 114,963
5,700 GRACE WR & CO 337,013
3,900 HERCULES INC 219,863
30,000 MONSANTO CO 3,675,000
6,800 MORTON INTERNATIONAL 243,950
2,800 NALCO CHEMICAL CO 84,350
<PAGE>
7,600 PRAXAIR INC 255,550
2,700 SIGMA-ALDRICH CORP 133,650
2,700 UNION CARBIDE CORPORATION 101,250
DRUGS
200,400 ABBOT LABS 8,366,700
24,500 ALZA CORP CLASS A 606,375
13,500 AMERICAN HOME PRODUCTS 1,309,500
21,300 BRISTOL MYERS SQUIBB CO 1,829,138
158,500 JOHNSON & JOHNSON 13,571,563
27,200 LILLY ELI & COMPANY 1,530,000
98,400 MERCK & COMPANY, INC. 6,469,800
67,570 PHARMACIA & UPJOHN INC 2,618,338
20,600 PFIZER INC 1,297,800
100,600 SCHERING PLOUGH 5,507,850
67,400 WALGREEN CO 2,013,575
COSMETICS
6,700 ALBERTO CULVER CO CLASS B 230,313
3,200 AVON PRODUCTS INC 241,200
30,100 INTERNATIONAL FLAVORS & FRAGRANCES 1,444,800
HEALTH PRODUCTS/CARE
18,900 ALLERGAN INC 614,250
2,200 BARD C R INC 70,950
14,500 BAUSCH & LOMB INC 574,563
11,800 BAXTER INTERNATIONAL INC. 494,125
2,100 BECTON DICKINSON & COMPANY 157,500
22,900 BEVERLY ENTERPRISES INC 243,313
78,700 COLUMBIA/HCA HEALTHCARE CORP 3,994,025
1,800 COMMUNITY PSYCHIATRIC CENTERS 22,050
19,300 MALLINCKRODT GROUP INC 702,038
9,200 TENET HEALTHCARE CORP 190,900
60,700 UNITED HEALTHCARE CORP 3,975,850
66,400 U S HEALTH CARE INC 3,087,594
TOTAL CHEMICAL AND DRUGS $77,240,231
CONSUMER PRODUCTS 17.74%
CONFECTIONS AND BEVERAGES
9,900 ANHEUSER-BUSCH COS $662,063
2,800 BROWN FORMAN INC CLASS B 102,200
338,600 COCA COLA COMPANY 25,141,050
45,300 NEWELL COMPANY 1,172,138
201,800 PEPSICO INC 11,275,575
<PAGE>
CONTAINERS
1,800 AVERY DENNISON CORP 90,225
1,600 BALL CORPORATION 44,000
24,400 CROWN CORK & SEAL INC 1,018,700
10,900 STONE CONTAINER 156,688
2,900 TEMPLE INLAND INC 127,963
PACKAGED FOOD
142,939 ARCHER DANIELS MIDLAND CO 2,572,902
2,300 CPC INTERNATIONAL, INC. 157,838
65,200 CAMPBELL SOUP CO 3,912,000
66,500 CONAGRA INC 2,743,125
1,900 COORS ADOLPH CO CLASS B 42,038
41,800 GENERAL MILLS INCORPORATED 2,413,950
92,100 HEINZ H J COMPANY 3,050,813
2,200 HERSHEY FOODS CORP 143,000
55,800 KELLOG COMPANY 4,310,550
28,800 PIONEER HI BRED INTERNATIONAL INC 1,602,000
33,000 QUAKER OATS CO 1,138,500
3,800 RALSTON-PURINA GROUP 237,025
84,800 SARA LEE CORPORATION 2,703,000
6,700 SYSCO CORP 217,750
31,600 WRIGLEY WILLIAM JR CO 1,659,000
PAPER
4,400 AMERICAN GREETINGS CLASS A 121,550
2,700 BEMIS CO 69,188
6,500 BOISE CASCADE CORP 225,063
11,000 FEDERAL PAPER BOARD INC 570,625
12,400 INTERNATIONAL PAPER CO 469,650
3,800 JAMES RIVER CORP 91,675
12,560 KIMBERLY CLARK CORP 1,039,340
16,300 MEAD CORP 851,675
1,300 POTLATCH CORP 52,000
3,500 UNION CAMP CORP 166,688
68,600 WEYERHAEUSER CO 2,966,950
PRINTING AND PUBLISHING
2,200 JOSTENS INC 53,350
15,300 KNIGHT-RIDDER INC 956,250
13,000 MCGRAW-HILL COMPANIES INC 1,132,625
7,900 MEREDITH CORP 330,813
28,100 NEW YORK TIMES CO CLASS A 832,463
