DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
Dear Shareholder:
DAVIS FINANCIAL FUND
An Exceptional Year in Stocks
- -----------------------------
The past year was marked by considerable short-term volatility in
the securities markets but proved to be very favorable to stocks. The
Standard & Poor's 500 Index* of large-company common stocks advanced
22.96%, including reinvested dividends, during the twelve months ended
December 31, 1996.
The market's results were driven largely by a combination of healthy
corporate profits and a benign U.S. economy. While various economic
indicators argued for an acceleration of growth and a step-up in inflation,
others contradicted this conclusion. In the end, we saw full employment
with low inflation, persistent growth and a shrinking national budget
deficit. The net result was the so-called "Goldilocks" economy - neither
too fast nor too slow to deter investors. The final quarter of 1996 was
exceptionally strong, with the Dow Jones Industrial Average* of blue-chip
stocks approaching an all-time high of 6547 on November 25th and
finishing the year with a gain of 28.71%, including reinvested dividends.
The Davis Financial Fund had an exceptionally strong year as well,
with Class A shares of the fund delivering a total return on net asset
value of 31.50% (see page 13). In reviewing the year, it is clear that, with
few exceptions, almost all financial companies posted excellent results.
The favorable economic and market conditions, as well as continued
consolidation within the banking and insurance sectors, drove
performance, and the fund benefited handsomely.
Where To From Here?
- ------------------
After such an outstanding year, the question is: Does the long-term
outlook for financial stocks remain bright? We believe so. The past year
notwithstanding, financial stocks continue to sell at steep discounts to
the markets, while long-term trends spell great prospects for the
financial sector.
Stocks are not just pieces of paper, like lottery tickets; they
represent ownership in real businesses. As a result, we believe that in
making an investment decision, the portfolio manager must do two things.
First, he must predict the future growth prospects of a business by
studying the fundamentals, competitive outlook and management
expertise. In essence, he must ask, "How much can I make?"
Second, the portfolio management must determine what to pay for
that predicted growth, bearing in mind that in most cases, the valuation is
based on the price/earnings multiple. During this valuation stage, he must
ask, "How much can I lose?"
This emphasis on the balancing of growth and value - or risk and
reward -- helps us to identify long-term opportunities. The ideal
situation is to find companies with good growth prospects at attractive
valuations (i.e., low price/earnings multiples). At Davis Selected
Advisers, we call such companies "growth stocks in disguise."
Growth Stocks in Disguise
- -------------------------
Which brings us to the financial stocks, particularly those with
established brand names and strong distribution systems.
From a top-down perspective, we are in the early innings of an
explosion in savings and investing as American baby-boomers plan for
their retirement and enter their peak savings years between the ages of
45 and 65. The transformation of this huge group from consumers and
spenders to savers and investors implies a fairly favorable inflation and
interest rate environment. Combined with the spread of capitalism around
the world, this creates a perfect economic backdrop for financial
companies that we foresee lasting at least through the end of this decade.
We also look at stock selection from the bottom up, or on the basis
of companies' individual merits and strengths. In tough times, the strong
get stronger and the weak go out of business. Having emerged from
twenty years of unprecedented interest rate volatility and the worst
devaluation in real estate since the Depression, well-managed financial
service companies are stronger than ever in terms of capital and
management.
We particularly like companies like Charles Schwab, which has built
a powerful brand name. We also have invested in many entrepreneurs with
proven records as winners and/or industry consolidators, such as Eli Broad
at SunAmerica Inc.; Sanford Weill at Travelers Inc.; and Richard Jenrette
at Equitable Companies. (We would add that many of Berkshire Hathaway's
largest holdings, including American Express, Geico and Wells Fargo, are
high quality financial stocks.)
These are well-run companies with terrific records that are focused
on growing markets, so they meet our first criterion: growth. And as
growth companies in rising markets, we might expect them to sell at lofty
valuations, but it is not so with financial companies, which continue to
sell at relatively low P/Es to the market. To our way of thinking, that
makes them "growth stocks in disguise" that offer a good balance of risk
and reward for the long term.
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.
DAVIS REAL ESTATE FUND
The Davis Real Estate Fund was our best-performing fund for the 12
months ended December 31, 1996. With a total return on net asset value
for Class A shares of 37.05% (see page 24), the fund finished the year well
ahead of the average total return of 30.80% for the 46 real estate funds
tracked by Lipper Analytical Services. (For the year ended December 31,
1996, Class A shares of the fund ranked fourteenth out of 46 real estate
funds tracked by Lipper.)
Where Real Estate Was
- ---------------------
The strong showing of real estate reflects the fact that real estate
is an asset class in the midst of a recovery. Most of us remember the real
estate debacle in the late 1980s and early 1990s. Some called it a
recession; we called it a depression. And make no mistake, that's exactly
what it was. By 1990 everyone knew someone who had been impacted by
the collapse of real estate prices.
Since 1993, however, real estate has been in sharp recovery. Real
estate investment trusts (REITs) -- publicly held companies that own
and/or provide mortgages for commercial, industrial and multifamily
residential properties -- have been able to purchase real estate assets at
attractive prices (in many cases, below replacement costs). Rents have
been rising, and occupancies have increased in most real estate
categories. More important is the fact that the usual lenders of capital -
insurance companies, savings and loans and banks - are not making loans
quite so freely. Lenders are demanding that developers put equity into
their projects, resulting in fewer of the highly speculative projects we
saw in the past.
With the recovery of and changes in the real estate industry, most of
the REITs we see are providing relatively stable earnings, and the average
yield today is around 7%, well above the current 2%-3% dividend yield for
the S&P 500.
Where Real Estate Is Going
- --------------------------
The real estate recovery is picking up steam. According to the
National Association of Real Estate Investment Trusts, the average total
return for REITs in 1996 was 35.75%. But the low-hanging fruit has been
plucked. Several markets have reached equilibrium, most notably the
apartment markets in the Southeast and Southwest United States. We are
finding values in the following:
California It is easy to forget that California is the seventh largest
----------
economy in the world. California's economy lagged that of the U.S.
entering the recession that began in the late '80s and has similarly lagged
the recovery in recent years. One of our larger holdings, Bay Apartment
Communities, owns and develops multi-family apartment complexes in or
near San Francisco, where lack of space and strict zoning regulations have
severely restricted new construction.
Hotels We loosely define full-service hotels this way: If you can
------
get room service, it is a full-service hotel. We like this category of real
estate because properties are being acquired at eighty cents on the dollar.
Implicitly, this means that there is no new construction; why construct
new properties at current costs when you can buy existing properties at a
discount?
With the exception of Las Vegas, there has been no significant
full-service hotel construction in more than five years. Yet demand has
risen consistently, allowing increases in both occupancy and average daily
room rental rates. We see this trend continuing in such REITs as Patriot
American Hospitality, Jameson Inns and Bristol Hotels.
Offices Again, we have focused on this category because of the
-------
supply-demand characteristics. There has been minimal new office
construction in the past years, while demand has continued to improve.
We have seen new leases signed by tenants at significantly higher rates
than in the recent past as vacancy rates have continued to decline. This
combination bodes well for the office category for the next several years.
Besides a favorable supply-demand scenario, we look for another
characteristic we consider very important: great management teams. We
have talked at length to the managements of nearly all the REITs in the
portfolio and toured a majority of the properties. We want to make sure
that the managements are seasoned, shareholder-oriented and personally
committed.
About 90% of the fund's assets are invested in REITs. But that is
not the only place we are finding attractive real estate investments. Of
note is Equitable Companies. Most think of it as an insurance company.
Few realize that it is the largest third-party manager of real estate in the
United States. About 10% of the fund's assets are invested in such real
estate-oriented, non-REIT holdings.
Even after the price increases of 1996, we continue to believe that
real estate as an asset class is nearer the bottom than the top of its
growth curve and prospects for 1997 are very positive.
DAVIS GROWTH OPPORTUNITY FUND
During much of 1996, uncertainty in the stock market drove many
investors to favor large-capitalization stocks, which fared better than
smaller-capitalization issues. The Standard & Poor's 500 Index* of
large-company common stocks advanced 22.96%, including reinvested
dividends, compared to rises of 19.23% for the Standard & Poor's 400
Midcap Index* and 16.55% for the Russell 2000 Index* of small-company
stocks.
Despite the general underperformance and relatively high volatility
of small- and medium-capitalization stocks in 1996, Class A shares of
the Davis Growth Opportunity Fund returned 18.73% (see page 9) on net
asset value for the twelve months ended December 31, 1996.
Throughout the year, the fund had a large commitment to technology
stocks, which proved to be both a burden and a boon. The downdraft in
technology during the first quarter (prompted by investors taking profits
after a strong runup in prices during 1995) affected performance, as did a
second downturn in mid-year, when investors reacted strongly to a
slow-down in semiconductor orders. On the other hand, among the fund's
biggest gainers during the year were semiconductor manufacturers Intel
and Adaptec, the leader in input/output devices.
Other strong performers were consumer products maker Philip
Morris; Pfizer, a pharmaceuticals manufacturer; and AFLAC, a specialty
insurance company.
We took advantage of a resurgence in initial public offerings to
invest in a few new issues, including RAC Financial, a mortgage and
home-improvement lender. In contrast to many recent IPOs, RAC was
inexpensively priced and showed conservative earnings estimates
compared to its growth potential. More importantly, RAC has many of the
attributes we seek for long-term holdings in the fund. In addition to a
strong balance sheet, the company has a savvy management group and has
developed an excellent credit risk management modeling program that
gives it a competitive edge. Shares of our initial purchase in February
1996 rose 145% through year-end.
Less positive were the results for Garden Ridge, a retailer of
candles, picture frames and other home decor items. Bought as an IPO at $
7.50, the stock price increased three-fold early in the year, then dropped
to $8 after the company reported weak summer and fall sales. During the
later part of the decline, we bought additional shares, as the company is
fundamentally strong and has the potential for gains after adjusting its
marketing strategy.
Finally, we continue to keep the portfolio fresh and have used the
general weakness in smaller stocks to replace slow-moving holdings with
new ideas and higher-quality small and mid-cap companies.
Semiconductor and other technology stocks have already started to
appreciate in 1997, and we may take some gains during the year to invest
in a number of new ideas we have identified.
DAVIS CONVERTIBLE SECURITIES FUND
The Davis Convertible Securities Fund rose 29.46% (see page 19) on
net asset value (Class A shares) and 28.21% (see page 20) on net asset
value (Class B shares), compared to a 14.4% gain for the Merrill Lynch
Convertible Securities Index* and a lackluster 3.63% rise for the Lehman
Brothers Aggregate Bond Index*. According to Lipper Analytical Services,
our fund's one-year total returns were good enough to earn first place
among convertible securities funds for the Class A Shares, and second
place for the Class B shares. We take even more pride in the fact that
Lipper also ranked the Class A shares first for the two- and three-year
periods ended December 31, 1996. (There were 42 funds in Lipper's
convertible securities funds category for the year ended December 31,
1996. For the two- and three-year periods ended December 31, 1996,
there were 35 and 27 funds, respectively, in Lipper's convertible
securities funds category.) At Davis Selected Advisers, we strive for this
kind of superior performance over the long run.
Seeking Equity Market Returns With Less Downside
- ------------------------------------------------
Because convertible bonds can be exchanged for common stock of the
issuing company, they have features of both stocks and bonds. Our goal
with the Davis Convertible Securities Fund is to use them to provide a
less risky way of participating in equity market total returns.
The convertible securities we prefer generally will capture 80% of
the underlying equity's appreciation but will have only 50% of the
downside risk should the price of the common stock fall. One area where
we find such convertible securities is among the businesses we know best
at Davis Selected Advisers - namely, financial services. Among our
favorites is SunAmerica, a company that has grown by providing
retirement products to an aging American populace. Another is First Bank
Systems, a regional bank that continues to set the industry standard on
cost control.
The fund's less aggressive nature was also bolstered by our
long-standing emphasis on real estate investment trusts (REITs) such as
Bay Apartment Communities, Centerpoint Properties and Patriot American
Hospitality. Real estate is a separate asset class that is inherently less
volatile than the stock market, provides a substantially higher yield and
still offers the potential for long-term capital appreciation.
Approximately 26% of the fund's assets were invested in real
estate-related securities at year-end.
Since year-end, we have made several changes to the portfolio. The
most significant was an increase in our exposure to energy securities,
more specifically to oil service companies such as Devon Energy and Baker
Hughes. After declining for more than a decade, worldwide demand and
prices for oil have returned to levels that make additional exploration
worthwhile. While exploration itself is a high-risk business, providing
equipment and services for exploration is a fairly stable enterprise with
significant cash flows.
Finally, as we left 1996, a spate of year-end calls on some of our
holdings forced us to convert them to common stock. Although the
fund strives to maintain an investment in convertible securities of at
least 65%, calls on the portfolio's convertible bonds during late December
temporarily reduced this percentage to 57.74%. Proceeds from the sale of
common stocks received in exchange for the called bonds will be
reinvested as soon as is practicable in additional convertible securities
from financial, energy, real estate and other companies with significant
long-term growth potential.
DAVIS GOVERNMENT BOND FUND
In the tough bond environment of 1996, our middle-of-the-road,
long-term approach to managing the Davis Government Bond Fund paid off.
With a one-year total return on net asset value of 3.40% (see page 26),
Class A shares of the Davis Government Bond Fund delivered nearly twice
the 1.72% average total return for the 170 government bond funds tracked
by Lipper Analytical Services.
During the first half of 1996, fears of an accelerated rate of
inflation drove 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 reassuring
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) . 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 25% of
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 37% of the
portfolio.
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 slightly defensive
posture.
*The Standard & Poor's 500 Index, the Dow Jones Industrial Average, the
Standard & Poor's 400 Midcap Index, the Russell 2000 Index, the Merrill
Lynch Convertible Securities Index and the Lehman Brothers Aggregate
Bond Index are unmanaged indices which have no specific investment
objective. Investments cannot be made directly into the indices. The
Standard & Poor's 500 Index, the Dow Jones Industrial Average, the
Standard & Poor's 400 Midcap Index, the Russell 2000 Index and the Merrill
Lynch Convertible Securities Index include net dividends reinvested, but
do not take into account any sales charge.
Sincerely,
Shelby M.C. Davis
President
February 22, 1996
DAVIS SERIES,INC
DAVIS GROWTH OPPORTUNITY FUND
Portfolio Holdings as of December 31, 1996
===============================================================================
Chart omitted. Details of chart are as follows:
Portfolio Makeup % of Fund Assets
---------------- ----------------
Common Stocks 96.1%
Cash & Cash Equivalents 3.9%
Chart omitted. Details of chart are as follows:
Sector Weightings % of Portfolio
----------------- --------------
Manufacturing 2.4%
Capital Equipment 9.2%
Insurance 9.9%
Restaurants 5.1%
Pharmaceuticals 11.0%
Diversified Financial Services 13.5%
Business Services 1.6%
Consumer Products 6.5%
Technology 28.1%
Retail 2.6%
Energy 9.4%
Other 0.7%
% of
Top 10 Holdings Sector Fund Assets
- -------------------------------------------------------------------------------
Intel Corp Electronics 15.99%
Adaptec, Inc. Electronics 10.05%
AFLAC Inc. Insurance 9.49%
Pfizer, Inc. Pharmaceuticals 7.17%
Seitel, Inc. Energy 6.85%
Novellus Systems, Inc. Capital Equipment 6.53%
Rac Financial Group, Inc. Financial Services 5.92%
Philip Morris Cos., Inc. Consumer Products 4.79%
Viragen Inc. Pharmaceuticals 3.27%
Federal National Mortgage Association Financial Services 3.09%
<TABLE>
DAVIS SERIES,INC
Davis GROWTH OPPORTUNITY FUND
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 12/31/96 total net assets)
<CAPTION>
12/31/96 Date of 1st % of
Security Sector Purchase Fund Assets
- -------- ------ -------- -----------
<S> <C> <C> <C>
Arbatax International, Inc. Financial Services 6/3/96 1.36%
Associates First Capital Corp., Class A Financial Services 5/7/96 0.13%
Brown & Sharpe Manufacturing, Class A Manufacturing 10/11/96 1.32%
Chrysler Corp Manufacturing 10/31/96 0.99%
Garden Botanika Inc. Retail 5/21/96 -
IMC Mortgage Co. Financial Services 6/25/96 2.50%
Iomega Corp. Conv., Sub. Notes,
6.75%, 03/15/01 Technology 3/8/96 -
Robert Mondavi, Class A Consumer Products 11/25/96 1.01%
Rac Financial Group, Inc. Financial Services 2/2/96 5.92%
Renaissance Re Holdings Ltd. Insurance 2/28/96 -
Riscorp Inc., Class A Insurance 2/29/96 -
Viragen Inc. Pharmaceuticals 3/20/96 3.27%
</TABLE>
<TABLE>
Positions Closed (1/1/96-12/31/96)
(Gains and losses greater than $500,000 are highlighted)
<CAPTION>
Date of Final
Security Sector Sale Gain/(Loss)
- -------- ------ ---- ----------
<S> <C> <C> <C>
Community Care of America Inc. Health 3/28/96 155,838
Garden Botanika Inc. Retail 9/23/96 (141,958)
Iomega Corp. Conv., Sub. Notes,
6.75%, 03/15/01 Technology 7/30/96 2,488,358
LaserMaster Technologies, Inc. Computer Products 4/2/96 (22,250)
MediSense Inc. Health 3/29/96 562,313
Mercer International Inc. Pulp and Paper 12/12/96 658,385
Micro Component Technology Inc. Capital Equipment 11/5/96 (492,370)
NAI Technologies, Inc. Computer Products 10/28/96 (46,250)
Renaissance Re Holdings Ltd. Insurance 4/18/96 (5,000)
REX Stores Corp. Retail 12/19/96 (689,640)
Riscorp Inc., Class A Insurance 4/30/96 60,875
Teva Pharmaceutical Industries Ltd. Pharmaceuticals 3/22/96 186,737
Transatlantic Holdings Inc. Insurance 5/20/96 223,764
ValuJet Airlines, Inc. Transportation 6/17/96 (1,321,045)
</TABLE>
DAVIS SERIES,INC.
DAVIS GROWTH OPPORTUNITY FUND
Comparison of Davis Series, Inc. - Davis Growth Opportunity Fund Class A shares
and Standard & Poor's 500 Stock Index
===============================================================================
Average Annual Total Return For the Periods ended December 31, 1996.
CLASS A SHARES (This calculation includes an initial sales charge of 4 3/4%.)
