Selected Funds SEMI-ANNUAL REPORT. Selected American Shares Selected International Fund. June 30, Selecting Quality Companies for the Long Term - PDF

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Selected Funds Selected American Shares Selected International Fund June 30, 2016 SEMI-ANNUAL REPORT Selecting Quality Companies for the Long Term Table of Contents Shareholder Letter... 2 Management s
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Selected Funds Selected American Shares Selected International Fund June 30, 2016 SEMI-ANNUAL REPORT Selecting Quality Companies for the Long Term Table of Contents Shareholder Letter... 2 Management s Discussion of Fund Performance: Selected American Shares... 3 Selected International Fund... 5 Fund Overview: Selected American Shares... 7 Selected International Fund... 8 Expense Example... 9 Schedule of Investments: Selected American Shares Selected International Fund Statements of Assets and Liabilities Statements of Operations Statements of Changes in Net Assets Notes to Financial Statements Financial Highlights Director Approval of Advisory Agreements Privacy Notice and Householding Directors and Officers This Semi-Annual Report is authorized for use by existing shareholders. Prospective shareholders must receive a current Selected Funds prospectus, which contains more information about investment strategies, risks, fees, and expenses. Please read the prospectus carefully before investing or sending money. Shares of the Selected Funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested. Portfolio Proxy Voting Policies and Procedures The Funds have adopted Portfolio Proxy Voting Policies and Procedures under which the Funds vote proxies relating to securities held by the Funds. A description of the Funds Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Funds toll-free at , (ii) on the Funds website at and (iii) on the SEC s website at In addition, the Funds are required to file Form N-PX, with their complete proxy voting record for the 12 months ended June 30 th, no later than August 31 st of each year. The Funds Form N-PX filing is available (i) without charge, upon request, by calling the Funds toll-free at , (ii) on the Funds website at and (iii) on the SEC s website at Form N-Q The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds Form N-Q is available without charge, upon request, by calling , on the Funds website at and on the SEC s website at The Funds Form N-Q may be reviewed and copied at the SEC s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling SEC-0330. Shareholder Letter Dear Fellow Shareholder, As stewards of our customers savings, the management team and Directors of the Selected Funds recognize the importance of candid, thorough, and regular communication with our shareholders. In our Annual and Semi-Annual Reports, we include all of the required quantitative information, such as financial statements, detailed footnotes, performance reports, fund holdings, and performance attribution. In addition, we produce a Manager Commentary for each Fund, which is published semi-annually. In this commentary, we give a more qualitative perspective on fund performance, discuss our thoughts on individual holdings, and share our investment outlook. You may obtain a copy of the current Manager Commentary either on the Funds website at or by calling We thank you for your continued trust. We will do our best to earn it in the years ahead. Sincerely, James J. McMonagle Christopher C. Davis Danton G. Goei Chairman President & Portfolio Manager Portfolio Manager August 5, SELECTED AMERICAN SHARES, INC. Management s Discussion of Fund Performance Performance Overview Selected American Shares underperformed the Standard & Poor s 500 Index ( S&P 500 ) for the six-month period ended June 30, 2016 (the period ). The Fund s Class S and D shares delivered a total return of negative 0.51% and negative 0.35%, respectively, versus a 3.84% return for the S&P 500. Only two sectors 1 within the S&P 500 reported negative performance figures, Financials (down 3%) and Information Technology (down less than 1%). The third-weakest performing sector was Health Care (up less than 1%). The sectors within the S&P 500 that reported the strongest performance were Telecommunication Services (up 25%), Utilities (up 23%), and Energy (up 16%). Detractors from Performance The Fund s holdings in the Financials sector were the most significant detractor from performance 2, both on an absolute basis and when compared to the S&P 500. The Fund s Financial holdings were down about 6%, compared to down 3% for the S&P 500 sector. The Fund suffered from a significant overweight position (29%, versus 17% for the S&P 500 ) in the weakest performing