20,800 TIME WARNER INC 787,800
36,300 TIMES MIRROR CO CL A NEW 1,229,663
16,800 TRIBUNE CO 1,026,900
4,950 WESTVACO CORP 137,363
<PAGE>
RECREATIONAL EQUIPMENT
10,200 BALLY ENTERTAINMENT CORP 142,800
4,300 BRUNSWICK CORP 103,200
4,950 HARRAH'S ENTERTAINMENT INC 120,038
4,700 HASBRO INC 145,700
29,725 MATTEL INC 914,044
5,000 OUTBOARD MARINE CORP 101,875
SOAPS
2,600 CLOROX CO 186,225
OTHER CONSUMER PRODUCTS
9,200 AMERICAN BRANDS INC 410,550
36,800 COLGATE PALMOLIVE CO 2,585,200
4,600 DIAL CORP ARIZ 136,275
21,400 GILLETTE CO 1,115,475
177,500 PROCTER & GAMBLE CO 14,732,500
8,400 RUBBERMAID INC 214,200
710 SCHWEITZER-MAUDUIT INTL INC 16,419
2,000 SPRINGS INDUSTRIES INC 82,750
10,800 UST INC 360,450
5,300 WHITMAN CORPORATION 123,225
PHOTOGRAPHY
86,100 EASTMAN KODAK CO 5,768,700
2,300 POLAROID CORP 108,963
HOUSEHOLD FURN/APPLIANCES
1,800 ARMSTRONG WORLD INDUSTUSTRIES 111,600
4,900 MAYTAG CO 99,225
RETAIL
29,500 TJX COMPANIES INC (NEW) 556,813
APPAREL
4,900 BROWN GROUP INC 69,825
134,200 LIMITED INC 2,331,725
26,900 LIZ CLAIBORNE INC 746,475
37,600 NIKE INC CL B 2,617,900
2,200 STRIDE RITE CORP 16,500
3,700 V F CORP 195,175
BROADCASTING
1,500 KING WORLD INC 58,313
<PAGE>
MISCELLANEOUS
5,000 PALL CORPORATION 134,367
TOTAL CONSUMER PRODUCTS $114,112,230
DURABLE GOODS 17.50%
AEROSPACE-AIRCRAFT
88,500 BOEING CO $6,936,188
3,200 GENERAL DYNAMICS CORP 189,200
10,920 LOCKHEED MARTIN CORPORATION 862,680
5,300 MCDONNELL DOUGLAS CORP 487,600
2,900 NORTHROP GRUMMAN CORP 185,600
66,400 RAYTHEON COMPANY 3,137,400
52,300 ROCKWELL INTERNATIONAL 2,765,363
23,500 TEXTRON INC 1,586,250
31,400 UNITED TECHNOLOGIES CORP 2,979,075
AGRICULTURAL MACHINERY
9,800 CATERPILLAR INC 575,750
68,400 DEERE & CO 2,411,100
AUTOMOBILE AND PARTS
94,300 CHRYSLER CORP 5,221,863
33,600 COOPER TIRE & RUBBER 827,400
4,200 CUMMINS ENGINE INC 155,400
6,700 DANA CORP 195,975
4,700 EATON CORP 252,038
16,800 ECHLIN INC 613,200
54,900 FORD MOTOR CO 1,592,100
36,300 GENERAL MOTORS CORP 1,919,363
6,000 GENUINE PARTS CO 246,000
24,460 NAVISTAR INTL CORP (NEW) 256,830
16,000 TRW INC 1,240,000
2,900 VARITY CORP NEW 107,663
ELECTRICAL
48,720 AMP INC 1,869,630
12 EMCOR GROUP INC SER Z WTS 12/15/99 0
59,600 EMERSON ELECTRIC COMPANY 4,872,300
23,600 HONEYWELL INC 1,147,550
2,800 RAYCHEM CORP 159,250
17,800 WESTINGHOUSE ELECTRIC CORPORATION 293,700
<PAGE>
ELECTRONICS
27,400 ADVANCED MICRO-DEVICES 452,100
11,000 APPLIED MATLS INC 433,125
85,700 CISCO SYSTEMS INC 6,395,363
17,700 E G & G INC 429,225
79,300 GENERAL ELECTRIC CORPORATION 5,709,600
4,600 GENERAL SIGNAL CORP 148,925
61,500 HEWLETT PACKARD CO 5,150,625
182,800 INTEL CORP 10,373,900
7,600 LORAL CORPORATION 268,850
11,600 MICRON TECHNOLGY INC. 459,650
7,500 NATIONAL SEMICONDUCTOR CORP 166,875
12,400 NATIONAL SERVICES INDUSTRIES INC 401,450
24,050 ORACLE CORPORATION 1,019,119
2,000 PERKIN ELMER CORP 75,500