One Year........................................................... 13.09%
Life of Class (December 1, 1994
through December 31, 1996)....................................... 25.74%
$10,000 invested over the life of the Class. Let's say you invested
$10,000 in Davis Series, Inc., Class A shares of Davis Growth Opportunity
Fund ("DGOF-A") on December 1, 1994 (inception of Class) and paid a 4
3/4% sales charge. As the chart shows, by December 1, 1996 the value of
your investment would have grown to $16,121 - a 61.21% increase on your
initial investment. For comparison, the Standard and Poor's 500 Stock
Index is also presented on the chart below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Davis Growth
Measurement period Opportunity Fund S&P 500
Class A shares Index
------------------ ------------------- ------------
FYE 12/01/94 9,525 10,000
FYE 12/31/94 9,259 10,254
FYE 12/31/95 13,578 14,103
FYE 12/31/96 16,121 17,339
Standard & Poor's 500 Stock Index 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, but does not
take into account any sales charge.
The performance data for Davis Growth Opportunity 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.
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
Comparison of Davis Series, Inc. - Davis Growth Opportunity Fund Class B
shares and Standard & Poor's 500 Stock Index
==========================================================================
Average Annual Total Return For the Periods ended December 31, 1996.
CLASS B SHARES (This calculation includes any applicable contingent
deferred sales charge.)
One Year................................................ 14.86%
Five Years.............................................. 10.98%
Ten Years............................................... 13.91%
$10,000 invested over ten years. Let's say you invested $10,000 in Davis
Series, Inc., Class B shares of Davis Growth Opportunity Fund ("DGOF-B")
on December 31, 1986. As the chart shows, by December 31, 1996 the
value of your investment would have grown to $36,832 - a 268.32%
increase on your initial investment. For comparison, the Standard and
Poor's 500 Stock Index is also presented on the chart below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Davis Growth
Measurement period Opportunity Fund S&P 500
Class B shares Index
------------------ ------------------- ---------------
FYE 12/31/86 10,000 10,000
FYE 12/31/87 10,455 10,518
FYE 12/31/88 11,555 12,254
FYE 12/31/89 16,183 16,123
FYE 12/31/90 15,420 15,622
FYE 12/31/91 21,731 20,361
FYE 12/31/92 21,107 21,910
FYE 12/31/93 23,461 24,104
FYE 12/31/94 21,486 24,431
FYE 12/31/95 31,250 33,580
FYE 12/31/96 36,832 41,269
Standard & Poor's 500 Stock Index 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, but does not
take into account any sales charge.
The performance data for Davis Growth Opportunity 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.
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
Portfolio Holdings as of December 31, 1996
==========================================================================
Chart omitted. Details of chart are as follows:
Portfolio Makeup % of Fund Assets
---------------- ----------------
Bonds 1.0%
Common Stocks 94.0%
Cash & Cash Equivalents 5.0%
Chart omitted. Details of chart are as follows:
Sector Weightings % of Portfolio
----------------- --------------
Restaurants 2.1%
Diversified Financial Services 22.4%
Consumer Products 4.7%
Banking 22.6%
Manufacturing 2.0%
Energy 3.7%
Insurance 32.6%
Technology 7.3%
Other 2.6%
% of
Top 10 Holdings Sector Fund Assets
- ----------------------------------------------------------------------------
Travelers Group Inc. Financial Services 4.23%
Intel Corp. Technology 4.07%
General RE Corp. Insurance 4.06%
American Express Co. Financial Services 3.61%
Morgan Stanley Group Inc. Financial Services 3.11%
SunAmerica, Inc. Financial Services 3.10%
Transatlantic Holdings, Inc. Insurance 2.99%
Philip Morris Cos., Inc. Consumer Products 2.92%
TCF Financial Corp. Banks and Savings & Loan
Associations 2.87%
Progressive Corp. (Ohio) Insurance 2.62%
<TABLE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
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 12/31/96 total net assets)
<CAPTION>
Date of 1st % of 12/31/96
Security Sector Purchase Fund Assets
<S> <C> <C> <C>
Adobe Systems Inc. Technology 5/7/96 -
Allied Group, Inc. Insurance 10/7/96 1.64%
Allmerica Property & Casuality Corp. Insurance 8/22/96 -
Allstate Corp Insurance 10/9/96 1.50%
Applied Materials, Inc. Technology 3/1/96 -
Archer-Daniels-Midland Co. Agriculture 9/30/96 0.95%
Associates First Capital Corp. Class A Financial Services 5/7/96 -
Cincinnati Financial Corp. Insurance 6/4/96 1.46%
Cincinnati Financial Corp., Sr.
Deb., 5.50%, 05/01/02 Insurance 10/18/96 0.94%
Dean Witter, Discover & Co. Financial Services 2/8/96 1.14%
Executive Risk, Inc. Insurance 1/18/96 0.64%
General Re Corp. Insurance 10/4/96 4.06%
Guinness PLC ORD Beverages 2/21/96 1.55%
Halliburton Co. Energy 10/1/96 1.04%
Komag Inc. Technology 12/13/96 1.17%
Martin Marietta Materials Inc. Building Materials 10/17/96 1.51%
Novellus Systems, Inc. Technology 4/2/96 1.64%
Nuernberger Beteil AG AKT LIT A Insurance 10/25/96 0.70%
Philip Morris Cos., Inc. Consumer Products 11/4/96 2.92%
Travelers/Aetna Property Casuality Corp.
Class A Insurance 4/22/96 -
</TABLE>
<TABLE>
Positions Closed (1/1/96-12/31/96)
(Gains and losses greater than $500,000 are highlighted)
<CAPTION>
Date of Final Gain/
Security Sector Sale (Loss)
- -------- ------ ------------- -----------
<S> <C> <C> <C>
Adobe Systems Inc. Technology 9/20/96 (222,769)
Allmerica Property & Casuality Corp. Insurance 12/18/96 78,360
Amerada Hess Corp. Energy 7/9/96 219,456
Applied Materials, Inc. Technology 6/17/96 (22,576)
Associates First Capital Corp. Class A Financial Services 5/24/96 27,191
Cirrus Logic, Inc. Computer Products 4/2/96 135,313
Duracraft Corp. Consumer Products 2/12/96 946,875
Electronic Arts Inc. Computer Products 5/7/96 179,999
Equitable of Iowa Cos. Financial Services 10/18/96 250,843
NAC RE Corp Insurance 10/17/96 286,812
Republic New York Corp. Banks and Savings & Loan Associations 10/17/96 760,928
The Seagram Co. Ltd. Consumer Products 10/2/96 65,019
Transport Holdings Inc., Class A Transportation 3/1/96 6,663
Travelers/Aetna Property Casuality Corp. ClassA Insurance 5/7/96 6,891
United Asset Management Corporation Financial Services 12/17/96 261,327
</TABLE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
Comparison of Davis Series, Inc. - Davis Financial Fund Class A shares and
Standard & Poor's 500 Stock Index
==========================================================================
Average Annual Total Return For the Periods ended December 31, 1996.
CLASS A SHARES (This calculation includes an initial sales charge of 4 3/4%.)
One Year..................................................... 25.28%
Life of Class (May 1, 1991 through December 31, 1996)........ 23.93%
$10,000 invested over the life of the Fund. Let's say you invested $10,000
in Davis Series, Inc., Class A shares of Davis Financial Fund ("DFF-A") on
May 1, 1991 (inception of Fund) and paid a 4 3/4% sales charge. As the
chart shows, by December 31, 1996 the value of your investment would
have grown to $33,780 - a 237.80% increase on your initial investment.
For comparison, the Standard and Poor's 500 Stock Index is also presented
on the chart below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Measurement period Davis Financial Fund S&P 500
Class A shares Index
------------------ ------------------- -------------
FYE 05/01/91 9,525 10,000
FYE 12/31/91 11,733 11,359
FYE 12/31/92 15,567 12,224
FYE 12/31/93 17,927 13,448
FYE 12/31/94 17,068 13,630
FYE 12/31/95 25,689 18,734
FYE 12/31/96 33,780 23,024
Standard & Poor's 500 Stock Index is an unmanaged index which has no
specific investment objective. The index used includes net dividends
reinvested, but does not take into account any sales charge. Investments
cannot be made directly into the index.
The performance data for Davis Financial 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.
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
Comparison of Davis Series, Inc. - Davis Financial Fund Class B shares and
Standard & Poor's 500 Stock Index
Average Annual Total Return For the Periods ended December 31, 1996.
===============================================================================
CLASS B SHARES (This calculation includes any applicable contingent
deferred sales charge.)
One Year....................................................... 27.29%
Life of Class (December 27, 1994 through December 31, 1996).... 37.32%
$10,000 invested over the life of the Class. Let's say you invested
$10,000 in Davis Series, Inc., Class B shares of Davis Financial Fund
("DFF-B") on December 27, 1994 (inception of Class). As the chart shows,
by December 31, 1996 the value of your investment (less applicable
contingent deferred sales charges) would have grown to $18,938 - a
89.38% increase on your initial investment. For comparison, the Standard
and Poor's 500 Stock Index is also presented on the chart below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Measurement period Davis Financial Fund S&P 500
Class B shares Index
------------------ ------------------- ---------------
FYE 12/27/94 10,000 10,000
FYE 12/31/94 9,910 9,934
FYE 12/31/95 14,766 13,663
FYE 12/31/96 18,938 16,798
Standard & Poor's 500 Stock Index is an unmanaged index which has no
specific investment objective. The index used includes net dividends
reinvested, but does not take into account any sales charge. Investments
cannot be made directly into the index.
The performance data for Davis Financial 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.
DAVIS SERIES INC.
DAVIS CONVERTIBLE SECURITIES FUND
Portfolio Holdings as of December 31, 1996
===============================================================================
Chart omitted. Details of chart are as follows:
Portfolio Makeup % of Fund Assets
---------------- ----------------
Preferred Stocks 31.5%
Bonds 26.2%
Common Stocks 40.3%
Cash & Cash Equivalents 2.0%
Chart omitted. Details of chart are as follows:
Sector Weightings % of Portfolio
----------------- --------------
[S] [C]
Energy 5.9%
Insurance 20.5%
Manufacturing 1.0%
Real Estate 26.5%
Diversified Financial Services 3.5%
Consumer Products 2.2%
Banking 18.2%
Technology 2.7%
Retail 7.2%
Other 12.3%
<TABLE>
<CAPTION>
% of
Top 10 Holdings Sector Fund Assets
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First Bank Systems, Inc. Banks and Savings &
Loan Associations 5.86%
Morgan Stanley Group Inc. - Citicorp, Conv. Pfd Banks and Savings &
Loan Associations 5.82%
Equitable Companies Inc., Conv. Sub. Deb., 6.125% 12/15/24 Insurance 5.58%
Vornado Realty Trust Retail 4.24%
Travelers Group Inc. Insurance 3.60%
Sunamerica Inc., Depository Shares, $2.78, Ser D Conv. Pfd Insurance 3.34%
Bay Apartment Communities, Inc. Multi-Family Housing 3.31%
Crescent Real Estate Equity Industrial 3.18%
American Travelers Corp., Conv. Sub. Deb., 6.50% 10/1/05 Insurance 2.85%
Centerpoint Properties Corp. Industrial 2.72%
</TABLE>
<TABLE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
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>
AirTouch Communications, Inc., 4.25%,
Ser. C Conv. Pfd Communications 9/12/96 1.19%
American Travelers Corp., Conv. Sub.
Deb., 6.50% 10/1/05 Insurance 4/15/96 2.85%
Aon Corporation Insurance 10/31/96 -
Bank of New York Co. Banks and Savings
& Loan Associations 8/15/96 2.67%
Cincinnati Financial Corp.
Conv. Deb., 5.50% 10/25/96 Insurance 10/22/96 1.87%
Morgan Stanley Group Inc. - Citicorp, Banks and Savings
Conv. Pfd & Loan Associations 2/1/96 5.82%
Crescent Real Estate Equity Industrial 9/26/96 3.18%
Debartolo Realty Corp. Retail 4/10/96 -
Delta Airlines, Inc. Transportation 7/11/96 -
Devon Financial Trust Financial 10/31/96 1.30%
Valhi Inc., Conv. Sub. Deb., 0.01% 10/20/07 Management Services 10/24/96 0.60%
First Bank System, Inc. Banks and Savings
& Loan Associations 12/27/96 5.86%
General Instruments Corp., Conv. Jr.
Sub., 5.00%, 6/15/00 Communications 6/21/96 -
Hilton Hotel Corp., Conv. Sub.
Note, 5.00% 5/15/06 Hotels 5/10/96 1.46%
Home Depot Inc., Conv. Sub.
Deb., 3.25% 10/1/01 Retail 9/27/96 0.31%
Host Marriott Services, Inc. Hotels & Lodging 1/2/96 -
Insignia Financial Group Financial 10/28/96 0.33%
Irvine Apartment Communities, Inc. Multi-Family Housing 4/19/96 0.70%
James River Corp. Pulp & Paper 2/28/96 -
Loral Space & Communications, Inc.,
6.00% Conv. Pfd Communications 11/1/96 1.44%
Masco Corp., Conv. Sub. Deb., 5.25% 2/15/12 Building & Home Products 12/27/96 1.30%
Noble Affiliates, Inc. Energy 11/1/96 2.10%
Noble Drilling Corp. Oil & Gas 6/19/96 1.00%
Orbital Sciences Corp. Aerospace 8/14/96 -
Phycor Inc., Conv. Sub. Deb., 4.50% 2/15/03 Medical Services 2/7/96 0.32%
Public Storage, Inc. Self Storage 5/7/96 2.27%
RJR Nabisco Holdings Consumer Products 11/11/96 2.17%
Rouse Co., Conv. Sub. Deb., 5.75% 7/23/02 Retail 9/12/96 1.21%
Sanifill, Inc. Conv. Sub. Deb. 5.00% 3/1/06 Industrial 3/4/96 -
</TABLE>
<TABLE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
Portfolio Activity January 1, 1996 through December 31, 1996 - Continued
==============================================================================================================================
New Positions Added (1/1/96-12/31/96) - Continued
(Highlighted Positions are those greater than 0.99% of Total Assets)
<CAPTION>
12/31/96 Date of 1st % of
Security Sector Purchase Fund Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Security Capital Industrial 7% Pfd Industrial 2/24/96 0.70%
Security Capital Pacific Trust Ser. A Conv. Pfd Multi-Family Housing 5/10/96 0.98%
Simon DeBartolo Group Inc. Industrial 8/12/96 -
SunAmerica, Inc.,Depository Shares,
$2.78, Ser. D Conv. Pfd Insurance 1/2/96 3.34%
Tenet Healthcare Corp. Sub. Notes 6% 12/1/05 Industrial 1/5/96 -
Thermo Fibergen, Inc. Pulp & Paper 9/13/96 -
Travelers Group, Inc. Insurance 7/30/96 3.60%
U S Office Products Co., Conv. Sub.
Note, 5.50% 2/1/01 Office Supplies 2/7/96 1.26%
Unocal Corp., $3.50, Conv. Pfd Energy 9/5/96 1.64%
</TABLE>
<TABLE>
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>
Allegheny Ludlum Corp., Conv.,
5.875% 3/15/02 Metals & Mining 1/2/96 (41,745)
Amoco Corp. Energy 12/30/96 250,882
AMR Corp., Conv. Sub. Qtrly.
Income Cap. Sec's., 6.125% 11/1/24 Transportation 6/30/96 49,535
Aon Corporation Insurance 11/5/96 66,294
Barnett Banks, Inc. Banks and Savings
& Loan Associations 12/30/96 510,670
Camden Property Trust Apartments 10/24/96 62,838
Chelsea GCA Realty Inc. Retail 3/11/96 20,640
Citicorp, $5.375, Ser. 13 Conv. Pfd Banks and Savings
& Loan Associations 2/1/96 1,781,653
Delta Airlines, Inc. Transportation 10/2/96 201,617
Equitable Cos. Inc. Insurance 4/16/96 25,407
Gables Residential Trust Multi-Family Housing 3/11/96 29,326
General Instruments Corp., Conv. Jr.
Sub., 5.00%, 6/15/00 Communications 9/12/96 16,491
Host Marriott Corp. Hotels & Lodging 11/21/96 352,630
Host Marriott Services, Inc. Hotels & Lodging 1/9/96 12,494
James River Corp. Pulp & Paper 2/29/96 1,936
James River Corp. of Virginia, 9.00%,
Ser. P Conv. Pfd Pulp & Paper 9/12/96 34,389
</TABLE>
<TABLE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
Portfolio Activity January 1, 1996 through December 31, 1996 - Continued
==========================================================================================================================
Positions Closed (1/1/96-12/31/96) - Continued
(Gains and losses greater than $500,000 are highlighted)
<CAPTION>
Stock/Bond Sector Date of Final Sale Gain/(Loss)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Legg Mason, Inc., Conv. Sub.
Deb., 5.25% 5/1/03 Financial Services 5/3/96 92,125
Legg Mason, Inc. Financial Services 1/17/96 77,927
NAC Re Corp. Insurance 7/17/96 8,077
Oasis Residential, Inc. Multi-Family Housing 5/21/96 (52,468)
Orbital Sciences Corp. Aerospace 10/25/96 118,042
Public Storage, Inc. Self Storage 5/10/96 220,599
Riverwood International Corp., Conv.
Sub. Note, 6.75% 9/15/03 Pulp & Paper 5/10/96 44,948
Rouse Co., 6.50%, Ser. A Conv. Pfd Real Estate 9/12/96 173,664
Sanifill, Inc. Conv. Sub. Deb. 5.00% 3/1/06 Industrial 4/12/96 (14,375)
Simon DeBartolo Group Inc. Industrial 11/5/96 57,103
Sovran Self Storage, Inc. Self Storage 11/5/96 102,986
Storage Trust Realty Self Storage 11/5/96 32,925
SunAmerica, Inc. Insurance 6/11/96 347,687
Tenet Healthcare Corp. Sub. Notes 6% 12/1/05 Industrial 1/5/96 12,500
Texas Instruments, Inc., Conv. Sub.
Deb., 2.75% 9/29/02 Electronics 3/14/96 105,628
Thermo Fibergen, Inc. Pulp & Paper 9/13/96 6,945
Transport Holdings, Inc., Class A Insurance 1/9/96 1,426
VSLI Technology Inc., Conv. Sub.
Note, 8.25% 10/1/05 Electronics 11/21/96 (6,000)
</TABLE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
Comparison of Davis Series, Inc. - Davis Convertible Securities Fund Class
A shares and Standard & Poor's 500 Stock Index
=============================================================================
Average Annual Total Return For the Periods ended December 31, 1996.