sector of the period. Wells Fargo 3 (down 12%), American Express (down 11%), Charles Schwab (down 23%), and Citizens Financial Group (down 23%) were all leading detractors. Returns from holdings in the Health Care sector also hindered performance. The Fund s Health Care holdings were down about 24%, compared to up less than 1% for the S&P 500 sector. Valeant Pharmaceuticals (down 80%) was the Fund s overall top detractor, while Express Scripts (down 13%) was also a weak performer. Additional detractors included Alphabet (down 9%), the Fund s largest holding, from the Information Technology sector; OCI N.V. (down 45%) and LafargeHolcim (down 16%) from the Materials sector; and Liberty Global (down 20%) from the Consumer Discretionary sector. The Fund had approximately 10% of its net assets invested in foreign securities. As a whole, the Fund s foreign holdings underperformed its domestic holdings (down 14%, versus up 2%). Contributors to Performance The Fund s holdings in the Energy sector made the most significant contribution to performance, both on an absolute basis and when compared to the S&P 500. The Fund s Energy holdings were up about 29%, compared to up 16% for the S&P 500 sector. The Fund benefited from an overweight position (9%, versus 7% for the S&P 500 ) in a strong performing sector. Apache (up 27%) and Encana (up 54%) were the Fund s overall top contributors. Cabot Oil & Gas (up 46%) was another key contributor. Returns from holdings in the Information Technology sector also helped performance. The Fund s Information Technology holdings were up about 3%, compared to down less than 1% for the S&P 500 sector. ASAC II L.P. (up 7%) and Texas Instruments (up 16%) were strong performers. During the period, ASAC II L.P., an investment vehicle that was formed to hold shares of Activision, distributed all Activision shares that the Fund was entitled to as a limited partner. Additional contributors included Berkshire Hathaway (up 10%) from the Financials sector; Didi Chuxing (up 36%) and Amazon (up 6%), the Fund s second-largest holding, both from the Consumer Discretionary sector; UnitedHealth Group (up 21%) from the Health Care sector; and United Technologies (up 8%) from the Industrials sector. Selected American Shares investment objective is to achieve both capital growth and income. In the current market environment, we expect that income will be low. There can be no assurance that the Fund will achieve its objective. Selected American Shares principal risks are: stock market risk, manager risk, common stock risk, large-capitalization companies risk, mid- and small-capitalization companies risk, headline risk, financial services risk, foreign country risk, emerging market risk, foreign currency risk, depositary receipts risk, and fees and expenses risk. See the prospectus for a full description of each risk. Past performance does not guarantee future results, Fund prices fluctuate, and the value of an investment may be worth more or less than the purchase price. Data provided in this performance overview is for the six-month period ended June 30, 2016, unless otherwise noted. Return figures for underlying Fund positions reflect the return of the security from the beginning of the period or the date of first purchase if subsequent thereto through the end of the period or the date the position is completely liquidated. The actual contribution to the Fund will vary based on a number of factors (e.g. trading activity, weighting). Portfolio holding information is as of the end of the six-month period, June 30, 2016, unless otherwise noted. 1 The companies included in the Standard & Poor s 500 Index are divided into ten sectors. One or more industry groups make up a sector. 2 A company s or sector s contribution to or detraction from the Fund s performance is a product both of its appreciation or depreciation and its weighting within the Fund. For example, a 5% holding that rises 20% has twice as much impact as a 1% holding that rises 50%. 3 This Management Discussion of Fund Performance discusses a number of individual companies. The information provided in this report does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase, sell, or hold any particular security. The Schedule of Investments lists the Fund s holdings of each company discussed. 