1,300 TEKTRONIX INC 63,863
2,900 TELEDYNE INC 74,313
12,200 TEXAS INSTRUMENTS 631,350
900 THOMAS AND BETTS CORPORATION 66,375
INDUSTRIAL MACHINERY
1,500 BRIGGS & STRATTON CORP 65,063
1,800 CINCINNATI MILACRON INC 47,250
31,200 COOPER INDUSTRIES INC 1,146,600
5,400 DOVER CORPORATION 199,125
13,700 HARNISCHFEGER INDUSTRIES INC 455,525
25,900 INGERSOLL RAND CO 909,738
400 NACCO INDUSTRIES INC CLASS A 22,200
6,600 TRINOVA CORP 188,925
OFFICE EQUIPMENT AND SUPPLIES
30,600 ALCO STANDARD CORP 1,396,125
27,200 DELUXE CORP 788,800
400 HARLAND JOHN H COMPANY 8,350
40,900 PITNEY BOWES INC 1,922,300
7,500 XEROX CORPORATION 1,027,500
RUBBER
1,200 GOODRICH B F CO 81,750
40,100 GOODYEAR TIRE & RUBBER CO 1,819,538
15,400 PREMARK INTERNATIONAL INC 779,625
OTHER DURABLE GOODS
16,100 CORNING INCORPORATED 515,200
1,200 CRANE CO 44,250
5,600 ILLINOIS TOOL WORKS INC 330,400
11,800 MILLIPORE CORP 485,275
<PAGE>
40,800 MINNESOTA MINING & MANUFACTURING 2,703,000
2,400 OWENS CORNING FIBERGLASS CORP-NEW 107,700
12,100 STANLEY WORKS 623,150
COMPUTERS AND SOFTWARE
39,300 APPLE COMPUTER INC 1,252,688
2,500 CERIDIAN CORP (FORMERLY CONTROL DATA CORP DEL) 103,125
62,900 COMPAQ COMPUTER CORPORATION 3,019,200
9,450 COMPUTER ASSOCIATES INTERNATIONAL INC. 537,469
6,400 CRAY RESEARCH INC 158,400
9,100 DATA GENERAL CORP 125,125
7,200 DIGITAL EQUIPMENT CORPORATION 461,700
1,600 INTERGRAPH CORP 25,200
26,900 IBM COMMON 2,468,075
31,800 MICROSOFT CORP 2,790,450
111,700 NOVELL INC 1,591,725
10,100 SILICON GRAPHICS 277,750
3,200 SUN MICROSYSTEMS 146,000
7,600 TANDEM COMPUTERS INC 80,750
7,800 UNISYS CORP 43,875
HOUSEHOLD FURN/APPLIANCES
5,100 WHIRLPOOL CORP 271,575
TELECOMMUNICATIONS
50,900 AIRTOUCH COMMUNICATIONS 1,437,925
8,550 ANDREW CORP 327,038
9,400 DSC COMMUNICATIONS 346,625
MISCELLANEOUS
75,300 ALLIED-SIGNAL INC 3,576,750
21,800 BLACK & DECKER CORP 768,450
22,900 ITT INDUSTRIES INC 549,600
1,800 JOHNSON CONTROLS INC 123,750
3,150 PARKER HANNIFIN CORP 107,888
2,100 SNAP ON TOOLS CORPORATION 95,025
23,600 TYCO LABRATORIES INC 840,740
TOTAL DURABLE GOODS $112,600,963
<PAGE>
FINANCIAL 15.33%
BANKS
101,125 BANC ONE CORP $3,817,469
10,200 BANK OF BOSTON CORP 471,750
29,800 BANK NEW YORK INC 1,452,750
93,300 BANKAMERICA CORPORATION 6,041,175
20,300 BANKERS TRUST NEW YORK CORP 1,349,950
3,800 BARNETT BANKS INC 224,200
8,000 BOATMEN'S BANCSHARES INC 327,000
14,500 CHASE MANHATTAN CORP 879,063
60,500 CHEMICAL BANKING CORPORATION (FORMERLY CHEMICA 3,554,375
97,100 CITICORP 6,529,975
11,200 CORESTATES FINANCIAL CORP 424,200
43,543 DEAN WITTER DISCOVER & CO 2,046,521
54,731 FIRST CHICAGO NBD CORP 2,161,875
7,000 FIRST FIDELITY BANCORPORATION NEW 527,625
6,300 FIRST INTERSTATE BANCORP 859,950
10,300 FIRST UNION CORP 572,938
42,366 FLEET FINANCIAL GROUP INC 1,726,415
78,242 KEYCORP NEW 2,836,273
27,100 MBNA CORP 999,313