CLASS A SHARES (This calculation includes an initial sales charge of 4 3/4%.)
One Year.......................................................... 23.30%
Life of Class (May 1, 1992
through December 31, 1996)...................................... 15.12%
$10,000 invested over the life of the Fund. Let's say you invested $10,000
in Davis Series, Inc., Class A shares of Davis Convertible Securities Fund
("DCSF-A") on May 1, 1992 (inception of Fund) and paid a 4 3/4% sales
charge. As the chart shows, by December 31, 1996 the value of your
investment would have grown to $19,308 - a 93.08% increase on your
initial investment. For comparison, the Standard and Poor's 500 Stock
Index is also presented on the chart below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Davis Convertible
Measurement period Securities Fund S&P 500
Class A shares Index
------------------ ------------------- ---------------
FYE 05/01/92 9,525 10,000
FYE 12/31/92 10,764 10,723
FYE 12/31/93 12,621 11,796
FYE 12/31/94 11,773 11,956
FYE 12/31/95 14,914 16,434
FYE 12/31/96 19,308 20,197
Standard & Poor's 500 Stock Index is an unmanaged index which has no
specific investment objective. The index used includes net dividends
reinvested, but does not take into account any sales charge. Investments
cannot be made directly into the index.
The performance data for Davis Convertible Securities 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.
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
Comparison of Davis Series, Inc. - Davis Convertible Securities Fund Class
B shares and Standard & Poor's 500 Stock Index
=============================================================================
Average Annual Total Return For the Periods ended December 31, 1996.
CLASS B SHARES (This calculation includes any applicable contingent
deferred sales charge.)
One Year.......................................................... 25.12%
Life of Class (February 3, 1995
through December 31, 1996)...................................... 25.30%
$10,000 invested over the life of the Class. Let's say you invested
$10,000 in Davis Series, Inc., Class B shares of Davis Convertible
Securities Fund ("DCSF-B") on February 3, 1995 (inception of Class). As
the chart shows, by December 31, 1996 the value of your investment (less
applicable contingent deferred sales charges) would have grown to
$15,384 - a 53.84% increase on your initial investment. For comparison,
the Standard and Poor's 500 Stock Index is also presented on the chart
below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Davis Convertible
Measurement period Securities Fund S&P 500
Class B shares Index
------------------ ------------------- ---------------
FYE 02/03/95 10,000 10,000
FYE 12/31/95 12,233 13,176
FYE 12/31/96 15,384 16,199
Standard & Poor's 500 Stock Index is an unmanaged index which has no
specific investment objective. The index used includes net dividends
reinvested, but does not take into account any sales charge. Investments
cannot be made directly into the index.
The performance data for Davis Convertible Securities 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.
DAVIS SERIES, INC.
Davis REAL ESTATE FUND
Portfolio Holdings as of December 31, 1996
=============================================================================
Chart omitted. Details of chart are as follows:
Portfolio Makeup % of Fund Assets
---------------- ----------------
Preferred Stocks 1.2%
Common Stocks 89.8%
Bonds 1.6%
Cash & Cash Equivalents 7.4%
Chart omitted. Details of chart are as follows:
Sector Weightings % of Portfolio
----------------- --------------
Insurance 0.9%
Real Estate 84.0%
Hotels & Lodging 14.0%
Other 1.1%
<TABLE>
<CAPTION>
% of
Top 10 Holdings Sector Fund Assets
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Cali Realty Corp. Office Space (REIT) 5.38%
Patriot American Hospitality Inc.(REIT) Hotels & Lodging (REIT) 5.20%
Bay Apartment Communities, Inc. Apartments (REIT) 4.03%
Crescent Real Estate Equities, Inc. Office Space (REIT) 3.96%
Reckson Associates Realty Corp. Industrial (REIT) 3.59%
Simon DeBartolo Group Inc. Industrial (REIT) 3.47%
Public Storage, Inc. Storage (REIT) 3.34%
Essex Property Trust Industrial (REIT) 3.01%
Centerpoint Properties Corp. Industrial (REIT) 3.01%
Vornado Realty Trust Retail (REIT) 2.84%
</TABLE>
<TABLE>
DAVIS SERIES, INC.
Davis REAL ESTATE FUND
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>
12/31/96 Date of 1st % of
Security Sector Purchase Fund Assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ambassador Apartments Inc. Apartments (REIT) 10/29/96 0.98%
Arden Realty Group, Inc. Office Space (REIT) 10/3/96 -
Bedford Property Investments Industrial (REIT) 11/7/96 0.94%
Boykin Lodging Co. Hotels & Lodgig 10/30/96 -
CarrAmerican Realty Corp. Industrial (REIT) 7/18/96 1.42%
Developers Diversified Realty Industrial (REIT) 7/9/96 0.90%
Essex Property Trust Industrial (REIT) 8/8/96 3.01%
FelCor Suites Hotels, Inc. Hotels & Lodging (REIT) 2/13/96 2.01%
First Industrial Realty Trust Industrial (REIT) 10/22/96 1.48%
Heartstream, Inc. Medical Instruments 1/31/96 -
Homestead Village Properties Inc. Hotels & Lodging(REIT) 11/13/96 0.14%
Homestead Village Properties Inc. Warrants Hotels & Lodging 11/13/96 0.00%
Host Marriott Services Corp. Hotels & Lodging 1/2/96 -
Interstate Hotels Company Hotels & Lodging 6/19/96 -
Jameson Inns Inc. Hotels & Lodging 12/17/96 1.10%
Kaufman & Broad Home Corp. Construction 1/31/96 0.40%
Mid-America Apartment Communities, Inc. Apartments(REIT) 1/26/96 -
Parkway Properties Inc. Apartments (REIT) 12/18/96 0.51%
Prentiss Properties Trust Office Space (REIT) 10/17/96 -
Regency Realty Corp. Retail (REIT) 6/12/96 1.07%
Simon De Bartolo Group, Inc. Industrial (REIT) 5/7/96 3.47%
Spieker Properties Group Industrial (REIT) 12/19/96 0.58%
Starwood Lodging Trust Hotels & Lodging (REIT) 8/2/96 1.27%
Storage USA Inc. Storage (REIT) 3/1/96 0.61%
Urban Shopping Centers Inc. Retail (REIT) 11/20/96 1.41%
Weeks Corp. Industrial (REIT) 6/5/96 0.97%
</TABLE>
<TABLE>
Positions Closed (1/1/96-12/31/96)
<CAPTION>
Security Sector Date of Final Sale Gain/(Loss)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Apartment Investment & Management Co.,
Class A Apartments (REIT) 6/25/96 (10,612)
Arden Realty Group, Inc. Office Space (REIT) 10/4/96 24,393
Boykin Lodging Co. Hotels & Lodging 10/30/96 (910)
Capstead Mortgage Corp. Mortgage (REIT) 7/10/96 226,651
Capstone Capital Corp. Healthcare (REIT) 7/3/96 41,849
Heartstream, Inc. Medical Instruments 1/31/96 1,500
Host Marriott Services Corp. Hotels & Lodging 1/9/96 5,343
</TABLE>
<TABLE>
DAVIS SERIES, INC.
Davis REAL ESTATE FUND
Portfolio Activity - January 1, 1996 through December 31, 1996 -Continued
============================================================================================================================
Positions Closed (1/1/96-12/31/96) - Continued
<CAPTION>
Secutity Sector Date of Final Sale Gain/(Loss)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interstate Hotels Company Hotels & Lodging 6/28/96 4,071
Merry Land & Investment Co., Inc. Apartments (REIT) 8/16/96 46,307
Merry Land & Investment Co., Inc. $1.75,
Ser. A Conv. Pfd. Apartments (REIT) 6/28/96 1,365
Mid-America Apartment Communities, Inc. Apartments (REIT) 9/16/96 (9,530)
Prentiss Properties Trust Office Space (REIT) 10/17/96 11,893
Shurgard Storage Centers Inc., Class A Storage (REIT) 8/1/96 44,776
</TABLE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
Comparison of Davis Series, Inc. - Davis Real Estate Fund Class A shares
and Standard & Poor's 500 Stock Index
=============================================================================
Average Annual Total Return For the Period ended December 31, 1996.
CLASS A SHARES (This calculation includes an initial sales charge of 4 3/4%.)
One Year........................................................ 30.54%
Life of Class (January 3, 1994
through December 31, 1996)...................................... 18.50%
$10,000 invested over the life of the Fund. Let's say you invested $10,000
in Davis Series, Inc., Class A shares of Davis Real Estate Fund ("DREF-A")
on January 3, 1994 (inception of Fund) and paid a 4 3/4% sales charge. As
the chart shows, by December 31, 1996 the value of your investment
would have grown to $16,625 - a 66.25% increase on your initial
investment. For comparison, the Standard and Poor's 500 Stock Index is
also presented on the chart below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Measurement period Davis Real Estate Fund S&P 500
Class A shares Index
------------------ ------------------- -------------
FYE 01/02/94 9,525 10,000
FYE 12/31/94 10,306 10,136
FYE 12/31/95 12,131 13,931
FYE 12/31/96 16,625 17,121
Standard & Poor's 500 Stock Index is an unmanaged index which has
no specific investment objective. The index used includes net dividends
reinvested, but does not take into account any sales charge. Investments
cannot be made directly into the index.
The performance data for Davis Real Estate 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.
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
Comparison of Davis Series, Inc. - Davis Real Estate Fund Class B shares
and Standard & Poor's 500 Stock Index
==========================================================================
Average Annual Total Return For the Period ended December 31, 1996.
CLASS B SHARES (This calculation includes any applicable contingent
deferred sales charge.)
One Year........................................................ 32.75%
Life of Class (December 27, 1994
through December 31, 1996)...................................... 25.10%
$10,000 invested over the life of the Class. Let's say you invested
$10,000 in Davis Series, Inc., Class B shares of Davis Real Estate Fund
("DREF-B") on December 27, 1994 (inception of Class). As the chart
shows, by December 31, 1996 the value of your investment (less
applicable contingent deferred sales charges) would have grown to
$15,997 - a 59.97% increase on your initial investment. For comparison,
the Standard and Poor's 500 Stock Index is also presented on the chart
below.
Graph omitted- details of graph are as follows:
Davis Series, Inc. -
Measurement period Davis Real Estate Fund S&P 500
Class B shares Index
------------------ ------------------- -------------
FYE 12/27/94 10,000 10,000
FYE 12/31/94 10,089 9,934
FYE 12/31/95 11,784 13,663
FYE 12/31/96 15,997 16,798
Standard & Poor's 500 Stock Index is an unmanaged index which has
no specific investment objective. The index used includes net dividends
reinvested, but does not take into account any sales charge. Investments
cannot be made directly into the index.
The performance data for Davis Real Estate 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.
DAVIS SERIES, INC.
DAVIS GOVERNMENT BOND FUND
Comparison of Davis Series, Inc. - Davis Government Bond Fund Class A
shares and the Lehman Brothers Intermediate Term U.S. Treasury
Securities Index
=============================================================================
Average Annual Total Return For the Periods ended December 31, 1996.
CLASS A SHARES (This calculation includes an initial sales charge of 4 3/4%.)
One Year........................................................ (1.53%)
Life of Class (December 1, 1994
through December 31, 1996)...................................... 4.81%
$10,000 invested over the life of the Class. Let's say you invested
$10,000 in Davis Series, Inc., Class A shares of Davis Government Bond
Fund ("DGBF-A") on December 1, 1994 (inception of Class) and paid a 4
3/4% sales charge. As the chart shows, by December 31, 1996 the value of
your investment would have grown to $11,029 - a 10.29% 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:
Davis Series, Inc. - Lehman Brothers
Davis Government Intermediate Term U.S.
Measurement period Bond Fund Treasury Securities
Class A shares Index
------------------ ------------------- ---------------------
FYE 12/01/94 9,525 10,000
FYE 12/31/94 9,539 10,032
FYE 12/31/95 10,666 11,485
FYE 12/31/96 11,029 11,941
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 Davis Government Bond 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.
DAVIS SERIES, INC.
DAVIS GOVERNMENT BOND FUND
Comparison of Davis Series, Inc. - Davis Government Bond Fund Class B
shares and the Lehman Brothers Intermediate Term U.S. Treasury
Securities Index
===============================================================================
Average Annual Total Return For the Periods ended December 31, 1996.
CLASS B SHARES (This calculation includes any applicable contingent
deferred sales charge.)
One Year............................................................. (0.11%)
Five Years........................................................... 3.84%
Ten Years............................................................ 5.33%
$10,000 invested over ten years. Let's say you invested $10,000 in Davis
Series, Inc., Class B shares of Davis Government Bond Fund ("DGBF-B") on
December 31, 1986. As the chart shows, by December 31, 1996 the value
of your investment would have grown to $16,818 - an 68.18% 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:
Davis Series, Inc. - Lehman Brothers
Davis Government Intermediate Term U.S.
Measurement period Bond Fund Treasury Securities
Class B shares Index
------------------ ------------------- ---------------
FYE 12/31/86 10,000 10,000
FYE 12/31/87 10,026 10,361
FYE 12/31/88 10,599 11,024
FYE 12/31/89 11,601 12,422
FYE 12/31/90 12,310 13,610
FYE 12/31/91 13,832 15,534
FYE 12/31/92 14,406 16,617
FYE 12/31/93 14,938 17,989
FYE 12/31/94 14,793 17,621
FYE 12/31/95 16,363 20,173
FYE 12/31/96 16,818 20,973
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 Davis Government Bond 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>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT december 31, 1996
DAVIS GROWTH OPPORTUNITY FUND
<CAPTION>
VALUE
SHARES (NOTE 1)
================================================================================================================================
COMMON STOCK - (96.09%)
BUSINESS SERVICES - (1.51%)
<S> <C> <C>
113,000 Thomas Group, Inc.<F1>.......................................................................... $ 1,002,875
-------------
CAPITAL EQUIPMENT - (8.87%)
31,200 ASM Lithography Holdings N.V.<F1>............................................................... 1,556,100
80,100 Novellus Systems, Inc.<F1>...................................................................... 4,340,419
-------------
5,896,519
-------------
CONSUMER PRODUCTS - (6.21%)
28,300 Philip Morris Cos., Inc......................................................................... 3,187,287
18,500 Robert Mondavi, Class A<F1>..................................................................... 670,625
135,000 Score Board, Inc.<F1>........................................................................... 270,000
-------------
4,127,912
-------------
ELECTRONICS - (26.96%)
166,800 Adaptec, Inc.<F1>............................................................................... 6,682,425
81,200 Intel Corp...................................................................................... 10,632,125
9,600 Texas Instruments, Inc.......................................................................... 612,000
-------------
17,926,550
-------------
ENERGY - (9.05%)
22,700 Anadarko Petroleum Corp......................................................................... 1,469,825
113,800 Seitel, Inc.<F1>................................................................................ 4,552,000
-------------
6,021,825
-------------
FINANCIAL SERVICES - (13.00%)
132,000 Arbatax International, Inc.<F1>................................................................. 904,200
2,000 Associates First Capital Corp................................................................... 88,250
55,200 Federal National Mortgage Association........................................................... 2,056,200
50,000 IMC Mortgage Co.<F1>............................................................................ 1,662,500
189,100 Rac Financial Group, Inc.<F1>................................................................... 3,935,644
-------------
8,646,794
-------------
INSURANCE - (9.49%)
147,675 AFLAC Inc....................................................................................... 6,313,106
-------------
MANUFACTURING - (2.31%)
62,675 Brown & Sharpe Manufacturing, Class A........................................................... 877,450
20,000 Chrysler Corp................................................................................... 660,000
-------------
1,537,450
-------------
PHARMACEUTICALS - (10.58%)
2,000 Johnson & Johnson............................................................................... 99,500
57,500 Pfizer, Inc..................................................................................... 4,765,312
415,000 Viragen Inc.<F1>................................................................................ 2,172,266
-------------
7,037,078
-------------
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT December 31, 1996
DAVIS GROWTH OPPORTUNITY FUND - Continued
VALUE
SHARES/PRINCIPAL (NOTE 1)
================================================================================================================================
COMMON STOCK - Continued
RESTAURANT - (4.94%)
204,000 DAKA International, Inc.<F1>.................................................................... $ 1,950,750
56,000 IHOP Corp.<F1>.................................................................................. 1,337,000
-------------
3,287,750
-------------
RETAIL - (2.51%)
192,000 Garden Ridge Corp.<F1>.......................................................................... 1,668,000
-------------
TELECOMMUNICATIONS - (0.66%)
70,000 TII Industries, Inc.<F1>........................................................................ 437,500
-------------
Total Common Stock - (identified cost $31,317,120)......................................... 63,903,359
-------------
SHORT TERM - (3.70%)
$ 2,460,000 State Street Bank and Trust Company Repurchase Agreement, 5.50%, 01/02/97,
dated 12/31/96, repurchase value of $2,460,752 (collateralized by
$2,510,000 par value U.S. Treasury Notes, 4.75%, 08/31/98, market
value $2,510,178) (identified cost $2,460,000)................................................ 2,460,000
-------------
TOTAL INVESTMENTS _ (99.79%) - (identified cost $33,777,120) -<F12>............................. 66,363,359
OTHER ASSETS LESS LIABILITIES - (0.21%)......................................................... 137,603
-------------
NET ASSETS - (100%)........................................................................ $ 66,500,962
=============
<FN>
<F1> Non-Income Producing Security.