3 SELECTED AMERICAN SHARES, INC. (CONTINUED) Management s Discussion of Fund Performance COMPARISON OF A $10,000 INVESTMENT IN SELECTED AMERICAN SHARES CLASS S VERSUS THE STANDARD & POOR S 500 INDEX OVER 10 YEARS FOR AN INVESTMENT MADE ON JUNE 30, 2006 $25,000 $20,000 S&P 500 SAS - S S&P 500 $20,466 $15,000 SAS - S $16,384 $10,000 ` $5,000 $0 06/30/06 06/30/07 06/30/08 06/30/09 06/30/10 06/30/11 06/30/12 06/30/13 06/30/14 06/30/15 06/30/16 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED JUNE 30, 2016 SINCE CLASS D S INCEPTION (May 3, 2004) GROSS EXPENSE RATIO NET EXPENSE RATIO FUND & BENCHMARK INDEX 1-YEAR 5-YEAR 10-YEAR Class S (0.07)% 8.82% 5.06% N/A 0.97% 0.97% Class D 0.29% 9.18% 5.41% 6.32% 0.64% 0.64% Standard & Poor s 500 Index 3.99% 12.10% 7.42% 7.54% The Standard & Poor s 500 Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks. Investments cannot be made directly in the Index. The performance data for Selected American Shares contained in this report represents past performance, assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Fund performance changes over time and current performance may be higher or lower than stated. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The operating expense ratios may vary in future years. For more current information please call Selected Funds Investor Services at SELECTED INTERNATIONAL FUND, INC. Management s Discussion of Fund Performance Performance Overview Selected International Fund underperformed the Morgan Stanley Capital International All Country World Index ex USA ( MSCI ) for the six-month period ended June 30, 2016 (the period ). The Fund s Class S and D shares delivered a total return of negative 2.77% and negative 2.56%, respectively, versus a negative 1.02% return for the MSCI. The sectors 1 within the MSCI that reported the weakest performance were Consumer Discretionary (down 9%), Financials (down 9%), and Health Care (down 3%). The sectors within the MSCI that reported the strongest performance were Energy (up 19%), Materials (up 11%), and Consumer Staples (up 7%). Detractors from Performance The Fund s holdings in the Health Care sector were the most significant detractor from performance 2, both on an absolute basis and when compared to the MSCI. The Fund s Health Care holdings were down about 45%, compared to down 3% for the MSCI sector. The Fund benefited from an underweight position (6%, versus 9% for the MSCI) in a weak performing sector, but suffered due to Valeant Pharmaceuticals 3 (down 80%), which was the Fund s overall top detractor. Returns from holdings in the Information Technology sector also hindered performance. The Fund s Information Technology holdings were down about 15%, compared to up 1% for the MSCI sector. SouFun Holdings (down 32%) and YY (down 46%) were weak performers. Another detractor from performance came from the Fund s Industrial holdings, which were down about 7%, compared to up 1% for the MSCI sector. CAR (down 41%) and Regus (down 21%) were leading detractors. Additional detractors included JD.com (down 34%) and Vipshop Holdings (down 27%) from the Consumer Discretionary sector, Lindt & Spruengli (down 9%) and United Spirits (down 18%) from the Consumer Staples sector, and LafargeHolcim (down 16%) from the Materials sector. The Fund no longer owns Lindt & Spruengli. At the country level, the Fund s Chinese holdings were the most significant detractor from performance. The Fund had approximately 31% of its net assets invested in Chinese companies. Contributors to Performance The Fund s holdings in the Energy sector made the most significant contribution to performance on an absolute basis. The Fund s Energy holdings were up about 50%, compared to up 19% for the MSCI sector. Encana (up 54%), the Fund s largest holding, and Paramount Resources (up 59%) were the Fund s overall top contributors. The Fund no longer owns Paramount Resources. When compared to the MSCI, returns from holdings in the Financial sector helped performance the most. The Fund s Financial holdings were up about 13%, compared to down 9% for the MSCI sector. The Fund also benefited from a significant underweight position (10%, versus 26% for the MSCI) in a weak performing sector. BM&FBOVESPA (up 105%) was a key contributor. Another contributor to performance came from the Fund s Consumer Discretionary holdings, which were up about 5%, compared to down 9% for the MSCI sector. The Fund s second-largest holding, Naspers (up 12%), along with Didi Chuxing (up 36%), Xiabu Xiabu (up 26%), Hunter Douglas (up 25%), and Hermes International (up 12%) were all strong performers. Additional contributors included L Oreal (up 15%) from the Consumer Staples sector and Schneider Electric (up 7%) from the Industrials sector. At the country level, the Fund s Brazilian holdings made the largest contribution to performance, followed by holdings from South Africa. The Fund had approximately 6% of its net assets invested in Brazilian companies and 5% in South African companies. Selected International Fund s investment objective is capital growth. There can be no assurance that the Fund will achieve its objective. Selected International Fund s principal