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SEMI-ANNUAL REPORT
DAVIS FUNDS
"OVER 25 YEARS OF RELIABLE INVESTING"
JUNE 30, 1999
DAVIS GROWTH OPPORTUNITY FUND
DAVIS FINANCIAL FUND
DAVIS REAL ESTATE FUND
DAVIS CONVERTIBLE SECURITIES FUND
DAVIS GOVERNMENT BOND FUND
DAVIS GOVERNMENT MONEY MARKET FUND
(part of Davis Series Inc.)
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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Dear Fellow Shareholder,
As investors of your money and ours, we constantly have to strike an emotional
balance between greed and fear. On days when the market is advancing, we
inevitably wish we had more money in the stocks that are going up the fastest.
And on days when the market is declining, we become fearful about the stocks we
own that are going down the most.
To help us control these powerful emotions, we have developed a discipline over
the years that focuses on buying growth companies at a value price and holding
them for the long haul. Normally, we do not buy the fastest growing companies,
in spite of our greed, because of our fear that when markets turn down these
stocks potentially have the farthest to fall. Similarly, we don't buy
"non-growth" value companies just because they are cheap since we always want to
aim for growth in our portfolios.
In effect, we think growth and value are joined at the hip. No one would really
ever want to own a no-growth stock, but everyone wants to buy growth. Our
strategy is a compromise in that we try to buy decent growth at a value price.
In a sense, the world of investing is a world of making choices, and the stock
market is not unlike the supermarket. We know when we go into the supermarket
that we are going to buy something because we need to eat. Our task is to pick
from the wide variety of brands available, those particular food products that
will provide us with the right kind of bodily nourishment. Similarly, when the
stock market opens its doors, we are likely to buy something. Our job is to pick
from the diverse array of stocks available and buy only those that we think will
enhance our financial nourishment. In both instances, we want to stay within our
budget. What we are looking for as investors is growth on sale. Our stock
choices tend to be good quality merchandise offered at a fair price. We are not
interested in buying premium-priced companies or bargain-basement specials.
As we move through the last year of this millennium with the stock market in
uncharted territory, we know that we will encounter numerous crosscurrents and
variables that could affect corporate earnings. These range from uncertainties
regarding the Presidential election in the year 2000 to the possibility of a
worldwide economic recovery that could rekindle inflation. In addition, we live
in an era of rapid technological change, which is reshaping the economic
landscape and creating both new opportunities and risks for a wide variety of
industries and companies.
In such an environment, we recognize that we will continue to be buffeted by the
conflicting emotions of greed and fear. But we are not going to turn our backs
on stocks. As long-term investors, we intend to remain true to our investment
discipline of using intensive research to buy well-managed growth companies at a
value price. We are confident that this discipline will guide us through
whatever financial storms may come our way, providing opportunities for
compounding of wealth over time (1).
Sincerely,
/s/ Shelby M. C. Davis
- -----------------------------------
Shelby M. C. Davis
Chief Investment Officer
August 12, 1999
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS FINANCIAL FUND
PERFORMANCE OVERVIEW
o The Davis Financial Fund outperformed its peer group, with the Class A
shares generating a total return on net asset value of 9.17% for the
six-month period and 10.23% for the one-year period ended June 30,
1999.(2) By way of comparison, the funds included in Lipper Analytical
Services' financial services funds category provided average returns of
7.20% and 2.16%, respectively, for the same time periods.(3)
o Morningstar has awarded the Fund its highest ***** (five-star) rating
overall.(4) According to Morningstar, Portfolio Managers Chris Davis and
Ken Charles Feinberg "know their universe inside and out--a key factor
behind the fund's stellar risk/reward profile....it's clearly one of the
category's most attractive options for the long run." (5)
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS
Q. To what do you attribute the Fund's performance so far this year?
A. The first half of 1999 has been a moderately difficult environment for
financial stocks. While the earnings reports of many of our companies have been
quite favorable, price/earnings multiples for many financial companies in
general have not increased at a rate commensurate with the S&P 500. In the short
run, this has meant that the Davis Financial Fund as well as most financial
funds have underperformed the S&P 500.