<F2> Aggregate cost for Federal Income Tax purposes is $33,777,120. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income Tax purposes
is as follows:
Unrealized appreciation.......................................................................... $ 35,448,897
Unrealized depreciation.......................................................................... (2,862,658)
-------------
Net unrealized appreciation................................................................. $ 32,586,239
=============
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT December 31, 1996
DAVIS GOVERNMENT BOND FUND
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
================================================================================================================================
FEDERAL HOME LOAN MORTGAGE CORPORATION - MORTGAGE POOLS - (14.50%)
<S> <C> <C>
$ 46,654 9.00%, 07/01/01................................................................................. $ 48,025
449,118 8.50%, 08/01/01................................................................................. 466,099
106,831 9.00%, 08/01/02................................................................................. 110,705
37,400 8.50%, 12/01/02................................................................................. 37,716
28,281 9.00%, 06/01/03................................................................................. 29,113
121,939 9.25%, 01/01/04................................................................................. 126,475
1,111,000 6.50%, 01/01/04................................................................................. 1,101,623
6,690 9.25%, 11/01/07................................................................................. 6,900
127,953 9.25%, 09/01/08................................................................................. 134,551
105,805 10.00%, 07/01/09................................................................................. 113,278
1,241,663 6.50%, 07/01/11................................................................................. 1,219,165
50,984 9.00%, 07/01/16................................................................................. 54,076
257,010 9.00%, 08/01/16................................................................................. 271,146
278,177 9.00%, 01/01/17................................................................................. 294,954
200,735 9.00%, 03/01/17................................................................................. 211,652
77,061 9.00%, 08/01/17................................................................................. 81,757
41,834 9.50%, 12/01/19................................................................................. 45,037
146,358 9.50%, 02/01/20................................................................................. 156,725
-------------
Total FHLMC - (identified cost $4,519,851)............................................... 4,508,997
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - MORTGAGE POOLS - (2.87%)
20,202 12.00%, 12/01/00................................................................................. 21,149
86,052 9.75%, 02/01/04................................................................................. 89,736
184,888 10.25%, 10/01/09................................................................................. 201,961
66,783 10.75%, 07/01/13................................................................................. 74,599
317,510 9.25%, 10/01/16................................................................................. 340,727
113,150 8.078%, 09/01/19<F2>............................................................................. 116,952
43,898 7.72%, 03/01/24<F2>............................................................................. 46,253
-------------
Total FNMA - (identified cost $868,661).................................................. 891,377
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - MORTGAGE POOLS - (19.37%)
57,055 6.00% with various maturities to 2024........................................................... 58,111
43,967 6.50% with various maturities to 2023........................................................... 44,909
1,224,743 7.00% with various maturities to 2026........................................................... 1,193,365
90,966 8.50% with various maturities to 2005........................................................... 93,895
526,924 8.50% with various maturities to 2002........................................................... 551,627
902,255 8.50% with various maturities to 2022........................................................... 939,753
39,151 9.00% with various maturities to 2002........................................................... 40,375
131,714 9.00% with various maturities to 2016........................................................... 140,998
634,413 9.00% with various maturities to 2017........................................................... 679,215
180,205 9.25% with various maturities to 2016........................................................... 191,327
54,856 10.00% with various maturities to 2000........................................................... 57,753
59,659 10.00% with various maturities to 2001........................................................... 62,810
117,548 10.00% with various maturities to 2020........................................................... 127,834
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT December 31, 1996
DAVIS GOVERNMENT BOND FUND - Continued
VALUE
PRINCIPAL (NOTE 1)
================================================================================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - MORTGAGE POOLS- Continued
$ 96,597 10.25% with various maturities to 2016........................................................... $ 105,034
138,897 10.50% with various maturities to 2013........................................................... 152,266
16,363 10.50% with various maturities to 2015........................................................... 18,143
196,851 10.50% with various maturities to 2016........................................................... 218,260
336,519 11.25% with various maturities to 2011........................................................... 364,178
245,611 11.50% with various maturities to 2013........................................................... 278,619
321,072 11.50% with various maturities to 2015........................................................... 363,883
63,762 12.25% with various maturities to 2013........................................................... 72,410
49,684 13.00% with various maturities to 2012........................................................... 57,975
35,711 13.00% with various maturities to 2013........................................................... 41,671
31,288 13.00% with various maturities to 2014........................................................... 36,513
82,363 14.25% with various maturities to 2014........................................................... 95,258
32,723 14.75% with various maturities to 2001........................................................... 34,073
-------------
Total GNMA - (identified cost $5,917,757)........................................................ 6,020,255
-------------
MEDIUM TERM NOTES - (25.03%)
800,000 Federal Home Loan Bank, 7.24%, 11/09/10.......................................................... 774,656
1,215,000 Federal Home Loan Mortgage Corporation, 6.615%, 03/03/04......................................... 1,188,088
1,000,000 Federal Home Loan Mortgage Corporation, 7.225%, 05/17/05......................................... 1,003,880
1,000,000 Federal Home Loan Mortgage Corporation, 6.66%, 12/05/05.......................................... 974,760
1,000,000 Federal Home Loan Mortgage Corporation, 6.63%, 01/12/09.......................................... 951,240
900,000 Federal Home Loan Mortgage Corporation, 8.00%, 06/20/11.......................................... 932,670
1,000,000 Federal National Mortgage Association, 6.850%, 09/12/05.......................................... 985,820
1,000,000 Federal National Mortgage Association, 7.15%, 11/03/10........................................... 971,230
Total Medium Term Notes - (identified cost $7,877,947)........................................... 7,782,344
COLLATERALIZED MORTGAGE OBLIGATIONS & REAL ESTATE MORTGAGE
INVESTMENT CONDUITS - (31.82%)
500,000 Federal Home Loan Mortgage Corporation, FHG 32E, 7.50%, 03/25/05................................. 501,160
40,066 Federal Home Loan Mortgage Corporation, 122 F, 8.75%, 10/15/05................................... 40,597
134,198 Federal Home Loan Mortgage Corporation, 1606 LC, 6.883%, 05/15/08<F2>............................ 131,504
1,150,750 Federal Home Loan Mortgage Corporation, 1702BL, 7.00%, 07/15/2................................... 11,128,414
538,142 Federal Home Loan Mortgage Corporation, 1401MA, 5.99%, 10/15/22<F2>.............................. 518,145
149,969 Federal Home Loan Mortgage Corporation, 1454N, 7.00%, 12/15/22................................... 137,325
1,000,000 Federal National Mortgage Association, 1995-23D, 7.00%, 10/25/07................................. 983,438
483,530 Federal National Mortgage Association, 1993-40K, 7.00%, 04/25/08................................. 468,163
1,000,000 Federal National Mortgage Association, 1994 G5-VC, 7.00%, 06/17/09............................... 969,640
1,474,104 Federal National Mortgage Association, 1988-19J, 8.50%, 07/25/18................................. 1,514,333
1,000,000 Federal National Mortgage Association, 1993-30 PL, 7.00%, 07/25/20............................... 974,920
42,164 Federal National Mortgage Association, 1991-115ZZ, 8.50%, 10/25/20............................... 42,559
300,000 Federal National Mortgage Association, 1992-174H, 7.25%, 09/25/21................................ 292,734
1,000,000 Federal National Mortgage Association, 1993-155TC, 7.00%, 03/25/23............................... 990,000
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT december 31, 1996
DAVIS GOVERNMENT BOND FUND - Continued
VALUE
PRINCIPAL (NOTE 1)
================================================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS & REAL ESTATE MORTGAGE
INVESTMENT CONDUITS - Continued
$ 1,250,000 Federal National Mortgage Association, 1993-120N, 7.00%, 07/25/23................................ $ 1,200,425
-------------
Total CMOs & REMICs - (identified cost $9,742,953).......................................... 9,893,357
-------------
SHORT TERM - (5.55%)
1,725,000 State Street Bank and Trust Company Repurchase Agreement, 5.27%,
01/03/97, dated 12/30/96, repurchase value of $1,726,010
(collateralized by $1,780,000 par value U.S. Treasury Notes, 4.75%,
10/31/98, market value $1,762,586) - (identified cost $1,725,000).............................. 1,725,000
-------------
TOTAL INVESTMENTS - (99.14%) - (identified cost $30,652,169) <F1>................................ 30,821,330
OTHER ASSETS LESS LIABILITIES - (0.86%).......................................................... 266,124
-------------
NET ASSETS - (100%)......................................................................... $ 31,087,454
=============
<FN>
<F1> Aggregate cost for Federal Income Tax purposes is $30,652,169. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:
Unrealized appreciation.......................................................................... $ 560,881
Unrealized depreciation.......................................................................... (391,720)
-------------
Net unrealized appreciation................................................................. $ 169,161
=============
<F2> The interest rates on floating rate securities, shown as of December 31, 1996, may change monthly or less
frequently and are based on indices of market interest rates.
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS GOVERNMENT MONEY MARKET FUND
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
================================================================================================================================
FEDERAL HOME LOAN BANK - (13.36%)
<S> <C> <C>
$ 6,275,000 5.215%, 01/02/97 Discount Note............................................................... $ 6,275,000
5,840,000 5.22%, 01/09/97 Discount Note............................................................... 5,834,072
26,560,000 5.22%, 01/23/97 Discount Note............................................................... 26,479,125
5,565,000 5.26%, 01/30/97 Discount Note............................................................... 5,542,234
10,935,000 5.37%, 02/20/97 Discount Note............................................................... 10,855,074
-------------
Total Federal Home Loan Bank - (identified cost $54,985,505)......................... 54,985,505
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - (50.13%)
24,045,000 5.22%, 01/03/97 Discount Note............................................................... 24,041,514
12,570,000 5.22%, 01/07/97 Discount Note............................................................... 12,560,887
21,480,000 5.23%, 01/14/97 Discount Note............................................................... 21,442,553
12,890,000 5.32%, 01/16/97 Discount Note............................................................... 12,863,332
6,955,000 5.22%, 01/17/97 Discount Note............................................................... 6,939,873
2,590,000 5.21%, 01/21/97 Discount Note............................................................... 2,582,878
8,335,000 5.42%, 01/22/97 Discount Note............................................................... 8,309,902
10,070,000 5.21%, 01/24/97 Discount Note............................................................... 10,037,938
34,150,000 5.39%, 01/30/97 Discount Note............................................................... 34,006,836
7,030,000 5.21%, 01/31/97 Discount Note............................................................... 7,000,496
17,790,000 5.29%, 01/31/97 Discount Note............................................................... 17,714,190
18,955,000 5.42%, 01/31/97 Discount Note............................................................... 18,872,240
14,392,000 5.22%, 02/04/97 Discount Note............................................................... 14,323,134
1,425,000 5.37%, 02/24/97 Discount Note............................................................... 1,413,734
11,375,000 5.36%, 03/21/97 Discount Note............................................................... 11,242,898
2,910,000 5.37%, 03/25/97 Discount Note............................................................... 2,874,406
-------------
Total Federal Home Loan Mortgage Corporation -
(identified cost $206,226,811)..................................................... 206,226,811
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - (36.70%)
7,795,000 5.25%, 01/06/97 Discount Note............................................................... 7,790,453
9,250,000 5.26%, 01/10/97 Discount Note............................................................... 9,239,188
950,000 5.31%, 01/13/97 Discount Note............................................................... 948,459
13,045,000 5.36%, 01/15/97 Discount Note............................................................... 13,019,750
13,685,000 5.23%, 01/22/97 Discount Note............................................................... 13,645,237
15,615,000 5.23%, 01/28/97 Discount Note............................................................... 15,556,019
12,020,000 5.23%, 01/29/97 Discount Note............................................................... 11,972,851
19,535,000 5.22%, 02/03/97 Discount Note............................................................... 19,444,358
8,550,000 5.25%, 02/06/97 Discount Note............................................................... 8,506,359
4,120,000 5.25%, 02/10/97 Discount Note............................................................... 4,096,568
13,700,000 5.21%, 02/12/97 Discount Note............................................................... 13,618,710
18,000,000 5.38%, 02/27/97 Discount Note............................................................... 17,849,360
6,450,000 5.27%, 03/04/97 Discount Note............................................................... 6,392,403
9,000,000 5.34%, 03/20/97 Discount Note............................................................... 8,897,205
-------------
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS GOVERNMENT MONEY MARKET FUND - Continued
VALUE
(NOTE 1)
================================================================================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION - Continued
Total Federal National Mortgage Association -
(identified cost $ 150,976,920)........................................................... $ 150,976,920
-------------
TOTAL INVESTMENTS - (100.19%) - (identified cost $412,189,236 -<F1>......................................... 412,189,236
LIABILITIES LESS OTHER ASSETS - (0.19%)..................................................................... (772,942)
-------------
NET ASSETS - (100%).................................................................................... $ 411,416,294
=============
<FN>
<F1> Aggregate cost for Federal income tax purposes is $412,189,236.
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS FINANCIAL FUND
<CAPTION>
VALUE
SHARES (NOTE 1)
================================================================================================================================
COMMON STOCK - (93.96%)
AGRICULTURE - (0.95%)
<S> <C> <C>
50,000 Archer-Daniels-Midland Co........................................................................ $ 1,100,000
-------------
AUTOMOBILES - (1.93%)
40,000 General Motors Corp.............................................................................. 2,230,000
-------------
Banks and Savings & Loan Associations - (21.43%)
15,000 BankAmerica Corp................................................................................. 1,496,250
210,811 Bank of East Asia Ltd............................................................................ 937,604
40,000 Bank of New York, Inc............................................................................ 1,350,000
46,800 Barnett Banks, Inc............................................................................... 1,924,650
40,000 First Bank System, Inc........................................................................... 2,730,000
24,000 Golden West Financial Corp....................................................................... 1,515,000
25,000 Greenpoint Financial Corp........................................................................ 1,181,250
306,287 Lloyds TSB Group PLC............................................................................. 2,261,601
18,000 J.P Morgan & Co., Inc............................................................................ 1,757,250
29,000 Norwest Corp..................................................................................... 1,261,500
45,000 State Street Boston Corp......................................................................... 2,902,500
50,000 TCF Financial Corp............................................................................... 2,175,000
12,333 Wells Fargo & Co................................................................................. 3,326,827
-------------
24,819,432
-------------
BEVERAGES - (1.55%)
228,000 Guinness PLC ORD................................................................................. 1,792,907
-------------
BULIDING MATERIALS - (1.51%)
75,000 Martin Marietta Materials Inc.................................................................... 1,743,750
-------------
CONSUMER PRODUCTS - (2.92%)
30,000 Philip Morris Cos., Inc.......................................................................... 3,378,750
-------------
ENERGY - (3.52%)
57,000 Burlington Resources, Inc........................................................................ 2,871,375
20,000 Halliburton Co................................................................................... 1,205,000
-------------
4,076,375
-------------
Financial Services - (51.32%)
INSURANCE - (30.97%)
2,206 Alleghany Corp.<F1>.............................................................................. 467,672
58,050 Allied Group, Inc................................................................................ 1,901,137
30,000 Allstate Corp.................................................................................... 1,736,250
15,375 American International Group, Inc................................................................ 1,664,343
19,000 Aon Corporation.................................................................................. 1,180,375
20,900 Argonaut Group, Inc.............................................................................. 650,512
32,000 W.R. Berkley Corp................................................................................ 1,634,000
20,000 Chubb Corp....................................................................................... 1,075,000
26,000 Cincinnati Financial Corp........................................................................ 1,686,750
20,000 Executive Risk, Inc.............................................................................. 740,000
29,809 General Re Corp.................................................................................. 4,702,370
80,000 Leucadia National Corp........................................................................... 2,140,000
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS FINANCIAL FUND - Continued
VALUE
SHARES/PRINCIPAL (NOTE 1)
================================================================================================================================
COMMON STOCK
Financial Services - Continued
INSURANCE _ Continued
30,000 Mercury General Corp............................................................................. $ 1,575,000
1,042 Nuernberger Beteil AGAKT LITA.................................................................... 805,810
36,000 Orion Capital Corp............................................................................... 2,200,500
45,000 Progressive Corp. (Ohio)......................................................................... 3,031,875
100,000 Risk Capital Holdings, Inc.<F1>.................................................................. 1,925,000
31,500 State Auto Financial Corp........................................................................ 578,813
43,000 Transatlantic Holdings, Inc...................................................................... 3,461,500
9,500 Trenwick Group Inc............................................................................... 441,750
69,000 20th Century Industries.......................................................................... 1,164,375
35,000 Vesta Insurance Group, Inc....................................................................... 1,098,125
-------------
35,861,157
-------------
OTHER FINANCIAL SERVICES - (20.35%)
74,000 American Express Co.............................................................................. 4,181,000
20,000 Dean Witter, Discover & Co....................................................................... 1,325,000
55,200 Donaldson, Lufkin & Jenrette Inc................................................................. 1,987,200
40,000 Equitable Cos. Inc............................................................................... 985,000
34,400 Jefferies Group, Inc............................................................................. 1,388,900
63,000 Morgan Stanley Group Inc......................................................................... 3,598,875
50,000 Charles Schwab Corp.............................................................................. 1,600,000
81,000 SunAmerica, Inc.................................................................................. 3,594,375
108,000 Travelers Group Inc.............................................................................. 4,900,749
-------------
23,561,099
-------------
RESTAURANT & FOOD - (1.95%)
50,000 McDonald's Corp.................................................................................. 2,262,500
-------------
Technology - (6.88%)
36,000 Intel Corp....................................................................................... 4,713,750
50,000 Komag Inc.<F1>................................................................................... 1,353,125
35,000 Novellus Systems, Inc.<F1>....................................................................... 1,896,563
-------------
7,963,438
-------------
Total Common Stock - (identified cost $65,946,388)............................................ 108,789,408
-------------
CONVERTIBLE BOND - (0.94%)
$ 750,000 Cincinnati Financial Corp., Sr. Deb., Conv., 5.50%, 05/01/02
(identified cost $980,625)..................................................................... 1,090,312
-------------
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1996
DAVIS FINANCIAL FUND - Continued
VALUE
PRINCIPAL (NOTE 1)
=================================================================================================================================
SHORT TERM - (2.66%)
$ 3,085,000 State Street Bank and Trust Company Repurchase Agreement, 5.50%,
01/02/97, dated 12/31/96, repurchase value of $3,085,943 (collateralized
by $3,150,000 par value U.S. Treasury Notes, 4.75%, 08/31/98, market
value $3,150,224 ) - (identified cost $3,085,000)............................................. $ 3,085,000
-------------
TOTAL INVESTMENTS _ (97.56%) _ (identified cost $70,012,013) _ <F2>............................. 112,964,720
OTHER ASSETS LESS LIABILITIES - (2.44%)......................................................... 2,828,010
-------------
NET ASSETS - (100%)........................................................................ $ 115,792,730
=============
<FN>
<F1> Non-Income Producing Security.