31,800 MELLON BANK CORP 1,709,250
57,600 MORGAN J P & CO 4,622,400
9,200 NATIONAL CITY CORP 304,750
21,200 NATIONSBANK CORP 1,476,050
20,200 NORWEST CORP 666,600
80,400 PNC FINANCIAL CORPORATION 2,592,900
4,700 SUNTRUST BANKS INC 321,950
4,600 U S BANCORP ORE 154,675
46,100 WACHOVIA CORP 2,109,075
13,300 WELLS FARGO & CO 2,872,800
FINANCE COMPANIES
134,700 AMERICAN EXPRESS CO 5,573,213
2,400 BENEFICIAL CORP 111,900
44,700 FEDERAL HOME LOAN MORTGAGE CORP 3,732,450
5,400 HOUSEHOLD INTERNATIONAL CORP 319,275
HOLDING COMPANY
900 EASTERN ENTERPRISES 31,725
FIRE AND CASUALTY INSURANCE
23,200 CHUBB CORP 2,244,600
23,500 GENERAL RE CORP 3,642,500
33,000 SAFECO CORP 1,138,500
<PAGE>
INSURANCE
6,000 AETNA LIFE & CASUALTY CO 415,500
11,900 ALEXANDER & ALEXANDER SERVICES INC 226,100
103,464 ALLSTATE CORPORATION 4,254,957
22,200 AMERICAN INTERNATIONAL GROUP 2,053,500
20,100 CIGNA CORP 2,075,325
22,900 ITT HARTFORD 1,107,788
27,600 MARSH & MCLENNAN COMPANIES INC. 2,449,500
24,000 SAINT PAUL COMPANIES INC 1,335,000
26,800 TORCHMARK CORPORATION 1,212,700
19,000 TRANSAMERICA CORP 1,384,625
32,563 TRAVELERS GROUP INC 2,047,399
18,200 UNUM CORPORATION 1,001,000
28,800 USF & G CORP 486,000
LIFE INSURANCE
10,000 AMERICAN GENERAL CORP 348,750
3,450 JEFFERSON PILOT CORP 160,425
5,100 LINCOLN NATIONAL CORP IND 274,125
36,800 PROVIDIAN CORP 1,499,600
162 TRANSPORT HOLDINGS, INC 6,602
1,650 USLIFE CORP 49,294
REAL ESTATE
12,200 FEDERAL NATIONAL MORTGAGE ASSOCIATION 1,514,325
SAVINGS & LOANS
27,000 AHMANSON H F & CO 715,500
2,600 GOLDEN WEST FINANCIAL CORP 143,650
6,000 GREAT WESTERN FINANCIAL 153,000
BROKERAGE
44,000 MERRILL LYNCH & CO 2,244,000
28,500 SALOMON INC 1,011,745
TOTAL FINANCIAL $98,597,840
METALS AND MINING 1.07%
ALUMINUM
45,800 ALUMINUM CO OF AMERICA $2,421,675
2,800 REYNOLDS METALS CO 158,550
<PAGE>
MINING
7,300 HOMESTAKE MINING CO 114,063
STEEL
5,100 ARMCO, INC. 29,963
33,900 BETHLEHEM STEEL CORPORATION 474,600
3,900 INLAND STEEL INDUSTRIES INC 97,988
4,800 NUCOR CORP 274,200
1,400 TIMKEN CO 53,550
23,400 USX-U S STEEL GROUP 719,550
25,700 WORTHINGTON INDUSTRIES INC 534,881
OTHER METALS
2,000 ASARCO INC 64,000
23,410 NEWMONT MINING CORP 1,059,303
3,500 PHELPS DODGE CORP 217,875
10,000 FREEPORT-MCMORAN COPPER-B 281,250
MINERALS
14,600 CYPRUS AMAX MINERALS CO 381,423
TOTAL METALS AND MINING $6,882,871
OIL-ENERGY 5.88%
OIL & GAS PRODUCERS
24,200 AMERADA HESS CORP $1,282,600
22,600 AMOCO CORPORATION 1,624,375
4,900 COASTAL CORP 182,525
2,800 ENSERCH CORP 45,500
1,000 HELMERICH AND PAYNE INC. 29,750
14,200 OCCIDENTAL PETROLEUM CORP 303,525
6,700 ROWAN COMPANIES INC 66,163
4,400 SANTA FE ENERGY RES INC 42,350
17,400 TENNECO INC 863,475
69,900 USX-MARATHON GROUP COM NEW FORMERLY USX CORP 1,363,050
NATURAL RESOURCES
48,300 DRESSER INDUSTRIES INC 1,177,313
3,300 KERR MCGEE CORP 209,550