risks are: stock market risk, manager risk, common stock risk, foreign country risk, emerging market risk, foreign currency risk, depositary receipts risk, large-capitalization companies risk, mid- and small-capitalization companies risk, headline risk, and fees and expenses risk. See the prospectus for a full description of each risk. Past performance does not guarantee future results, Fund prices fluctuate, and the value of an investment may be worth more or less than the purchase price. Data provided in this performance overview is for the six-month period ended June 30, 2016, unless otherwise noted. Return figures for underlying Fund positions reflect the return of the security from the beginning of the period or the date of first purchase if subsequent thereto through the end of the period or the date the position is completely liquidated. The actual contribution to the Fund will vary based on a number of factors (e.g. trading activity, weighting). Portfolio holding information is as of the end of the six-month period, June 30, 2016, unless otherwise noted. 1 The companies included in the Morgan Stanley Capital International All Country World Index ex USA are divided into ten sectors. One or more industry groups make up a sector. 2 A company s or sector s contribution to or detraction from the Fund s performance is a product both of its appreciation or depreciation and its weighting within the Fund. For example, a 5% holding that rises 20% has twice as much impact as a 1% holding that rises 50%. 3 This Management Discussion of Fund Performance discusses a number of individual companies. The information provided in this report does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase, sell, or hold any particular security. The Schedule of Investments lists the Fund s holdings of each company discussed. 5 SELECTED INTERNATIONAL FUND, INC. (CONTINUED) Management s Discussion of Fund Performance COMPARISON OF A $10,000 INVESTMENT IN SELECTED INTERNATIONAL FUND CLASS S VERSUS THE MORGAN STANLEY CAPITAL INTERNATIONAL ALL COUNTRY WORLD INDEX EX USA (MSCI ACWI EX USA) OVER 10 YEARS FOR AN INVESTMENT MADE ON JUNE 30, 2006 $20,000 MSCI ACWI ex USA $15,000 SIF - S MSCI ACWI ex USA $12,037 $10,000 SIF - S $10,678 $5,000 $0 06/30/06 06/30/07 06/30/08 06/30/09 06/30/10 06/30/11 06/30/12 06/30/13 06/30/14 06/30/15 06/30/16 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED JUNE 30, 2016 FUND & BENCHMARK INDEX 1-YEAR 5-YEAR 10-YEAR SINCE CLASS D S INCEPTION (May 3, 2004) GROSS EXPENSE RATIO NET EXPENSE RATIO Class S (11.71)% 1.94% 0.66% N/A 1.52% 1.30% Class D (11.33)% 2.49% 1.14% 2.85% 0.87% 0.78% MSCI ACWI EX USA (10.24)% 0.10% 1.87% 5.11% On May 1, 2011, the Fund changed its name from Selected Special Shares to Selected International Fund and changed its investment strategy from investing primarily in domestic equity securities to investing primarily in foreign equity securities. Performance prior to that date is unlikely to be relevant to future performance. The Fund s performance benefited from IPO purchases in 2010 and After purchase, the IPOs rapidly increased in value. The Adviser purchases shares intending to benefit from long-term growth of the underlying company; the rapid appreciation of the IPOs were unusual occurrences. The MSCI ACWI EX USA is a free float-adjusted market capitalization weighted index designed to measure the equity market performance of developed and emerging markets, excluding the United States. The Index includes reinvestment of dividends, net of foreign withholding taxes. Investments cannot be made directly in the Index. The performance data for Selected International Fund contained in this report represents past performance, assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Fund performance changes over time and current performance may be higher or lower than stated. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The operating expense ratios may vary in future years. For more current information please call Selected Funds Investor Services at SELECTED AMERICAN SHARES, INC. Fund Overview June 30, 2016 (Unaudited) Portfolio Composition Industry Weightings (% of Fund s 06/30/16 Net Assets) (% of 06/30/16 Stock Holdings) Fund S&P 500 Common Stock (U.S.) 84.86% Diversified Financials 17.23% 4.63% Common Stock (Foreign) 8.64% Information Technology 16.09% 19.77% Preferred Stock (Foreign) 1.77% Retailing 12.98% 5.52% Short-Term Investments 5.82% Energy 11.86% 7.40% Other Assets & Liabilities (1.09)% Banks 11.01% 5.22% % Materials 8.66% 2.88% Capital Goods 6.35% 7.43% Health Care 5.28% 14.69% Insurance 2.94% 2.67% Food & Staples Retailing 2.10% 2.35% Automobiles & Components 1.99% 0.86% Med
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