<F2> Aggregate cost for Federal Income Tax purposes is $70,012,013. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:
Unrealized appreciation......................................................................... $ 43,290,775
Unrealized depreciation......................................................................... (338,068)
-------------
Net unrealized appreciation................................................................ $ 42,952,707
=============
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS CONVERTIBLE SECURITIES FUND
<CAPTION>
VALUE
SHARES (NOTE 1)
=================================================================================================================================
CONVERTIBLE Preferred Stock - ( 31.53%)
Banks AND SAVINGS & LOAN ASSOCIATIONS - (7.68%)
<S> <C> <C>
17,300 Banc One Corp., $3.50, Ser. C Conv. Pfd......................................................... $ 1,444,550
47,500 Morgan Stanley Group Inc. - Citicorp, Conv. Pfd................................................. 4,536,250
-------------
5,980,800
-------------
COMMUNICATIONS - (2.63%)
20,500 AirTouch Communications, Inc., 4.25%, Ser. C Conv. Pfd.......................................... 927,625
20,000 Loral Space & Communications, Inc., 6.00%, 144A Conv. Pfd....................................... 1,125,000
-------------
2,052,625
-------------
COMPUTER Products - (1.43%)
10,400 Salomon Inc. - Hewlett-Packard Company, ELK, 5.25%, 01/01/97 Pfd................................ 1,111,500
-------------
CONSUMER PRODUCTS - (2.17%)
250,000 RJR Nabisco Holdings Group Inc. Pfd............................................................. 1,687,500
-------------
Energy - (1.64%)
22,320 Unocal Corp., 6.25%, Conv. Pfd.................................................................. 1,280,610
-------------
FINANCIAL - (1.64%)
15,300 Devon Financing Trust Ser 144A Conv. Pfd........................................................ 1,015,538
5,000 Insignia Financial Group Ser 144A Conv. Pfd..................................................... 258,750
-------------
1,274,288
-------------
INDUSTRIAL (REIT) - (0.70%)
20,000 Security Capital Industrial Trust, 7.00%, Ser. B Cum. Conv. Pfd................................ 545,000
-------------
INSURANCE - (3.34%)
26,800 SunAmerica Inc., Depository Shares, $2.78, Ser. D Conv. Pfd..................................... 2,606,300
-------------
MULTI-FAMILY HOUSING (REITS) - (3.65%)
20,000 Merry Land & Investment Co., Inc., $1.75, Ser. A Conv. Pfd...................................... 572,500
58,300 Oasis Residential, Inc., $2.25, Ser. A Cum. Conv. Pfd........................................... 1,508,512
25,000 Security Capital Pacific Trust Ser. A Conv. Pfd................................................. 765,625
-------------
2,846,637
-------------
PUBLISHING - (1.13%)
50,000 News Corp. Ltd. Spons. ADR Pfd.................................................................. 881,250
-------------
PULP & PAPER - (3.25%)
9,200 International Paper Capital Trust, 144A Conv. Pfd............................................... 420,900
6,500 International Paper Capital Trust, 5.25%, Conv. Pfd............................................. 297,375
15,000 James River Corp. of Virginia, 9.00%, Ser. P Conv. Pfd.......................................... 472,500
24,500 Sonoco Products Co., $2.25, Ser. A Conv. Pfd.................................................... 1,344,437
-------------
2,535,212
-------------
SELF STORAGE (REIT) - (2.27%)
34,000 Public Storage, Inc., 8.25%, Conv. Pfd.......................................................... 1,772,250
-------------
Total Convertible Preferred Stock - (identified cost $19,459,197)............................... 24,573,972
-------------
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS CONVERTIBLE SECURITIES FUND - Continued
VALUE
PRINCIPAL (NOTE 1)
=================================================================================================================================
Convertible Bonds - (26.21%)
BUILDING & HOME PRODUCTS - (1.62%)
$ 250,000 Home Depot Inc., Conv. Sub. Deb., 3.25%,10/01/01................................................ $ 244,688
1,000,000 Masco Corp., Conv. Sub. Deb., 5.25%, 02/15/12................................................... 1,015,000
-------------
1,259,688
-------------
COMMUNICATIONS - (0.40%)
297,000 General Instruments Corp., Conv. Sub. Deb., 5.00%,06/15/00...................................... 317,790
-------------
ELECTRONICS - (1.20%)
600,000 Texas Instruments, Inc., Conv. Sub. Deb., 2.75%, 09/29/02....................................... 931,500
-------------
ENGINEERING - (0.76%)
500,000 Thermo Electron Corp., 144A Conv. Sub. Deb., 4.25%, 01/01/03.................................... 589,375
-------------
FINANCIAL SERVICES - (1.79%)
500,000 Alex Brown, Inc., Conv. Sub. Deb., 5.75%, 06/12/01.............................................. 1,392,616
-------------
HOTELS - (1.46%)
1,100,000 Hilton Hotels Corp., Conv. Sub. Note, 5.00%, 05/15/06........................................... 1,138,500
-------------
INDUSTRIAL (REIT) - (1.15%)
700,000 Liberty Property Trust, Conv. Sub. Deb., 8.00%, 07/01/01........................................ 898,625
-------------
INSURANCE - (12.18%)
900,000 American Travellers Corp., Conv. Sub. Deb., 6.50%, 10/1/05...................................... 2,223,000
1,000,000 Cincinnati Financial Corp. Conv. Sub. Deb., 5.50%, 05/01/02..................................... 1,453,750
3,803,000 Equitable Companies Inc., Conv. Sub. Deb., 6.125%, 12/15/24..................................... 4,344,927
1,400,000 Leucadia National Corp., Conv. Sub. Deb., 5.25%, 02/01/03....................................... 1,466,500
-------------
9,488,177
-------------
MACHINERY - (0.97%)
700,000 Raymond Corp., Conv. Sub. Deb., 6.50%, 12/15/03................................................. 758,625
-------------
MANAGEMENT SERVICES - (0.60%)
1,000,000 Valhi Inc., Conv. Sub. Deb., 0.01%, 10/20/07.................................................... 463,750
-------------
MEDICAL SERVICES _ (0.32%)
250,000 Phycor Inc., Conv. Sub. Deb., 4.50%, 2/15/03.................................................... 247,188
-------------
MULTI-FAMILY HOUSING (REIT) _ (0.75%)
500,000 Camden Property Trust, Conv. Sub. Deb., 7.33%, 04/01/04......................................... 586,875
-------------
OFFICE SUPPLIES _ (1.26%)
750,000 U S Office Products Co., Conv. Sub. Note, 5.50%, 02/01/01....................................... 983,437
RETAIL - (1.69%)
350,000 Mid-Atlantic Realty Trust, Conv. Sub. Deb., 7.625%, 09/15/03 (REIT)............................. 374,938
900,000 Rouse Co., Conv. Sub. Deb., 5.75%,07/23/02...................................................... 945,000
-------------
1,319,938
-------------
TRANSPORTATION - (0.06%)
500,000 Florida West Airlines, Inc., 8.00%, 03/25/99<F2>................................................ 50,000
-------------
Total Convertible Bonds - (identified cost $17,563,219)................................. 20,426,084
-------------
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS CONVERTIBLE SECURITIES FUND - Continued
VALUE
SHARES (NOTE 1)
=================================================================================================================================
COMMON STOCK - (40.31%)
BANKS AND SAVINGS & LOAN ASSOCIATIONS _ (10.16%)
61,574 Bank of New York Inc............................................................................ $ 2,078,122
66,953 First Bank System, Inc.......................................................................... 4,569,542
29,206 Norwest Corp.................................................................................... 1,270,461
-------------
7,918,125
-------------
ENERGY - (3.16%)
9,574 Burlington Northern Santa Fe Corp............................................................... 826,954
34,106 Noble Affiliates, Inc........................................................................... 1,632,825
-------------
2,459,779
-------------
HOTELS (REIT) - (0.66%)
11,900 Patriot American Hospitality Inc................................................................ 513,187
-------------
INSURANCE - (4.61%)
20,000 Leucadia National Corp.......................................................................... 535,000
61,741 Travelers Group Inc............................................................................. 2,801,498
5,500 Trenwick Group, Inc............................................................................. 255,750
-------------
3,592,248
-------------
MULTI-FAMILY HOUSING (REITS) _ (6.27%)
61,300 Avalon Properties, Inc.......................................................................... 1,762,375
71,600 Bay Apartment Communities, Inc.................................................................. 2,577,600
21,700 Irvine Apartment Communities, Inc............................................................... 542,500
-------------
4,882,475
-------------
OFFICE /INDUSTRIAL (REITS) _ (8.05%)
30,000 Beacon Properties Corp.......................................................................... 1,098,750
18,600 Cali Realty Corp................................................................................ 574,275
64,656 Centerpoint Properties Corp..................................................................... 2,117,484
47,000 Crescent Real Estate Equity..................................................................... 2,479,250
-------------
6,269,759
-------------
OIL & GAS - (0.99%)
39,113 Noble Drilling Corp.<F1>........................................................................ 777,371
-------------
RETAIL (REITS) - (5.37%)
25,250 Kimco Realty Corp............................................................................... 880,594
62,900 Vornado Realty Trust............................................................................ 3,302,250
-------------
4,182,844
-------------
SELF STORAGE (REIT) - (1.04%)
30,000 Storage Trust Realty............................................................................ 810,001
-------------
Total Common Stock - (identified cost $21,814,803)...................................... 31,405,789
-------------
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1996
DAVIS CONVERTIBLE SECURITIES FUND - Continued
<CAPTION>
VALUE
(NOTE 1)
=================================================================================================================================
TOTAL INVESTMENTS - (98.05%) - (identified cost $58,837,219) - <F3>..................... $ 76,405,845
OTHER ASSETS LESS LIABILITIES - (1.95%)................................................. 1,516,234
NET ASSETS - (100%)................................................................ $ 77,922,079
<FN>
<F1> Non-Income Producing Security.
<F2> This security is in default and is not currently paying interest.
<F3> Aggregate cost for Federal Income Tax purposes is $58,936,742. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income Tax purposes
is as follows:
Unrealized appreciation............................................................... $ 18,147,198
Unrealized depreciation............................................................... (678,095)
Net unrealized appreciation........................................................... $ 17,469,103
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT december 31, 1996
DAVIS REAL ESTATE FUND
<CAPTION>
VALUE
SHARES (NOTE 1)
=================================================================================================================================
COMMON STOCK - (89.85%)
APARTMENTS (REITS) - (20.94%)
<C> <C> <C>
25,500 Ambassador Apartments Inc...................................................................... $ 602,438
60,600 Avalon Properties, Inc......................................................................... 1,742,250
68,900 Bay Apartment Communities, Inc................................................................. 2,480,400
22,533 Camden Property Trust.......................................................................... 645,007
33,200 Equity Residential Properties Trust............................................................ 1,369,500
63,200 Essex Property Trust........................................................................... 1,856,500
27,000 Gables Residential Trust....................................................................... 783,000
65,300 Irvine Apartment Communities, Inc.............................................................. 1,632,500
22,000 Oasis Residential, Inc......................................................................... 500,500
28,900 Security Capital Pacific Trust................................................................. 661,087
40,000 United Dominion Realty Trust Inc............................................................... 620,000
-------------
12,893,182
-------------
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (0.61%)
9,000 Bancorp Hawaii, Inc............................................................................ 378,000
-------------
CONSTRUCTION - (0.40%)
19,000 Kaufman & Broad Home Corp...................................................................... 244,625
-------------
HOTELS & LODGING _ (12.59%)
30,000 Bristol Hotel Co.<F1>.......................................................................... 952,500
35,000 FelCor Suite Hotels, Inc. (REIT)............................................................... 1,238,125
3,632 Homestead Village Properties Inc.<F1>.......................................................... 65,376
52,000 Host Marriot Corp.<F1>......................................................................... 832,000
51,800 Jameson Inns Inc............................................................................... 679,875
74,300 Patriot American Hospitality Inc. (REIT)....................................................... 3,204,187
14,200 Starwood Lodging Trust (REIT).................................................................. 782,775
-------------
7,754,838
-------------
INDUSTRIAL (REITS) - (11.83%)
56,600 Centerpoint Properties Corp.................................................................... 1,853,650
30,000 First Industrial Realty Trust.................................................................. 911,250
49,000 Liberty Property Trust......................................................................... 1,261,750
52,400 Reckson Associates Realty Corp................................................................. 2,213,900
20,952 Security Capital Industrial Trust.............................................................. 447,849
18,000 Weeks Corp..................................................................................... 598,500
-------------
7,286,899
-------------
INSURANCE - (0.81%)
20,350 Equitable Cos. Inc............................................................................. 501,119
-------------
MANUFACTURED HOUSING (REITS) _ (1.08%)
24,000 ROC Communities, Inc........................................................................... 666,000
-------------
OFFICE SPACE (REITS) _ (17.19%)
45,000 Beacon Properties Corp......................................................................... 1,648,125
33,000 Bedford Property Investments................................................................... 577,500
107,400 Cali Realty Corp............................................................................... 3,315,975
30,000 CarrAmerica Realty Corp........................................................................ 877,500
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT December 31, 1996
DAVIS REAL ESTATE FUND - Continued
VALUE
SHARES (NOTE 1)
=================================================================================================================================
COMMON STOCK - Continued
OFFICE SPACE (REITS) _ Continued
46,200 Crescent Real Estate Equities, Inc............................................................. $ 2,437,050
27,500 Duke Realty Investments, Inc................................................................... 1,058,750
12,000 Parkway Properties Inc......................................................................... 312,000
10,000 Spieker Properties Group....................................................................... 360,000
-------------
10,586,900
-------------
RETAIL (REITS) - (18.58%)
26,800 Chelsea GCA Realty Inc......................................................................... 927,950
15,000 Developers Diversified Realty.................................................................. 556,875
25,000 JDN Realty Corp................................................................................ 690,625
39,450 Kimco Realty Corp.............................................................................. 1,375,819
66,800 The Macerich Co................................................................................ 1,745,150
25,000 Regency Realty Corp............................................................................ 656,250
68,964 Simon De Bartolo Group Inc..................................................................... 2,137,884
30,000 Urban Shopping Centers Inc..................................................................... 870,000
33,350 Vornado Realty Trust........................................................................... 1,750,875
18,000 Weingarten Realty Investors.................................................................... 731,250
-------------
11,442,678
-------------
STORAGE (REITS) _ (5.82%)
66,300 Public Storage, Inc............................................................................ 2,055,300
15,000 Sovran Self Storage Inc........................................................................ 468,750
25,400 Storage Trust Realty........................................................................... 685,800
10,000 Storage USA Inc................................................................................ 376,250
-------------
3,586,100
-------------
Total Common Stock - (identified cost $40,381,326)..................................... 55,340,341
-------------
CONVERTIBLE PREFERRED STOCK - (1.20%)
REAL ESTATE - (1.20%)
16,700 Oasis Residential, Inc., $2.25, Ser. A Cum. Conv. Pfd......................................... 432,112
10,000 Security Capital Pacific Trust, $1.75, Ser. A Conv. Pfd...................................... 306,250
-------------
Total Preferred Stock _ (identified cost $618,100)....................................... 738,362
-------------
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS AT December 31, 1996
DAVIS REAL ESTATE FUND - Continued
VALUE
PRINCIPAL/UNITS (NOTE 1)
=================================================================================================================================
CONVERTIBLE CORPORATE BONDS _ (1.59%)
REAL ESTATE - (1.59%)
$ 576,000 Equitable Cos. Inc., Conv. Sub. Deb., 6.125%, 12/15/24....................................... $ 658,080
250,000 Liberty Property Trust, Conv. Sub. Deb., 8.00%, 07/01/01...................................... 320,938
Total Convertible Corporate Bonds _ (identified cost $907,360)........................ 979,018
WARRANTS - (0.03%)
2,437 Homestead Village Properties Inc., Expire 10/29/87<F1> (identified cost $ -0-)................ 19,801
SHORT TERM - (6.66%)
4,100,000 State Street Bank and Trust Company Repurchase Agreement, 5.50%,
01/02/97, dated 12/31/96, repurchase value of $4,101,253
(collateralized by $4,185,000 par value U.S. Treasury Notes,
4.75%, 08/31/98, market value $4,185,298) - (identified
cost $4,100,000)............................................................................ 4,100,000
TOTAL INVESTMENTS _ (99.33%) _ (identified cost $46,006,786) _ <F2>...................... 61,177,522
OTHER ASSETS LESS LIABILITIES _ (0.67%).................................................. 413,555
NET ASSETS _ (100%)................................................................. $ 61,591,077
<FN>
<F1> Non-Income Producing Security.