One primary reason for this relative underperformance is that the conventional
wisdom on Wall Street says that financial stocks trail the market during periods
of Federal Reserve tightening and rising interest rates. The current modestly
restrictive Federal Reserve posture has very likely encouraged some large
investment firms with shorter term performance goals to reduce holdings of
financial stocks.
So far in 1999, the Federal Reserve has raised the federal funds rate once by 25
basis points. In all likelihood, such an increase neither meaningfully threatens
the growth rate of the economy nor hurts the earnings outlook for financial
companies. However, investors are concerned that should inflation reaccelerate
to the point to cause the Federal Reserve to significantly raise short-term
interest rates, the economy could materially slow down. This outcome could
adversely impact financial institutions such as banks and consumer finance
companies as increasing unemployment, eroding consumer confidence, slowing loan
demand and rising credit losses would affect earnings growth.
The current economic environment, however, continues to be excellent as credit
losses remain generally stable, reflecting the strength of corporate America's
balance sheet and rising discretionary income among consumers due to record low
unemployment and favorable mortgage rates. Neither Chris nor I devote much time
to predicting the short-term direction of interest rates or what actions the
Federal Reserve might take down the road as very few economists and investors
have any long-term track record of accurately forecasting these moves. We always
love to quote Warren Buffett, who said, "Forecasts tell you more about the
forecaster than they do about the future."
2
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
To reduce our risk as investors, however, we carefully evaluate and monitor the
fundamentals of all our companies as well as the quality and depth of the
management teams who will lead them through different economic environments. We
sleep well at night knowing that the Fund is well diversified with outstandingly
managed companies in several different financial services industries. In fact,
modestly rising interest rates can be good for the earnings of banks as the net
interest spread between their cost of funds and the rates they earn on loans
actually rises, thereby increasing net interest income. Similarly, the earnings
of property casualty stocks can benefit from higher interest rates as new cash
is reinvested at higher yields, thereby boosting net investment income earned on
their huge bond portfolios.
Q. What holdings were important contributors to Fund performance in the first
half?
A. The Fund's performance was aided by significant gains in some of our favorite
holdings, including American Express, Providian, Household International and
Citigroup.(6) We continue to be extremely excited about the outlook for these
companies due to their outstanding management teams, high and increasing returns
on equity, strong balance sheets, and significant long-term growth
opportunities. All four companies are also aggressively repurchasing shares with
their considerable excess cash flow.
However, performance continues to be dragged down by our investments in property
casualty stocks. Commercial lines insurers have been fighting through the
difficult headwind of falling insurance rates for the past ten years. For most
of this period, insurers were able to post reasonable results because the costs
to pay claims was also falling due to the overall decrease in claims inflation,
particularly lower medical costs and jury awards. Unfortunately for insurers,
the cost to settle claims began rising a year or so ago making the rates
insurers charged woefully inadequate. Instead of increasing rates to an
appropriate level to offset these rising costs, the general response of this
fragmented, undisciplined industry has been to ignore the worsening cost trends.
The bad news is that the losses from these underpriced policies are now coming
in and are significantly pressuring reported earnings--a process one CEO
described as the chickens coming home to roost.
The good news is that commercial lines insurers are now feeling enough pain that
they have little choice but to respond. The boards of directors of a few
companies have even replaced their CEOs, which has helped focus the industry on
the gravity of the current situation. The fact that rates in several specialty
lines are now rising above the inflation in claims loss costs at least gives us
reason to be a little optimistic. However, our outlook remains tempered as there
is still far too much capital chasing too few insurance premiums. We can only
hope that the current momentum builds and insurers again learn that corporations
expect to pay a fair price for a product that is as necessary and important as
insurance protection. Positions such as American International Group, Chubb,
Cincinnati Financial, Transatlantic Holdings, RLI Corp. and Travelers would be
big beneficiaries if the insurance rate picture continues to improve.(6)
3
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
Q. What is your outlook for financial stocks?
A. In our semi-annual report one year ago, we noted how financial services
companies had been outstanding investments for most of this decade on both an
absolute basis as well as relative to the S&P 500.(7) At that time, we also
expressed growing concern that price/earnings multiples for the group had risen
and investor expectations were running particularly high. Today, however,
investors appear less eager to own financial stocks due to the short-term
concerns over interest rates we discussed earlier, and price/earnings multiples
have generally come down. While first-class banks sold at a 33% discount to the
market one year ago, they now trade at almost a 50% discount. Discounts to the
market multiple have been this large only one other time in the last 50 years.
