Financial Statements
and Financial Highlights
Select Asset Fund, Series 2, Inc.
August 31, 1999
with Report of Independent Auditors
Report of Independent Auditors
Board of Directors and Stockholder
Select Asset Fund, Series 2, Inc.
We have audited the accompanying statement of assets and liabilities of Select
Asset Fund, Series 2, Inc. as of August 31, 1999, the related statement of
operations for the eight month period ended August 31, 1999, and the
statements of changes in net assets for the eight month period ended
August 31, 1999 and for the year ended December 31, 1998, and the financial
highlights since 1997. These statements and financial highlights are the
responsibility of the Fund'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. 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
Select Asset Fund, Series 2, Inc. at August 31, 1999, the results of its
operations for the eight month period ended August 31, 1999, and the changes
in its net assets for the eight month period ended August 31, 1999 and for the
year ended December 31, 1998, and its financial highlights since 1997, in
conformity with generally accepted accounting principles.
September 30, 1999
Select Asset Fund, Series 2, Inc.
Statement of Assets and Liabilities
August 31, 1999
Assets
Net asset value $0
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Statement of Operations
For the eight month period ended August 31, 1999
Investment income:
Dividend income $88,411
Interest income 5,998
Total investment income 94,409
Expenses:
Administration fees (Note 2) 32,744
Investment management fee (Note 2) 1,773
Independent auditors 5,767
Interest expense 1,832
Directors fees and expenses 3,000
Legal fees 7,014
Other expenses 564
Total expenses 52,694
Net investment income 41,715
Net realized gain on investments (109,941)
Net realized gain on in-kind transfer (Note 1) 209,789,004
Net decrease in unrealized appreciation (209,789,004)
Net increase in net assets resulting from operations ($68,226)
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Statements of Changes in Net Assets
For the eight For the
month period ended year ended
August 31, 1999 December 31, 1998
From operations:
Net investment income $41,715 $5,661,498
Net realized gain (loss) on investments (109,941) 6,393,972
Net realized gain on in-kind transfer 209,789,004 0
Net change in unrealized appreciation
on investments (209,789,004) (195,542,832)
Decrease in net assets resulting
from operations (68,226) (183,487,362)
Dividends from net investment income:
Common stock (41,715) (5,661,498)
(41,715) (5,661,498)
Distribution from net realized gains:
Common stock 0 (6,393,972)
In-kind transfer (209,789,004) 0
(209,789,004) (6,393,972)
Decrease in net assets resulting from distributions
to stockholder (209,830,719) (12,055,470)
Increase (decrease) from capital transactions:
Capital contribution from common stockholder 0 138,719,277
Redemption of common stock (710,710) 0
Distribution of capital to common stockholder (160,809,862) (249,797,572)
(161,520,572) (111,078,295)
Total decrease in net assets (371,419,517) (306,621,127)
Net assets:
Beginning of period 371,419,517 678,040,644
End of period $0 $371,419,517
See accompanying notes.
Select Asset Fund, Series 2, Inc.
Notes to Financial Statements
August 31, 1999
1. Organization and Significant Accounting Policies
On January 7, 1999 the Board of Directors approved a Plan of Liquidation and
Dissolution for the Select Asset Fund, Series 2, Inc. (the "Fund"). As of
August 31, 1999 the Fund was fully liquidated and all remaining capital has
been distributed to the common stockholder through an in-kind distribution.
For purposes of these financial statements, in accordance with generally
accepted accounting principles, the in-kind distribution was treated as a
realized gain. For tax purposes the distribution would not result in a
realized gain until the securities were actually sold.
The Fund was registered as a diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended. The Fund
received notification from the Securities Exchange Commission ("SEC") that it
was de-registered effective September 24, 1999.
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements.
Security Transactions
Security transactions were accounted for on a trade date plus one business day
basis which does not differ materially from a trade date basis. The cost of
securities sold was determined using the identified cost method. Dividend
income was recorded on ex-dividend date and interest income was recorded on
the accrual basis.
Federal Income Taxes
It was 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
was required.