<F2> Aggregate cost for Federal Income Tax purposes is $46,006,786. At December 31, 1996
unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation.................................................................. $ 15,259,806
Unrealized depreciation.................................................................. (89,070)
Net unrealized appreciation......................................................... $ 15,170,736
</FN>
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES At December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DAVIS
DAVIS GOVERNMENT DAVIS DAVIS
DAVIS GOVERNMENT MONEY DAVIS CONVERTIBLE REAL ESTATE
GROWTH BOND MARKET FINANCIAL SECURITIES SECURITIES
FUND FUND FUND<F1> FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
value(see schedules of
investments).............................. $ 66,363,359 $ 30,821,330 $ 412,189,236 $112,964,720 $ 76,405,845 $ 61,177,522
Cash........................................ 27,026 121,742 40,310 7,733 209,136 2,668
Receivables:
Dividends and interest.................... 43,968 263,078 2,324 180,218 344,427 309,591
Capital stock sold........................ 184,728 50,000 - 788,791 146,127 721,654
Securities sold........................... 1,748,282 - 889,108 - 1,926,477 -
Note receoveable (Note 7)................. - - - 1,999,950 - -
------------ ------------ ------------- ------------ ------------ ------------
Total assets........................... 68,367,363 31,256,150 413,120,978 115,941,412 79,032,012 62,211,435
------------ ------------ ------------- ------------ ------------ ------------
LIABILITIES:
Payables:
Investment securities
purchased............................... 1,749,660 _ _ 18,936 1,042,479 _
Capital stock reacquired.................. 548 85,763 150,083 - 22,000 138,480
Accrued expenses............................ 57,898 56,907 324,040 100,202 37,159 94,924
Commissions payable to
distributor (Note 3)...................... 58,295 26,026 _ 29,544 8,295 15,581
Distributions payable....................... _ _ 1,230,561 _ _ 371,373
------------ ------------ ------------- ------------ ------------ ------------
Total liabilities...................... 1,866,401 168,696 1,704,684 148,682 1,109,933 620,358
------------ ------------ ------------- ------------ ------------ ------------
NET ASSETS (Note 5)......................... $ 66,500,962 $ 31,087,454 $ 411,416,294 $115,792,730 $ 77,922,079 $ 61,591,077
============ ============ ============= ============ ============ ============
Class A Shares
Net assets................................ $ 27,158,384 $ 18,128,556 $ 406,547,209 $107,579,278 $ 42,841,372 $ 32,507,288
Shares outstanding........................ 1,435,009 3,145,351 406,547,209 5,957,330 2,018,880 1,530,298
Net asset value and redemption
price per share (net
assets/shares outstanding).............. $ 18.93 $ 5.76 $ 1.00 $ 18.06 $ 21.22 $ 21.24
========= ======== ======== ========= ========= =========
Maximum offering price per
share (100/95.25 of net
asset value)............................ $ 19.87 $ 6.05 $ 1.00 $ 18.96 $ 22.28 $ 22.30
========= ======== ======== ========= ========= =========
Class B Shares
Net assets................................ $ 39,342,578 $ 12,958,898 $ 4,154,607 $ 8,213,452 $ 2,074,812 $ 10,918,918
Shares outstanding........................ 2,117,162 2,253,237 4,154,607 458,570 98,581 515,294
Net asset value, offering and
redemption price per share
(net assets/shares
outstanding)(Note 3)................... $ 18.58 $ 5.75 $ 1.00 $ 17.91 $ 21.05 $ 21.19
========= ======== ======== ========= ========= =========
CLASS C SHARES
Net assets................................ $ 714,478
Shares outstanding........................ 714,478
Net asset value, offering and
redemption price per share
(net assets/shares
outstanding)........................... $ 1.00
CLASS Y SHARES
Net assets................................ $ 33,005,895 $ 18,164,871
Shares outstanding........................ 1,550,619 849,869
Net asset value, offering and
redemption price per share
(net assets/shares
outstanding)........................... $ 21.29 $ 21.37
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
STATEMENT OF OPERATIONS Year ended December 31, 1996
==========================================================================================================================
<CAPTION>
DAVIS
DAVIS GOVERNMENT DAVIS DAVIS
DAVIS GOVERNMENT MONEY DAVIS CONVERTIBLE REAL ESTATE
GROWTH BOND MARKET FINANCIAL SECURITIES SECURITIES
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
(LOSS)
Income:
Dividends (net of foreign taxes
withheld of $23,730 and $1,722
for Financial Fund and
Convertible Securities Fund,
respectively.................... $ 345,282 $ _ $ _ $ 1,433,512 $ 2,044,673 $1,872,618
Interest.......................... 105,187 2,598,784 20,375,092 506,475 833,995 149,511
----------- ---------- ----------- ----------- ----------- ----------
Total income.................. 450,469 2,598,784 20,375,092 1,939,987 2,878,668 2,022,129
----------- ---------- ----------- ----------- ----------- ----------
Expenses:
Management fees (Note 2).......... 465,749 200,005 1,825,917 700,862 494,195 286,302
Custodian fees.................... 72,940 86,759 164,810 96,408 70,437 72,604
Transfer agent fees
Class A.................. 43,272 59,536 194,055 52,311 17,194 16,693
Class B.................. 73,959 37,397 2,945 8,634 2,347 5,718
Class C.................. - - 789 - - -
Class Y.................. - - - - 6 7
Audit fees........................ 14,302 16,538 7,556 13,725 9,341 10,337
Legalfees......................... 9,504 5,504 58,464 18,382 7,077 5,503
Accounting fees (Note 2).......... 15,996 17,004 12,000 15,996 15,996 12,000
Reports to shareholders........... 27,413 17,723 28,403 12,525 3,864 4,399
Directors fees and expenses....... 22,737 18,971 43,414 22,357 14,640 18,365
Registration and filing fees...... 42,396 41,324 115,219 40,272 28,750 36,321
Miscellaneous..................... 13,398 26,889 55,385 17,682 3,233 6,506
Distribution plan payments
(Note 3)
Class A......................... 45,833 43,662 _ 75,327 23,521 22,619
Class B......................... 358,112 136,766 _ 42,952 10,953 26,901
----------- ---------- ----------- ----------- ----------- ----------
Total expenses................ 1,205,611 708,078 2,508,957 1,117,433 701,554 524,275
----------- ---------- ----------- ----------- ----------- ----------
Fee Reduction (Note 6)............ (2,927) (2,098) (186) (4,153) (2,058) (2,333)
Net Expenses...................... 1,202,684 705,980 2,507,771 1,113,280 699,496 521,942
Net investment
income (loss)............. (752,215) 1,892,804 17,866,321 826,707 2,179,172 1,500,187
----------- ---------- ----------- ----------- ----------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from
investment transactions.. 5,082,446 170,808 _ 5,277,490 5,214,600 733,835
Net increase (decrease) in
unrealized appreciation
depreciation of investments
during the period................. 15,946,731 (1,062,065) _ 20,747,872 10,270,464 12,119,634
----------- ---------- ----------- ----------- ----------- ----------
Net realized and unrealized
gain (loss) on investments.... 11,029,177 (891,257) _ 26,025,362 15,485,064 12,853,469
----------- ---------- ----------- ----------- ----------- ----------
Net increase in net
assets resulting from
operations.................... $10,276,962 $1,001,547 $17,866,321 $26,852,069 $17,664,236 $14,353,656
=========== ========== =========== =========== =========== ==========
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS Year ended December 31, 1996
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL ESTATE
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES SECURITIES
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ (752,215) $ 1,892,804 $ 17,866,321 $ 826,707 $ 2,179,172 $ 1,500,187
Net realized gain from
investment transactions........ 5,082,446 170,808 _ 5,277,490 5,214,600 733,835
Net increase (decrease) in
unrealized appreciation/
depreciation of investments.... 5,946,731 (1,062,065) _ 20,747,872 10,270,464 12,119,634
Net increase in net assets ------------ ------------ ------------- ----------- ------------ ------------
resulting from operations...... 10,276,962 1,001,547 17,866,321 26,852,069 17,664,236 14,353,656
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A........................ _ (1,178,705) (17,525,480) (835,471) (2,094,357) (1,269,681)
Class B........................ _ (714,099) (266,131) (2,523) (33,281) (146,572)
Class C........................ _ _ (74,710) _ _ _
Class Y........................ - - - - (92,432) (105,733)
Realized gains from
investment transactions
Class A........................ (2,051,127) - - (4,907,119) (2,972,683) (385,179)
Class B........................ (3,031,319) - - (370,371) (142,573) (123,445)
Class Y........................ - - - - (2,229,742) (209,063)
Paid-in capital
Class A........................ (18,603) (322,082) - (21,227) (24,207) (319,474)
Class B........................ (27,494) (223,986) - (721) (437) (26,294)
Class Y........................ - - - - (1,614) (21,298)
CAPITAL SHARE
TRANSACTIONS (NOTE 5)............ (3,136,657) (4,936,341) 51,126,506 13,441,577 7,714,677 20,110,368
------------ ------------ ------------- ----------- ------------ ------------
Total increase (decrease)
in net assets................ 8,285,076 (6,373,666) 51,126,506 34,156,214 17,787,587 31,857,285
NET ASSETS:
Beginning of period.............. 58,215,886 37,461,120 360,289,788 81,636,516 60,134,492 29,733,792
------------ ------------ ------------- ----------- ------------ ------------
End of period.................... $ 66,500,962 $ 31,087,454 $ 411,416,294 $115,792,730 $ 77,922,079 $ 61,591,077
============ ============ ============= =========== ============ ============
NET ASSETS CONSIST OF:
Paid-in capital.................. $ 33,914,723 $ 35,423,700 $ 411,416,294 $72,840,023 $ 60,452,976 $ 46,420,341
Accumulated net realized gain
(loss.......................... - (4,505,407) - - (99,523) -
Unrealized appreciation
on investments................. 32,586,239 169,161 - 42,952,707 17,568,626 15,170,736
------------ ------------ ------------- ------------ ------------ ------------
$ 66,500,962 $ 31,087,454 $ 411,416,294 $115,792,730 77,922,079 $ 61,591,077
============ ============ ============= ============ ============= ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
DAVIS SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS Year ended December 31, 1995
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL ESTATE
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES SECURITIES
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ (678,520) $ 2,191,740 $ 15,438,495 $ 362,062 $ 2,065,758 $ 1,429,977
Net realized gain (loss) from....
investment transactions........ 4,837,350 (32,015) _ 7,641,002 2,889,149 (16,147)
Net increase in unrealized
appreciation/depreciation
of investments................. 15,832,681 1,884,744 _ 19,535,935 7,434,048 3,011,729
Net increase in net assets ------------ ------------ ------------- ----------- ------------ ------------
resulting from operations...... 19,991,511 4,044,469 15,438,495 27,538,999 12,388,955 4,425,559
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A........................ _ (1,257,060) (15,326,497) (357,170) (2,021,859 (1,399,690)
Class B........................ _ (934,680) (106,550) _ (3,002) (8,487)
Class C........................ _ _ (5,448) _ _ _
Realized gains from
investment transactions
Class A........................ (1,889,930) - - (7,475,056) (2,423,570) -
Class B........................ (2,947,420) - - (166,551) (15,365) -
Paid-in capital
Class A........................ - (315,408) - - - -
Class B........................ - (234,519) - - - -
CAPITAL SHARE
TRANSACTIONS (NOTE 5)............ (5,479,797) (3,118,148) 119,563,068 4,397,937 4,365,522 1,231,958
------------ ------------ ------------- ----------- ------------ ------------
Total increase (decrease)
in net assets................ 9,674,364 (1,815,346) 119,563,068 23,938,159 12,290,681 4,249,340
NET ASSETS:
Beginning of period.............. 48,541,522 39,276,466 240,726,720 57,698,357 47,843,811 25,484,452
------------ ------------ ------------- ----------- ------------ ------------
End of period (including
undistributed net investment
income for the Davis
Financial, Davis Convertible
Securities and Davis Real
Estate Funds of $11,287,
$40,897, and $21,800,
respectively)................... $ 58,215,886 $ 37,461,120 $ 360,289,788 $81,636,516 $ 60,134,492 $ 29,733,792
============ ============ ============= =========== ============ ============
</TABLE>
See Notes to Financial Statements.
DAVIS SERIES, INC.
notes to financial statements
December 31, 1996
============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Davis Series, Inc. is registered under the Investment Company Act of 1940
as amended, as a diversified, open-end management investment company.
The Company operates as a series fund issuing shares of common stock in
the following six series:
Davis Growth Opportunity Fund seeks to achieve growth of capital. It
invests primarily in common stocks and other equity securities, and may
invest in both domestic and foreign issuers.
Davis Government Bond Fund seeks to achieve current income. It invests
in debt securities which are obligations of, or which are guaranteed by,
the U.S. Government, its agencies or instrumentalities.
Davis Government Money Market Fund seeks to achieve as high a level of
current income as is consistent with the principle of preservation of
capital and maintenance of liquidity. It invests in debt securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements involving such securities. There is no
assurance that the Fund will be able to maintain a stable net asset value
of $1.00 per share.
Davis Financial Fund seeks to achieve growth of capital. It invests
primarily in common stocks and other equity securities, and will
concentrate investments in companies principally engaged in the banking
and financial services industries.
Davis Convertible Securities Fund seeks to achieve total return. The Fund
invests primarily in convertible securities, which combine fixed income
with potential for capital appreciation. It may invest in lower rated
bonds commonly known as "junk bonds," so long as no such investment
would cause 35% or more of the Funds net assets to be so invested.
Davis Real Estate Fund seeks to achieve total return through a combination
of growth and income. It invests primarily in securities of companies
principally engaged in or related to the real estate industry or which own
significant real estate assets or which primarily invest in real estate
financial instruments.
Because of the risk inherent in any investment program. The Company
cannot ensure that the investment objective of any of its series will be
achieved .
The Company accounts separately for the assets, liabilities and operations
of each series. On December 1, 1994 each series commenced the offering
of shares in two classes, Class A and Class B. The Class A shares are sold
with a front-end sales charge, except for shares of Davis Government
Money Market Fund which are sold at net asset value and the Class B
shares are sold at net asset value and may be subject to a contingent
deferred sales charge upon redemption. The Davis Government Money
Market Fund offers Class C shares which are sold at net asset value.
Class Y shares were offered commencing September 1, 1996. All classes
have identical rights with respect to voting (exclusive of each Class
distribution arrangement), liquidation and distributions. The following is
a summary of significant accounting policies followed by the Company in
the preparation of its financial statements.
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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
average of closing bid and asked prices. Securities for which market
quotations are not readily available are valued at fair value as determined
by the Board of Directors. The Davis Government Money Market Fund uses
the amortized cost method of valuing investment securities which
represents fair value as determined by the Board of Directors.
B. CURRENCY TRANSLATION - The market values of all assets and
liabilities denominated in foreign currencies are recorded in the financial
statements after translation to the U.S. dollar based upon the mean
between the bid and offered quotations of the currencies against U.S.
dollars on the date of valuation. The cost basis of such assets and
liabilities is determined based upon historical exchange rates. Income and
expenses are translated at average exchange rates in effect as accrued or
incurred.
C. FORWARD CURRENCY CONTRACTS - The Company may enter into
forward purchases or sales of foreign currencies to hedge certain foreign
currency denominated assets and liabilities against declines in market
value relative to the U.S. dollar. Forward currency contracts are
marked-to-market daily and the change in market value is recorded by the
Company as an unrealized gain or loss. When the forward currency
contract is closed, the Company records a realized gain or loss equal to
the difference between the value of the forward currency contract at the
time it was opened and value at the time it was closed. Investments in
forward currency contracts may expose the Company to risks resulting
from unanticipated movements in foreign currency exchange rates or
failure of the counterparty to the agreement to perform in accordance
with the terms of the contract.
D. FEDERAL INCOME TAXES - It is the Company'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. Therefore, no provision for federal income tax is required.
At December 31, 1996, the Davis Government Bond Fund had approximately
$4,505,400 of capital loss carryovers available to offset future capital
gains, if any, of which $2,603,500, $1,110,900, $84,300, $376,100,
$298,600 and $32,000 expire in 1997, 1998, 1999, 2001, 2002 and 2003,
respectively.
E. 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.
F. 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. Discounts on debt securities are amortized
in accordance with the requirements of the Internal Revenue Code.
Dividends and distributions to shareholders are recorded on the
ex-dividend date.
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
============================================================================
Note 2 - Investment Advisory Fees and other transactions with AFFILIATE
Advisory fees are paid monthly to Davis Selected Advisers, L.P. the
Funds' investment adviser (the "Adviser"). The fee for the Davis
Government Money Market Fund is .50 of 1% of the first $250 million of
average daily net assets, .45 of 1% of the next $250 million of average
daily net assets and .40 of 1% of average daily net assets in excess of
$500 million. The fee for the Davis Government Bond Fund is .50 of 1%
average daily net assets. The rate for the Davis Growth Opportunity Fund,
Davis Financial Fund, Davis Convertible Securities Fund and Davis Real
Estate Fund is .75 of 1% of the average daily net assets for the first $250
million, .65 of 1% of the average net assets on the next $250 million, and
.55 of 1% of the average daily net assets in excess of $500 million.
The Adviser is paid for registering Fund shares for sale in various
states. The fee for the year ended December 31, 1996 for the Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Government Money
Market Fund, Davis Financial Fund, Davis Convertible Securities Fund and
Davis Real Estate Fund, amounted to $9,000 for each fund.
The Adviser is paid for certain transfer agent services. The fee for
the year ended December 31, 1996 for the Davis Growth Opportunity Fund,
Davis Government Bond Fund, Davis Government Money Market Fund, Davis
Financial Fund, Davis Convertible Securities Fund and Davis Real Estate
Fund amounted to $6,058, $4,291, $12,905, $4,328, $1,421 and $2,702,
respectively. The Advisers is also paid for certain accounting services.
The fee for the year ended December 31, 1996 for the Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Government Money
Market Fund, Davis Financial Fund, Davis Convertible Securities Fund and
Davis Real Estate Fund amounted to $15,996, $17,004, $12,000, $15,996,
$15,996 and $12,000, respectively. Two directors and the officers of the
Company are also directors and officers of the general partner of Davis
Selected Advisers, L.P. Tanaka Capital Management, Inc. (the
"Sub-Adviser"), acts as the sub-adviser of the Davis Growth Opportunity
Fund. The Sub-Adviser manages the day to day investment operations for
the Davis Growth Opportunity Fund. The Sub-Adviser also provides
investment advisory services to employee benefit plans, institutions,
trusts and individuals. Graham Y. Tanaka is the owner of the Sub-Adviser.
The Company pays no fees directly to the Sub-Adviser. The Sub-Adviser
receives from the Adviser a reallowed portion of its advisory fee equal to
.30% of the first $100 million of the Davis Growth Opportunity Fund's
annual average net assets and .25% of such Fund assets over $100 million
with a minimum annual fee of $100,000. However, the Sub-Adviser's fees
on Fund assets over $100 million may not exceed one-third of the fees
paid to the Adviser from the Davis Growth Opportunity Fund.
The Company has adopted procedures to treat Shelby Cullom Davis &
Co. ("SCD") as an affiliate of the Adviser. During the year ended December
31, 1996, SCD received $1,200 and $372 in commission on the
purchases/sales of portfolio securities in Davis Financial Fund and Davis
Convertible Securities Fund, respectively.
Note 3 - Distribution and underwriting Fees
CLASS A SHARES OF DAVIS GROWTH OPPORTUNITY FUND, DAVIS
GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS CONVERTIBLE
SECURITIES FUND AND DAVIS REAL ESTATE FUND
Class A shares of the Funds are sold at net asset value plus a sales
charge and are redeemed at net asset value (without a contingent deferred
sales charge).
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
============================================================================
Note 3 - Distribution and underwriting Fees - (Continued)
During the year ended December 31, 1996, Davis Selected Advisers,
L.P., the Company's Underwriter (the "Underwriter") received $74,530,
$18,190, $167,334, $52,343 and $317,436 from commissions earned on
sales of Class A shares of Davis Growth Opportunity Fund, Davis Government
Bond Fund, Davis Financial Fund, Davis Convertible Securities Fund and
Davis Real Estate Funds' capital stock, respectively, of which $17,154,
$3,320, $32,447, $10,506 and $55,353 was retained by the Underwriter
and the remaining $57,376, $14,870, $134,887, $41,837 and $262,083 was
reallowed to investment dealers. The Underwriter paid the costs of
prospectuses in excess of those required to be filed as part of the
Company's registration statement, sales literature and other expenses
assumed or incurred by it in connection with such sales.
The Underwriter is reimbursed for amounts paid to dealers as a
maintenance fee with respect to Class A shares sold by dealers and
remaining outstanding during the period. The maintenance fee is paid at
the annual rate of 1/4 of 1% of the average net assets maintained by the
responsible dealers. The Underwriter is not reimbursed for accounts in
which the Underwriter pays no service fees to other firms. The
maintenance fee for Class A shares of Davis Growth Opportunity Fund,
Davis Government Bond Fund, Davis Financial Fund, Davis Convertible
Securities Fund and Davis Real Estate Fund for the year ended December
31, 1996 was $45,833, $43,662, $75,327, $23,521 and $22,619,
respectively.