3,000 LOUISIANA LAND & EXPLORATION CO 128,625
22,900 WILLIAMS COMPANIES INC-DELAWARE 1,004,738
<PAGE>
OIL EQUIPMENT, WELLS & SVCS
2,800 ASHLAND, INC 98,350
45,500 BAKER HUGHES INC 1,109,063
5,200 HALLIBURTON CO 263,250
3,700 WESTERN ATLAS INC 186,850
OIL - DOMESTIC
46,700 BURLINGTON RESOURCES INC 1,832,975
15,600 PENNZOIL CO 659,100
13,100 PHILLIPS PETROLEUM CO 447,038
65,200 UNOCAL CORP 1,898,950
OIL-INTERNATIONAL
56,700 ATLANTIC RICHFIELD CO 6,279,525
174,800 CHEVRON CORP 9,177,000
56,200 EXXON CORP. 4,503,025
17,800 MOBIL CORP 1,993,600
5,000 SUN COMPANY INC 136,875
11,900 TEXACO INC 934,148
TOTAL OIL-ENERGY $37,843,288
RETAIL 3.66%
DEPARTMENT STORES
3,900 DAYTON HUDSON CORP $292,500
4,100 HARCOURT GENERAL INC 171,688
84,400 MAY DEPARTMENT STORES COMPANY 3,565,900
29,400 MELVILLE CORPORATION 904,050
10,000 MERCANTILE STORES 462,500
12,100 PENNEY JC INC 576,263
101,900 SEARS ROEBUCK & CO 3,974,100
40,600 WINN-DIXIE STORES INC 1,497,125
GROCERY
69,800 ALBERTSON'S INC 2,294,675
40,100 AMERICAN STORES CO 1,072,675
79 BRUNOS INC NEW 830
1,700 FLEMING COMPANIES 35,063
2,500 GIANT FOOD INC 78,750
1,600 GREAT ATLANTIC & PACIFIC TEA INC 36,800
6,600 KROGER CO 247,500
25,700 SUPERVALUE INC 809,550
<PAGE>
OTHER RETAIL
34,300 CIRCUIT CITY STORES 947,538
1,000 LONGS DRUG STORES CORP 47,875
10,100 LOWES COMPANIES INC 338,350
3,900 PEP BOYS - MANNY, MOE, AND JACK 99,938
32,377 PRICE/COSTCO INC 493,749
23,900 RITE AID CORPORATION 818,575
23,900 TANDY CORP 991,850
115,400 TOYS R US 2,509,950
SPORTING GOODS
25,100 REEBOK INTERNATIONAL LIMITED 709,075
2,200 RUSSELL CORP 61,050
APPAREL
7,900 GAP INC 331,800
4,100 NORDSTROM INC 166,047
TOTAL RETAIL $23,535,766
UTILITIES 13.77%
ELECTRIC
48,200 AMERICAN ELECTRIC POWER INC $1,952,100
7,700 BALTIMORE GAS & ELECTRIC CO 219,450
54,700 CAROLINA POWER & LIGHT CO 1,887,150
65,800 CENTRAL & SOUTH WEST CORP 1,834,175
20,885 CINERGY CORP 639,603
81,700 CONSOLIDATED EDISON NY INC 2,614,400
38,100 DETROIT EDISON CO 1,314,450
46,100 DOMINION RESOURCES INC-VA 1,901,625
9,400 DUKE POWER CO 445,325
78,600 ENTERGY CORP NEW 2,299,050
10,700 FPL GROUP INC 496,213
8,700 GENERAL PUBLIC UTILITIES CORPORATION 295,800
68,800 HOUSTON INDUSTRIES INC 1,668,400
37,800 NIAGARA MOHAWK POWER 363,825
17,800 NORTHERN STATES POWER CO 874,425
40,800 OHIO EDISON CO 958,800
57,500 PECO ENERGY CO 1,732,188
17,400 PACIFICORP 369,750
87,600 PUBLIC SERVICE ENTERPRISE GROUP 2,682,750
155,400 SBC COMMUNICATIONS INC 8,935,500
173,100 SOUTHERN CO 4,262,588
68,500 UNICOM CORPORATION 2,243,375
36,100 UNION ELECTRIC CO 1,507,175
<PAGE>
GAS
13,100 COLUMBIA GAS SYSTEM INC 574,763
32,200 CONSOLIDATED NATURAL GAS 1,461,075
14,400 ENRON CORP 549,000
14,000 NICOR COMMON 385,000
38,900 NORAM ENERGY CORP 345,238
7,100 ONEOK INC 162,413
7,000 PACIFIC ENTERPRISES 197,750
10,800 PANHANDLE EASTERN CORP 301,050