Distribution of Income and Gains
The Fund distributed 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 were declared and paid at least annually.
Net capital gains, if any, were generally distributed annually.
The character of income and gains to be distributed was determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Amounts distributed in excess of taxable
income and net realized gains, if any, were considered a return of capital.
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 was the sole common
stockholder of the Fund. Certain officers and directors of the Fund were
affiliated with the common stockholder. No fees or expenses were paid to the
affiliated officers and directors.
For the eight month period ended August 31, 1999 and the year ended December
31, 1998, dividend and capital gain distributions to the common stockholder
were $41,715 and $12,055,470, respectively.
For the year ended December 31, 1998, the common stockholder made capital
contributions to the Fund in the amount of $138,719,277.
Comerica Bank served as both custodian and administrator for the Fund and
received a fee based on 0.06% of net assets outstanding at the end of the
fiscal year. An affiliate of Comerica Bank served as investment advisor to the
Fund. The annual investment management fee was 0.01% of average equity
investments. The administration and management fees were calculated and
accrued on a monthly basis and generally were paid on a quarterly basis.
3. Investment Transactions
The aggregate cost of securities purchased and the aggregate proceeds of
securities sold, excluding short-term securities, for the eight month period
ended August 31, 1999 were $1,600,100 and $1,020,631, respectively.
Select Asset Fund, Series 2, Inc.
Financial Highlights
Year ended December 31,
1999(1) 1998 1997 1996 1995
For a share of common stock outstanding
throughout the period:
Net asset value, beginning of
period $5.23 $9.54 $6.83 $14.41 $10.97
Net investment income 0.00 0.08 0.21 0.20 0.52
Net realized and unrealized gains
(losses) on investments 0.00 (2.66) 3.57 1.77 6.00
Total from investment
operations 0.00 (2.58) 3.78 1.97 6.52
Capital contribution 0.00 1.95 5.12 0.00 0.00
Less dividends from net investment income:
Common stock equivalent of dividends
paid to AMPS holders 0.00 0.00 (0.19) (0.14) (0.45)
Dividends paid to common
shareholder 0.00 (0.08) (0.03) (0.06) (0.05)
Less distributions from net realized gains:
Distributions paid to common
shareholder 0.00 (0.09) (1.95) (1.80) (0.54)
Distributions from in-kind transfer paid to
common shareholder (2.96) 0.00 0.00 0.00 0.00
Less distributions from paid-in capital:
Return of capital to common
shareholder (2.27) (3.51) (4.02) (7.55) (2.04)
Total distributions (5.23) (3.68) (6.19) (9.55) (3.08)
Net asset value, end of period $0.00 $5.23 $9.54 $6.83 $14.41
Total investment return 0.02%(2)-27.06% 33.84% 13.67% 59.43%
Ratios/supplemental data:
Net assets at end of period (000s) 0 371,420 678,041 795,185 936,359
Average net assets (000s) 4,169 418,540 926,937 860,368 901,872
Ratio of expenses to average net assets
applicable to common stock (3) 1.26% 0.09% 0.14% 0.23% 0.13%
Ratio of net investment income to average net assets
applicable to common stock (3) 1.00% 1.35% 1.68% 1.64% 2.64%
Portfolio turnover 24.48% 8.25% 5.37% 17.51% 16.27%
Asset coverage per AMPS share
end of period 0.0000 0.0000 0 $256,511 0
AMPS shares outstanding 0 0 0 3,100 0
Asset coverage for notes payable,
end of period 0 333,413% 598,019% 674,557% 794,298%
Notes payable, end of period 0 111,400 113,400 117,900 117,900
(1)For the eight month period ended August 31, 1999.
(2)Total investment return for the period, not annualized.
(3)Ratios are calculated on the basis of income and expenses applicable to
both the common and preferred stock relative to the average net assets
of the common stockholder. Ratios do not reflect the effect of dividend
payments to AMPS holders. Ratios from 1996 and years prior have been
restated to exlude the effect of dividend payments to AMPS holders.
See accompanying notes.