CLASS B SHARES OF DAVIS GROWTH OPPORTUNITY FUND, DAVIS
GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS CONVERTIBLE
SECURITIES FUND AND DAVIS REAL ESTATE FUND
Class B shares of the Funds are sold at net asset value and are
redeemed at net asset value. A contingent deferred sales charge my be
assessed on shares redeemed within six years of purchase.
Each of the Class B shares of the Funds (other than Davis Government
Money Market Fund) have entered into a Distribution Plan with Davis
Selected Advisers, L.P. (the "Distributor") pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Distribution Plans provide that the
Funds will pay the Distributor a 4% commission on the proceeds from the
sale of each Funds' Class B shares and the Distributor reallows 4% to the
qualified dealer responsible for the sale of the shares. Pursuant to rules
implemented by the National Association of Securities Inc., (the "NASD")
distribution plan payments are limited to 1% of each Fund's annual average
net assets attributable to Class B shares, of which 0.75% may be used to
pay distribution expenses and 0.25% may be used to pay shareholder
service fees. The NASD rules also limit the aggregate amount the Funds
may pay for distribution to 6.25% of gross Funds sales since inception of
the Distribution Plans plus interest at 1% over the prime rate on unpaid
amounts. The Distributor intends to seek full payment (plus interest at
prime plus 1%) of distribution charges that exceed the 1% annual limit in
some future period or periods when the plan limits have not been reached.
During the year ended December 31, 1996, Class B shares of the
Davis Growth Opportunity Fund, Davis Government Bond Fund, Davis
Financial Fund, Davis Convertible Securities Fund and Davis Real Estate
Fund made distribution plan payments which included commissions of
$277,701, $104,536, $32,304, $8,209 and $20,407, respectively and
maintenance fees of $80,411, $32,230, $10,648, $2,744 and $6,494,
respectively.
Commissions earned by the Distributor during the year ended
December 31, 1996 on the sale of Class B shares of the Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund,
Davis Convertible Securities Fund and Davis Real Estate Fund amounted to
$190,981, $57,311, $217,478, $38,329
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
============================================================================
Note 3 - Distribution and underwriting Fees - (Continued)
CLASS B SHARES OF DAVIS GROWTH OPPORTUNITY FUND, DAVIS
GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS CONVERTIBLE
SECURITIES FUND AND DAVIS REAL ESTATE FUND - Continued
and $344,984, of which $165,409, $56,774, $189,836, $37,198 and
$325,477 was reallowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the
Davis Growth Opportunity Fund, Davis Government Bond Fund, Davis
Financial Fund, Davis Convertible Securities Fund and Davis Real Estate
Fund in the amounts of $180,986, $408,923, $242,356, $46,038 and
$339,925, respectively, representing the cumulative commissions earned
by the Distributor on the sale of the Funds' Class B shares reduced by
cumulative commissions paid by the Funds and cumulative contingent
deferred sales charges paid by redeeming shareholders. The Funds have no
contractual obligation to pay any such distribution charges and the
amounts, if any, timing and condition of such payments are solely within
the discretion of the Directors who are not interested persons of the
Funds or the Distributor.
A contingent deferred sales charge is imposed upon redemption of
certain Class B shares of the Funds within six years of the original
purchase. The charge is a declining percentage starting at 4% of the lesser
of net asset value of the shares redeemed or the total cost of such shares.
During the year ended December 31, 1996 the Distributor received
contingent deferred sales charges from Class B shares of the Davis
Growth Opportunity Fund, Davis Government Bond Fund, Davis Financial
Fund, Davis Convertible Securities Fund and Davis Real Estate Fund of
$51,754, $22,644, $21,693, $327 and $3,336, respectively.
DAVIS GOVERNMENT MONEY MARKET FUND
All classes of shares of the Davis Government Money Market Fund are
sold to investors at net asset value. The shareholders of the Davis
Government Money Market Fund have adopted a Distribution expense plan in
accordance with Rule 12b-1, which does not provide for any amounts to be
paid directly to the Distributor as either compensation or reimbursement
for distributing shares of the Fund, but does authorize the use of the
advisory fee to the extent such fee may be considered to be indirectly
financing any activity or expense which is primarily intended to result in
the sale of Fund shares. The Adviser has entered into related service
agreements with various firms which provide cash management and other
services to the Fund's shareholders. The Adviser, at its sole discretion,
currently pays such firms a fee of .25 of 1% based on the average net
assets of those accounts serviced. During the year ended December 31,
1996 the Adviser made payments totaling $3,507 to qualified dealers
responsible for the maintenance of shares of the Fund.
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 the Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Real Estate Fund were as follows:
<TABLE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
==============================================================================================================================
Note 4 - Purchases and Sales of Securities - (Continued)
<CAPTION>
DAVIS DAVIS DAVIS
GROWTH GOVERNMENT DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cost of purchases......... $ 18,529,986 $ 14,905,496 $ 29,579,254 $ 30,440,384 $ 22,665,476
Proceeds of sales......... $ 23,068,053 $ 18,505,201 $ 23,714,396 $ 28,475,459 $ 6,940,767
</TABLE>
Note 5 - Capital Stock
At December 31, 1996, there were 5 billion shares of capital stock
($0.01 par value per share) authorized of which 500 million shares each
are designated to the Davis Growth Opportunity Fund, Davis Government
Bond Fund, Davis Government Money Market Fund, Davis Financial Fund,
Davis Convertible Securities Fund and Davis Real Estate Fund.
Transactions in capital stock were as follows:
<TABLE>
Year Ended
December 31, 1995
-------------------------------------------------------------------------------------------
CLASS A
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold........................... 255,172 272,374 169,910,817 449,739 622,121 790,297
Shares issued in reinvestment
of distributions.................... 104,897 177,540 3,536,913 301,467 233,729 82,413
----------- ----------- ------------- ----------- ------------ -----------
360,069 449,914 173,447,730 751,206 855,850 872,710
Shares redeemed....................... (252,296) (887,124) (124,018,542) (303,617) (2,116,170) (1,126,180)
----------- ----------- ------------- ----------- ------------ -----------
Net increase (decrease)............. 107,773 437,210 49,429,188 (447,589) (1,260,320) (253,470)
=========== =========== ============= =========== ============ ===========
Proceeds from shares sold............. $ 4,701,372 $ 1,589,302 $ 169,910,817 $ 7,228,963 $ 13,045,489 $14,629,230
Proceeds from shares issued in
reinvestment of distributions....... 1,996,999 1,025,599 3,536,913 5,513,629 4,826,570 1,500,218
----------- ----------- ------------- ----------- ------------ -----------
6,698,371 2,614,901 173,447,730 12,742,592 17,872,059 16,129,218
Cost of shares redeemed............... (4,586,515) (5,123,786) (124,018,542) (4,793,945) (44,862,290) (21,662,936)
----------- ----------- ------------- ----------- ------------ -----------
Net increase (decrease)............. $ 2,111,856 $(2,508,885) $ 49,429,188 $ 7,948,647 $ (26,990,231) $(5,533,488
=========== =========== ============= =========== ============ ===========
</TABLE>
<TABLE>
Year Ended
December 31, 1995
-------------------------------------------------------------------------------------------
CLASS A
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold........................... 359,034 660,268 266,441,150 396,303 233,755 266,125
Shares issued in reinvestment
of distributions.................... 105,481 179,677 11,012,683 518,751 233,400 86,954
----------- ----------- ------------- ----------- ------------ -----------
464,515 839,945 277,453,833 915,054 467,155 353,079
Shares redeemed....................... (107,883) (714,819) (160,315,534) (804,015) (260,368) (298,037)
----------- ----------- ------------- ----------- ------------ -----------
Net increase (decrease)............. 356,632 125,126 117,138,299 (111,039) (206,787) 55,042
=========== =========== ============= =========== ============ ===========
Proceeds from shares sold............. $ 5,898,293 $ 3,901,967 $ 266,441,150 $ 5,245,284 $ 4,282,025 $ 4,010,602
Proceeds from shares issued in
reinvestment of distributions....... 1,800,883 1,059,274 11,012,683 7,501,765 4,174,785 1,334,734
----------- ----------- ------------- ----------- ------------ -----------
7,699,176 4,961,241 277,453,833 12,747,049 8,456,810 5,345,336
Cost of shares redeemed............... (1,869,087) (4,226,021) (160,315,534) (10,100,288) (4,477,654) (4,466,171)
----------- ----------- ------------- ----------- ------------ -----------
Net increase (decrease)............. $ 5,830,089 $ 735,220 $ 117,138,299 $(2,646,761) $ 3,979,156 $ 879,165
=========== =========== ============= =========== ============ ===========
</TABLE>
<TABLE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
Note 5 - Capital Stock - Continued
CLASS B Year ended
December 31, 1995
----------------------------------------------------------------------------------------
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold........................... 343,025 349,690 15,481,272 357,639 70,295 490,136
Shares issued in reinvestment
of distributions................. 152,295 99,849 234,340 14,071 8,070 10,505
------------- ------------- ------------ ---------- ---------- ---------
495,320 449,539 15,715,612 371,710 78,365 500,641
Shares redeemed....................... (446,289) (866,250) (14,257,584) (35,443) (602) (10,556)
------------- ------------- ------------ ---------- ---------- ---------
Net increase (decrease).......... 49,031 (416,711) 1,458,028 336,267 77,763 490,085
============= ============= ============ ========== ========== =========
Proceeds from shares sold............. $ 6,179,416 $ 2,015,748 $ 15,481,272 $5,811,595 $1,391,416 $9,158,900
Proceeds from shares issued in
reinvestment of distributions... 2,852,206 576,412 234,340 255,253 168,855 213,141
------------- ------------- ------------ ---------- ---------- --------
9,031,622 2,592,160 15,715,612 6,066,848 1,560,271 9,372,041
Cost of shares redeemed............... (8,006,821) (5,019,616) (14,257,584) (573,918) (12,027) (180,773)
------------- ------------- ------------ ---------- ---------- --------
Net increase (decrease).......... $ 1,024,801 $ (2,427,456) $ 1,458,028 $5,492,930 $1,548,244 $9,191,268
============= ============= ============ ========== ========== ==========
</TABLE>
<TABLE>
CLASS B Year ended
December 31, 1995
----------------------------------------------------------------------------------------
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold........................... 270,466 286,256 10,318,022 126,655 25,669 24,891
Shares issued in reinvestment
of distributions................. 164,363 126,951 78,144 8,296 1,016 426
------------- ------------- ------------ ---------- ---------- --------
434,829 413,207 10,396,166 134,951 26,685 25,317
Shares redeemed....................... (1,180,563) (1,067,618) (8,446,585) (15,306) (5,867) (2,412)
------------- ------------- ------------ ---------- ---------- --------
Net increase (decrease).......... (745,734) (654,411) 1,949,581 119,645 20,818 22,905
============= ============= ============ ========== ========== ========
Proceeds from shares sold............. $ 4,609,337 $ 1,688,695 $ 10,318,022 $1,866,084 $ 477,808 $382,977
Proceeds from shares issued in
reinvestment of distributions... 2,779,819 746,462 78,144 119,292 18,368 6,693
------------- ------------- ------------ ---------- ---------- --------
7,389,156 2,435,157 10,396,166 1,985,376 496,176 389,670
Cost of shares redeemed............... (18,699,042) (6,288,525) (8,446,585) (234,200) (109,810) (36,877)
------------- ------------- ------------ ---------- ---------- --------
Net increase (decrease).......... $ (11,309,886) $ (3,853,368) $ 1,949,581 $1,751,176 $ 386,366 $352,793
============= ============= ============ ========== ========== ========
</TABLE>
<TABLE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1996
Note 5 - Capital Stock - Continued
<CAPTION>
March 30, 1995
(commencement of operations)
Year ended through
December 31, 1996 December 31, 1995
----------------- -----------------
CLASS C - Davis Government Money Market Fund
<S> <C> <C>
Shares sold............................................. 4,821,807 677,165
Shares issued in reinvestment
of distributions................................... 69,986 4,412
------------ ------------
4,891,793 681,577
Shares redeemed......................................... (4,652,503) (206,389)
------------ ------------
Net increase....................................... 239,290 475,188
============ ============
Proceeds from shares sold............................... $ 4,821,807 $ 677,165
Proceeds from shares issued in
reinvestment of distributions...................... 69,986 4,412
------------ ------------
4,891,793 681,577
Cost of shares redeemed................................. (4,652,503) (206,389)
------------ ------------
Net increase....................................... $ 239,290 $ 475,188
============ ============
</TABLE>
<TABLE>
December 11, 1996 December 11, 1996
(commencement (commencement
of operation) through of operation) through
December 31, 1996 December 31, 1996
----------------- -----------------
<CAPTION>
CLASS Y
DAVIS DAVIS
CONVERTIBLE REAL
SECURITIES ESTATE
FUND FUND
---- ----
<S> <C> <C>
Shares sold............................................. 1,462,032 833,978
Shares issued in reinvestment
of distributions................................... 108,436 15,891
------------ ------------
1,570,468 849,869
Shares redeemed......................................... (19,849) -
------------ ------------
Net increase....................................... 1,550,619 849,869
============ ============
Proceeds from shares sold............................... $ 31,272,873 $ 16,116,495
Proceeds from shares issued in
reinvestment of distributions...................... 2,323,787 336,093
------------ ------------
33,596,660 16,452,588
Cost of shares redeemed................................. (439,996) -
------------ ------------
Net increase....................................... $ 33,156,664 $ 16,452,588
============ ============
</TABLE>
Note 6 - CISTODY FEES
Under an agreement with the custodian bank, custody fees are
reduced by credits for cash balances. Such reductions amounted to
$2,927, $2,098, $186, $4,153, $2,058 and $2,333 for Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Government Money
Market Fund, Davis Financial Fund, Davis Convertible Securities Fund and
Davis Real Estate Fund, respectively.
Note 7- NOTE 7- NOTE RECEIVABLE
At December 31, 1996, Davis Financial Fund owned a note receivable
from the Robert Plan Corporation in the amount of $1,999,950. Principal
plus accrued interest at 5% over the prime rate of The Chase Manhattan
Bank is payable in eight equal installments on January 31, 1997, April 30,
1997, July 31, 1997, October 31, 1997, January 30, 1998, April 30, 1998,
July 31, 1998 and October 30, 1998.
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GROWTH OPPORTUNITY FUND
=================================================================================================================================
The following financial information represents selected data for
each share of capital stock outstanding throughout each period:
Class A
<CAPTION>
One Month
ended
-----Year Ended December 31,----- December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period..................................... $ 17.25 $ 12.83 $ 13.70
------- ------- -------
Income (Loss) From Investment Operations
- -----------------------------------------
Net Investment
Income (Loss)............................. (0.13) (0.11) (0.01)
Net Gains or Losses
on Securities (both realized
and unrealized)........................... 3.37 6.08 (0.29)
------- ------- -------
Total From Investment
Operations.............................. 3.24 5.97 (0.30)
------- ------- -------
Less Distributions
- ------------------
Dividends (from net
investment income)........................ _ _ _
Distributions (from
capital gains)............................ (1.55) (1.55) (0.57)
Distributions (from
paid-in capital........................... (0.01) _ _
------- ------- -------
Total Distributions....................... (1.56) (1.55) (0.57)
------- ------- -------
Net Asset Value,
End of Period............................... $ 18.93 $ 17.25 $ 12.83
======= ======= =======
Total Return<F1>.............................. 18.73%4 6.65% (2.21)%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)............................. $ 27,158 $ 22,890 $ 12,455
Ratio of Expenses to
Average Net Assets........................ 1.49%<F2> 1.51% 1.42%<F3>
Ratio of Net Income to
Average Net Assets........................ (0.76)% (0.71)% (0.08)%<F3>
Portfolio Turnover Rate..................... 30.55% 30.07% 37.31%
Average Commission Rate per share........... $0.0454 _ _
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement was 1.48% for 1996. Prior to
1996, such reductions were reflected in the expenses ratios.
<F3> Annualized
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GROWTH OPPORTUNITY FUND
=================================================================================================================================
The following financial information represents selected data for
each share of capital stock outstanding throughout each period:
Class B
---------------------------Class B------------------------------
<CAPTION>
Year ended December 31,
-----------------------------------------------------------
1996 1995 1994 1993<F1> 1992<F1>
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period........................... $ 17.08 $ 12.82 $ 14.67 $ 13.25 $ 13.73
------- -------- -------- -------- --------
Income (Loss) From Investment
- -----------------------------
Operations
- ----------
Net Investment
Income (Loss)...................... (0.27) (0.26) (0.12) (0.07) (0.07)
Net Gains or Losses
on Securities
(both realized and
unrealized)........................ 3.33 6.07 (1.11) 1.54 (0.32)
-------- -------- -------- -------- --------
Total From Investment
Operations....................... 3.06 5.81 (1.23) 1.47 (0.39)
-------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends (from net
investment income)................ - _ _ (0.05) _
Distributions (from
capital gains) (1.55) (1.55) (0.62) _ _
Distributions (from
paid-in capital)................. (0.01) _ _ _ (0.09)
------- -------- -------- -------- --------
Total Distributions............... (1.56) (1.55) (0.62) (0.05) (0.09)
------- -------- -------- -------- --------
Net Asset Value,
End of Period....................... $ 18.58 $ 17.08 $ 12.82 $ 14.67 $ 13.25
======= ======== ======== ======== ========
Total Return<F2> 17.86% 45.44% (8.45)% 11.16% (2.86)%
- ------------..........................
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)....................... $ 39,343 $ 35,326 $ 36,087 $ 51,762 $ 46,958
Ratio of Expenses to
Average Net Assets................ 2.25%<F3> 2.30% 2.15% 2.39% 2.55%
Ratio of Net Income to
Average Net Assets................ (1.52)% (1.50)% (0.81)% (0.55)% (0.54)%
Portfolio Turnover Rate............. 30.55% 30.07% 37.31% 38.93% 39.01%
Average Commission Rate per share... $0.0454 _ _ _ _
<FN>
<F1> 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 business of January 7, 1994.
<F2> Sales charges are not reflected in calculation.
<F3> Ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement was 2.25% for 1996. Prior to
1996, such reductions were reflected in the expenses ratios.