9,200 PEOPLES ENERGY CORP 292,100
4,400 SONAT INC 156,750
400 TEXAS UTILITIES CO 16,450
TELEPHONE
57,900 A T & T 3,749,025
16,300 ALLTEL CORP 480,850
115,300 BELL ATLANTIC CORP 7,710,688
260,400 BELLSOUTH CORP 11,327,400
145,300 NYNEX CORP 7,846,200
25,100 PACIFIC TELESIS GROUP 843,988
14,700 SPRINT CORP 586,163
146,500 U S WEST INC 5,237,375
146,500 US WEST MEDIA GROUP 2,783,500
WASTE DISPOSAL
54,700 BROWNING FERRIS INDUSTRIES INC 1,613,650
43,000 LAIDLAW TRANS INC CL B NON VOTING 440,745
TOTAL UTILITIES $88,559,291
MISCELLANEOUS 12.84%
BROADCAST/COMMUNICATIONS
3,700 CAPITAL CITIES/ABC INC $456,488
82,350 COMCAST CORP CLASS A SPL 1,497,741
38,000 GANNETT CO., INC. 2,332,250
203,000 MCI COMMUNICATIONS 5,303,375
185,200 MOTOROLA INC 10,556,400
43,800 TELE COMMUNICATIONS INC CL A 870,525
2,000 TELLABS INC 74,000
22,100 VIACOM INC CL B VTG 1,046,988
138,300 DISNEY WALT CO 8,159,700
<PAGE>
BUSINESS SERVICES
30,400 AMDAHL CORP 258,400
2,700 AUTODESK INC 92,475
38,100 AUTOMATIC DATA PROCESSING 2,828,925
4,900 BLOCK H & R INC 198,450
14,800 COMPUTER SCIENCES CORP 1,039,700
7,800 DONNELLEY R R & SONS 307,125
4,700 DOW JONES & CO 187,413
61,300 DUN & BRADSTREET 3,969,175
19,200 ECOLAB INC 576,000
6,900 FIRST DATA CORP 461,438
2,000 GRAINGER W W INC 132,500
3,600 INTERPUBLIC GROUP COMPANIES INC 156,150
12,900 OGDEN CORP 275,738
2,900 SAFETY KLEEN CORP 45,313
3,900 SCIENTIFIC-ATLANTA 58,500
5,100 SERVICE CORPORATION INTERNATIONAL 224,400
FOOD SERVICE
41,800 DARDEN RESTAURANTS INC 496,375
900 LUBYS CAFETERIAS INC 20,025
187,400 MCDONALDS CORPORATION 8,456,425
34,200 PHILLIP MORRIS COMPANIES INC 3,095,100
2,500 RYANS FAMILY STEAK HOUSE 17,500
13,800 SHONEY'S INC 141,450
6,100 WENDYS INTERNATIONAL INC 129,625
HOTEL & MOTEL
2,400 HILTON HOTELS CORP 147,600
22,900 ITT CORP NEW 1,213,700
14,000 MARRIOTT INTERNATIONAL CORP 535,500
HOUSING
1,400 PULTE CORP 47,075
MED SERV & SUPPLIES
29,900 BIOMET INC 534,463
4,600 MANOR CARE INC 161,000
56,000 MEDTRONIC INC 3,129,000
2,850 ST. JUDE MEDICAL INC. 122,550
1,100 SHARED MEDICAL SYSTEM CORP 59,813
REAL ESTATE
1,800 CENTEX CORP 62,550
<PAGE>
TRANSPORTATION
3,600 AMR CORP 267,300
10,003 BURLINGTON NORTHERN SANTA FE 780,234
55,800 CSX CORP 2,545,875
3,900 CONRAIL INC 273,000
14,600 CONSOLIDATED FREIGHTWAYS 386,900
2,500 DELTA AIR LINES INC 184,688
3,100 FEDERAL EXPRESS CORP 229,013
2,200 FLEETWOOD ENTERPRISES INC 56,650
5,900 NORFOLK SOUTHERN CORP 468,313
9,650 PACCAR INC 406,506
4,000 PITTSTON BRINKS GROUP 125,500
10,500 ROADWAY SERVICES 513,188
4,600 RYDER SYSTEMS INC 113,850
5,720 SANTA FE PACIFIC GOLD 69,355
38,000 SOUTHWEST AIRLINES CO 883,500
56,800 UNION PACIFIC CORP 3,748,800
18,400 U S AIR GROUP 243,800
6,700 YELLOW CORPORATION 82,913
MISCELLANEOUS
9,000 HANDLEMAN CO-DELAWARE 51,750
35,300 WARNER-LAMBERT 3,428,513
TELECOMMUNICATIONS
138,600 AMERITECH CORP 8,178,293