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GOVERNMENT BOND FUND
=================================================================================================================================
The following financial information represents selected data for
each share of capital stock outstanding throughout each period:
Class A
<CAPTION>
One Month
ended
-----Year Ended December 31,----- December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period........................ $ 6.00 $ 5.79 $ 5.78
------- ------ ------
Income (Loss) From Investment Operations
- -----------------------------------------
Net Investment Income...................... 0.33 0.39 0.02
Net Gains or Losses on
Securities (both realized
and unrealized).......................... (0.14) 0.27 (0.01)
------- ------ ------
Total From Investment
Operations............................. 0.19 0.66 0.01
------- ------ ------
Less Distributions
- ------------------
Dividends (from net
investment income)....................... (0.33) (0.36) _
Distributions (from
paid-in capital)......................... (0.10) (0.09) _
------- ------ ------
Total Distributions...................... (0.43) (0.45) _
------- ------ ------
Net Asset Value, End of Period............... $ 5.76 $ 6.00 $ 5.79
======= ====== ======
Total Return<F1>............................. 3.40% 11.82% (0.97)%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)............................ $ 18,129 $ 21,485 $ 20,035
Ratio of Expenses to
Average Net Assets....................... 1.77% 1.74% 1.64%<F2>
Ratio of Net Income to
Average Net Assets....................... 5.88% 6.54% 6.22%<F2>
Portfolio Turnover Rate.................... 45.50% 41.04% 62.17%
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Annualized
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GOVERNMENT BOND FUND
=================================================================================================================================
The following financial information represents selected data for
each share of capital stock outstanding throughout each period:
Class B
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------
1996 1995 1994 1993<F1> 1992<F1>
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period................. $ 5.98 $ 5.79 $ 6.33 $ 6.61 $ 6.88
------ ------ ------ ------ ------
Income (Loss) From Investment
Operations
- -----------------------------
Net Investment Income............... 0.29 0.34 0.31 0.36 0.37
Net Gains or Losses on
Securities (both realized
and unrealized)................... (0.13) 0.26 (0.37) (0.12) (0.10)
------ ------ ------ ------ ------
Total From Investment
Operations...................... 0.16 0.60 (0.06) 0.24 0.27
------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net
investment income)................ (0.29) (0.33) (0.37) (0.42) (0.27)
Distributions (from
paid-in capital).................. (0.10) (0.08) (0.11) (0.10) (0.27)
------ ------ ------ ------ ------
Total Distributions................. (0.39) (0.41) (0.48) (0.52) (0.54)
------ ------ ------ ------ ------
Net Asset Value, End of Period........ $ 5.75 $ 5.98 $ 5.79 $ 6.33 $ 6.61
====== ====== ====== ====== ======
Total Return.......................... 22.78% 10.62% (0.97)% 3.69% 4.14%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)..................... $ 12,959 $ 15,976 $ 19,241 $ 50,080 $ 54,422
Ratio of Expenses to
Average Net Assets................ 2.53%<F3> 2.51% 2.38% 2.37% 2.51%
Ratio of Net Income to
Average Net Assets................ 5.13% 5.77% 5.48% 5.52% 5.83%
Portfolio Turnover Rate............. 45.50% 41.04% 62.17% 42.82% 81.28%
<FN>
<F1> Per share calculations other than distributions were based on
average shares outstanding during the period.
<F2> Sales charges are not reflected in calculation.
<F3> Ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement was 2.52% for 1996. Prior to
1996, such reductions were reflected in the expenses ratios.
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GOVERNMENT MONEY MARKET FUND
=================================================================================================================================
The following financial information for each respective fund representsselected data for each share of capital stock outstanding
throughout each period.
Class A
<CAPTION>
Year ended
December 31,
------------------------------------------------------------
1996 1995 1994 1993 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.................................... 047 .051 .034 .020 .027
Less Distributions
- ------------------
Dividends (from net
investment income)........................ (.047) (.051) (.034) (.020) (.027)
------- ------- ------- ------- -------
Net Asset Value, End of
Period...................................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return
- ------------.................................. 4.80% 5.25% 3.48% 2.01% 2.70%
Ratios/Supplemental Data
- ------------------------
Net Assets, End of
Period (000
omitted).................................. $ 406,547 $ 357,118 $ 239,980 $ 39,531 $ 42,410
Ratio of Expenses
to Average
Net Assets................................ 0.66% 0.73% 0.64% 1.15% 1.14%
Ratio of Net Income
to Average
Net Assets................................ 4.72% 5.13% 3.43% 1.98% 2.68%
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GOVERNMENT MONEY MARKET FUND
=================================================================================================================================
The following financial information for each respective fund represents
selected data for each share of capital stock outstanding throughout each
period.
----------Class B---------- ----------CLASS C----------
<CAPTION>
December 8, 1994 March 30, 1995
(Commencement (Commencement
Year of operations) Year of operations)
Ended through Ended through
December 31, December 31, December 31, December 31,
--------------- ------------ ------------ ------------
1996 1995 1994 1996 1995
---- ---- ---- ---- ----
<S> <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............................... .047 .051 .003 .047 .041
Less Distributions
- ------------------
Dividends (from net
investment income)................... (.047) (.051) (.003) (.047) (.041)
Net Asset Value, End of
Period................................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return............................. 4.80% 5.25% 0.34% 4.80% 4.21%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of
Period (000 omitted)................. $ 4,155 $ 2,697 $ 747 $ 714 $ 475
Ratio of Expenses
to Average Net Assets................ 0.66% 0.73% 0.64%<F1> 0.66% 0.73%<F1>
Ratio of Net Income
to Average Net Assets................ 4.72% 5.13% 3.43%<F1> 4.72% 5.13%<F1>
<FN>
<F1> Annualized
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS FINANCIAL FUND
=================================================================================================================================
The following financial information for each respective fund represents
selected data for each share of capital stock outstanding throughout each
period.
Class A
<CAPTION>
Year Ended
December 31,
--------------------------------------------------------
1996 1995 1994 1993<F3> 1992<F2>
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period....................... $ 14.50 $ 10.68 $ 11.70 $ 11.20 $ 8.76
------- ------- ------- ------- ------
Income (Loss) From Investment Operations
- ------------------------------------------
Net Investment Income..................... 0.14 0.07 0.08 0.07 0.05
Net Gains or Losses on
Securities (both realized
and unrealized)......................... 4.44 5.32 (0.61) 1.59 2.79
------- ------- ------- ------- ------
Total From Investment
Operations.......................... 4.58 5.39 (0.53) 1.66 2.84
------- ------- ------- ------- ------
Less Distributions
- ------------------
Dividends (from net
investment income)...................... (0.15) (0.07) (0.08) (0.08) (0.05)
Distributions (from
capital gains).......................... (0.87) (1.50) (0.39) (1.08) (0.35)
Distributions (from
paid-in capital)........................ _ _ (0.02) _ _
------- ------- ------- ------- ------
Total Distributions................... (1.02) (1.57) (0.49) (1.16) (0.40)
------- ------- ------- ------- ------
Net Asset Value, End of Period............. $ 18.06 $ 14.50 $ 10.68 $ 11.70 $ 11.20
======= ======= ======= ======= =======
Total Return <F1>.......................... 31.50% 50.51% (4.55)% 14.87% 32.67%
- -------------
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted).......................... $107,579 $79,874 $57,670 $50,778 $31,660
Ratio of Expenses to
Average Net Assets..................... 1.15% 1.18% 1.24% 1.32% 1.68%
Ratio of Net Income
to Average Net Assets.................. 0.92% .53% 0.67% 0.57% 0.43%
Portfolio Turnover Rate.................. 25.78% 41.89% 43.95% 70.33% 49.64%
Average Commission Rate per share........ $0.0518 _ _ _ _
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Reflects the reimbursement of certain expenses by the Fund's
investment manager.
<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 business on January 7,
1994.
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS FINANCIAL FUND
=================================================================================================================================
The following financial information for each respective fund represents
selected data for each share of capital stock outstanding throughout each
period.
Class B
<CAPTION>
December 27, 1994
(Commencement
of operations)
through
-------Year Ended December 31,------- December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period..................... $ 14.41 $ 10.68 $ 11.22
Income (Loss) From Investment Operations
- ----------------------------------------
Net Investment Income................... 0.01 0.01 0.03
Net Gains or Losses on
Securities (both realized
and unrealized)....................... 4.37 5.22 (0.13)
Total From
Investment Operations............. 4.38 5.23 (0.10)
Less Distributions
- ------------------
Dividends (from net
investment income).................... (0.01) _ (0.03)
Distributions (from
capital gains)........................ (0.87) (1.50) (0.39)
Distributions (from
paid-in capital)...................... _ _ (0.02)
Total Distributions................. (0.88) (1.50) (0.44)
Net Asset Value, End of
Period.................................. $ 17.91 $ 14.41 $ 10.68
Total Return <F1>......................... 30.29% 49.00% (0.90)%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)......................... $ 8,213 $ 1,762 $ 28
Ratio of Expenses to
Average Net Assets.................... 2.04% 2.09% 2.04%<F2>
Ratio of Net Income
to Average Net Assets................. 0.19% (0.38)% (0.13)%<F2>
Portfolio Turnover Rate................. 25.78% 41.89% 43.95%
Average Commission Rate per share....... $ 0.0518 _ _
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Annualized
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS CONVERTIBLE SECURITIES FUND
=================================================================================================================================
The following financial information represents selected data for each
share of capital stock outstanding throughout the period.
Class A
<CAPTION>
May 1, 1992
Year (Commencement
Ended of operations)
December 31, through
----------------------------------------------------
1996 1995 1994 1993 December 31, 1992
---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.............. $ 18.22 $ 15.57 $ 17.45 $ 15.73 $ 14.29
------- ------- ------- ------- -------
Income From Investment
- -----------------------
Operations
- ----------
Net Investment Income............ 0.71 0.67 0.67 0.67 0.40
Net Gains or Losses on
Securities (both realized
and unrealized)................ 4.56 3.42 (1.83) 2.02 1.44
------- ------- ------- ------- -------
Total From Investment
Operations................. 5.27 4.09 (1.16) 2.69 1.84
------- ------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net
investment income)............. (0.69) (0.66) (0.67) (0.67) (0.40)
Distributions (from
capital gains)................. (1.54) (0.78) (0.05) (0.30) _
Distributions (from
paid-in capital)............... (0.04) _ _ _ _
------- ------- ------- ------- -------
Total Distributions.......... (2.27) (1.44) (0.72) (0.97) (0.40)
------- ------- ------- ------- -------
Net Asset Value, End of Period..... $ 21.22 $ 18.22 $ 15.57 $ 17.45 $ 15.73
======= ======= ======= ======= =======
Total Return <F1>.................. 29.46% 26.68% (6.72)% 14.87% 19.95%<F2>
- ---------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted).................. $42,841 $59,757 $47,844 $50,778 $24,323
Ratio of Expenses to
Average Net Assets............. 1.05% 1.14% 1.20% 1.32% 1.35%
Ratio of Net Income
to Average Net Assets.......... 3.34% 3.87% 4.06% 0.57% 4.94%
Portfolio Turnover Rate.......... 43.16% 53.58% 45.15% 70.33% 11.51%
Average Commission Rate
per share...................... $ 0.0552 _ _ _ _
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Annualized
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS CONVERTIBLE SECURITIES FUND
=================================================================================================================================
The following financial information represents selected data for each
share of capital stock outstanding throughout the period.
---------------Class B---------------- ----------CLASS Y----------
<CAPTION>
February 3, 1995 December 11, 1996
(Commencement (Commencement
Year of operations) of operations
Ended through through
December 31, December 31, December 31,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period.................... $ 18.14 $ 15.95 $ 21.39
------- ------- -------
Income From Investment
- -----------------------
Operations
- ----------
Net Investment Income.................. 0.59 0.54 0.07
Net Gains or Losses on
Securities (both realized
and unrealized)...................... 4.45 2.97 1.44
------- ------- -------
Total From Investment
Operations....................... 5.04 3.51 1.51
------- ------- -------
Less Distributions
- ------------------
Dividends (from net
investment income)................... (0.56) (0.54) (0.06)
Distributions (from
capital gains)....................... (1.54) (0.78) (1.54)
Distributions (from
paid-in capital)..................... (0.03) _ (0.01)
------- ------- -------
Total Distributions................ (2.13) (1.32) (1.61)
------- ------- -------
Net Asset Value, End of Period........... $ 21.05 $ 18.14 $ 21.29
======= ======= =======
Total Return <F1>........................ 28.21% 25.31% 7.01%
- -------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted)........................ $ 2,075 $ 378 $ 33,006
Ratio of Expenses to
Average Net Assets................... 2.01%<F2> 2.01%<F3> 0.98%<F3>
Ratio of Net Income
to Average Net Assets................ 2.40% 3.00%<F3> 3.11%<F3>
Portfolio Turnover Rate................ 43.16% 53.58% 43.16%
Average Commission
Rate per share....................... $ 0.0552 - $ 0.0552
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Ratio of expenses to average net assets after the reduction of custodian fees
under a custodian agreement was 2.00% for Class B shares for 1996. Prior to
1996, such reductions were reflected in the expenses ratios.
<F3> Annualized
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS REAL ESTATE FUND
=================================================================================================================================
The following financial information represents selected data for each
share of capital stock outstanding throughout the period.
Class A
<CAPTION>
January 3, 1994
Year (Commencement
Ended of operations)
------------December 31,----------- through
December 31,
1996<F1> 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 16.44 $ 14.72 $ 14.29
Income From Investment Operations
- ---------------------------------
Net Investment Income.............................. 0.71 0.82 0.62
Net Gains on Securities (both
realized and unrealized)......................... 5.22 1.71 0.55
Total From Investment Operations5.932.531.17
Less Distributions
- ------------------
Dividends (from net investment
income).......................................... (0.70) (0.81) (0.62)
Distributions (from capital
gains)........................................... (0.25) _ (0.12)
Distributions (from paid-in capital)............... (0.18) (1.13) _
Total Distributions............................ (0.81) _ (0.74)
Net Asset Value, End of Period....................... $ 21.24 $ 16.44 $ 14.72
Total Return<F2>..................................... 37.05% 17.70% 8.25%<F4>
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000 omitted)............ $32,507 $29,320 $25,450
Ratio of Expenses to Average Net
Assets........................................... 1.32%<F3> 1.43% 1.86%<F4>
Ratio of Net Income to Average
Net Assets....................................... 3.95% 5.44% 3.98%<F4>
Portfolio Turnover Rate............................ 18.60% 38.82% 35.80%
Average Commission Rate per share.................. $0.0600 _ _
<FN>
<F1> Per share calculations other than distributions were based on
average shares outstanding during the period.
<F2> Sales charges are not reflected in calculation.
<F3> Ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement was 1.37% for 1996. Prior to
1996, such reductions were reflected in the expenses ratios.
<F4> Annualized
</FN>
</TABLE>
<TABLE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS REAL ESTATE FUND
=================================================================================================================================
The following financial information represents selected data for each
share of capital stock outstanding throughout the period.
-------------------Class B---------------------- ---------- Class Y----------
<CAPTION>
December 27, 1994 December 8,1996
(Commencement (Commencement
Year of operations) of operations
Ended through through
December 31, December 31, Decemaber 31,
1996<F1> 1995 1994 1996
---- ---- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 16.41 $ 14.72 $ 14.73 $ 19.29
------- ------- ------- -------
Income From Investment
- ----------------------
Operations
- ----------
Net Investment Income............ 0.56 0.68 0.02 0.13
Net Gains on Securities (both
realized and
unrealized).................... 5.21 1.70 0.11 2.35
------- ------- ------- -------
Total From Investment
Operations................. 5.77 2.38 0.13 2.48
------- ------- ------- -------
Less Distributions
Dividends (from net investment
income)........................ (0.63) (0.69) (0.02) (0.13)
Distributions (from capital
gains)......................... (0.25) _ (0.12) (0.25)
Dividends (from paid-in capital). (0.11) _ _ (0.02)
------- ------- ------- -------
Total Distributions.......... (0.99) (0.69) (0.14) (0.40)
------- ------- ------- -------
Net Asset Value, End of Period..... $ 21.19 $ 16.41 $ 14.72 $ 21.37
------- ------- ------- -------
Total Return<F2>................... 35.99% 16.59% 0.89% 12.89%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000 omitted).................. $ 10,919 $ 414 $ 34 $18,165
Ratio of Expenses to Average Net
Assets......................... 2.22% 2.39% 2.64%<F2> 1.18%<F2>
Ratio of Net Income to Average
Net Assets..................... 3.46% 4.48% 3.20%<F3> 4.22%<F3>
Portfolio Turnover Rate.......... 18.60% 38.82% 35.80% 18.60%
Average Commission Rate
per share...................... $ 0.0600 _ _ $0.0600
<FN>
<F1> Per share calculations other than distributions were based on
average shares outstanding during the period.
<F2> Sales charges are not reflected in calculation.
<F3> Annualized
</FN>
</TABLE>
DAVIS SERIES, INC.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
=============================================================================
To the Shareholders and Board of Directors
of Davis Series, Inc.
We have audited the accompanying statement of assets and
liabilities of Davis Series, Inc., (comprising, respectively, the Davis
Growth Opportunity Fund, Davis Government Bond Fund, Davis Government
Money Market Fund, Davis Financial Fund, Davis Convertible Securities
Fund and Davis Real Estate Fund) including the schedules of portfolio
investments as of December 31, 1996 and the related statements of
operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated thereon. 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
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 Davis Series, Inc. 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 in the period then ended and the financial highlights for
each of the periods indicated thereon, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 5, 1997
Davis Series, INC.
124 East Marcy Street Santa Fe, New Mexico 87501
=============================================================================
Directors Officers
Jeremy B. Biggs Jeremy H. Biggs
Wesley E. Bass, Jr. Chairman
Marc P. Blum Shelby M.C. Davis
Shelby M.C. Davis President
Eugene M. Feinblatt Carl R. Luff
Jerry D. GeistVice President, Treasurer
D. James Guzy & Assistant Secretary
G. Bernard Hamilton Eileen R. Street
LeRoy E. Hoffberger Vice President, Secretary
Laurence W. Levine & Assistant Treasurer
Christian R. Sonne Carolyn H. Spolidoro
Edwin R. Werner Vice President
Christopher C. Davis
Vice President
Andrew A. Davis
Vice President
Investment Adviser & Distributor
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
Transfer Agent & Custodian
State Street Bank and Trust Company
c/o The Davis Funds
P.O. Box 8406
Boston, MA 02266-8406
Counsel
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
Auditors
Tait, Weller & Baker
Two Penn Center, Suite 700
Philadelphia, Pennsylvania 19102-1707
============================================================================
For more information about Davis Series, Inc. including management fee,
charges and expenses, see the current prospectus which must precede or
accompany this report.
============================================================================
9702-15 DS80