2,000 HARRIS CORP-DELAWARE 109,250
TOTAL MISCELLANEOUS $82,625,211
TOTAL COMMON STOCK $656,146,029
<PAGE>
OTHER
PREFERRED STOCKS 0.00%
117 TELEDYNE PFRD SERIES E $1,682
1,682
MUTUAL FUNDS - OPEN END 0.73%
4,718,311 AMERICAN AADVANTAGE MM FUND $4,718,311
4,718,311
TOTAL OTHER $4,719,993
TOTAL INVESTMENTS -102.73% (cost$477,309,065) $660,866,022
LIABILITIES IN EXCESS OF OTHER ASSETS (2.73%) (17,525,940)
NET ASSETS - 100% $643,340,082
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
<PAGE>
To the Board of Directors and Shareholder
Select Asset Fund, Series 1, Inc.:
In planning and performing our audit of the financial statements of Se-
lect Asset Fund, Series 1, Inc. for the year ended December 31, 1995, we
considered its internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures
for the purpose of expressing our opinion on the financial statements
and to comply with the requirements of Form N-SAR, not to provide assur-
ance on the internal control structure.
The management of Select Asset Fund, Series 1, Inc. is responsible for
establishing and maintaining an internal control structure. In fulfill-
ing this responsibility, estimates and judgments by management are re-
quired to assess the expected benefits and related costs of internal
control policies and procedures. Two of the objectives of an internal
control structure are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss from unau-
thorized use or disposition and that transactions are executed in accor-
dance with management's authorization and recorded properly to permit
preparation of financial statements in conformity with generally accept-
ed accounting principles.
Because of inherent limitations in any internal control structure, er-
rors or irregularities may occur and not be detected. Also, projection
of any evaluation of the structure to future periods is subject to the
risk that it may become inadequate because of changes in conditions or
that the effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessari-
ly disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Insti-
tute of Certified Public Accountants. A material weakness is a condi-
tion in which the design or operation of the specific internal control
structure elements does not reduce to a relatively low level the risk
that errors or irregularities in amounts that would be material in rela-
tion to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters in-
volving the internal control structure, including procedures for safe-
guarding securities, that we consider to be material weaknesses as de-
fined above as of December 31, 1995.
This report is intended solely for the information and use of the Board
of Directors, management and the Securities and Exchange Commission.
KPMG Peat Marwick, LLP
February 16, 1996
New York, New York