As a result, we believe the risk/reward trade-off for these stocks is
increasingly attractive.
However, there are potential near-term and long-term issues that could hurt the
outlook for banks in particular. These issues include: possible year 2000
computer disruptions; the impact of the Internet on existing bank franchises;
potentially sweeping regulatory reform from Congress that could permanently
alter the playing field; further encroachment into the banking business by
competitors with lower operating and regulatory costs, such as brokerage and
investment firms and credit card companies; as well as the continuing health of
the economy. We will stay intensely focused on how these and other trends impact
the operating environment for our companies.
Chris and I remain extremely excited about the long-term outlook for financial
services companies for a variety of reasons. These include: favorable
demographic trends, continued deregulation of huge overseas markets, ongoing
consolidation, the emergence of powerful brand-name companies and the strong
excess cash flow at many companies. We expect that our well-managed companies
will continue to represent outstanding investments and post earnings growth
faster than the overall market.(8)
MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS REAL ESTATE FUND
PERFORMANCE OVERVIEW
o The Davis Real Estate Fund's Class A shares provided a total return on net
asset value of 12.23% for the three-month period, 4.22% for the six-month
period and -6.50% for the one-year period ended June 30, 1999.2 By way of
comparison, the Morgan Stanley REIT (Real Estate Investment Trust) Index
returned 9.91%, 4.62% and -8.41%, respectively, for the same time
periods.(9)
o Since the Fund's inception on January 3, 1994, the Class A shares have
delivered an average annual total return on net asset value of 12.63%,
ranking the Fund #1 among the 12 real estate funds tracked by Lipper
Analytical Services over that time period.(10)
o According to Morningstar, "Davis Real Estate Fund has taken the
slow-and-steady route to the top of the real-estate universe. This fund has
consistency to thank for its top-flight five-year record.... This
consistency stems from manager Andrew Davis' emphasis on high-quality
companies.... On the strength of its record and manager, this fund would be
well-suited to anyone interested in real-estate stocks."(11)
4
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER
Q. Why should investors own real estate?
A. With the overall stock market at the high end of fairly valued and bond
yields at unattractive levels, real estate stocks may present an attractive
investment for both equity and fixed-income investors to buy today and put away.
A decade from now we think investors could find that real estate stocks that
were yielding 7% when they bought them in 1999 may be yielding 11% on their
cost. Moreover, to our mind, real estate stocks today represent the ideal Davis
Double Play. We're finding companies with excellent prospects for expanding
earnings and expanding price/earnings multiples that have the potential to
deliver multi year compounding of their stock prices.(8)
Q. Could you provide some perspective on the recent performance of real estate
stocks?
A. After a terrible 18-month period, real estate appears to have finally found a
bottom and is gradually attracting value-oriented investors. The stocks that
have performed the best to date are large-cap, liquid real estate investment
trusts (REITs). These are the stocks that non-real-estate equity funds and other
big investors have tended to buy as they return to the sector. However, we
expect that to change because earnings drive stock prices in the long run.
What we've done in this environment is reduce the positions in the portfolio
from around 55 to 35 names and dramatically increase the weightings in our top
20 holdings.(6) We've examined the earnings growth rates of these companies
closely. While larger cap real estate stocks have outperformed smaller cap
stocks so far in 1999, many smaller companies have superior growth rates and
should be rewarded for those better growth rates over time. We've also
concentrated on company balance sheets--avoiding businesses with weaker balance
sheets and even selling companies with strong growth rates that we felt were too
highly leveraged.
Q. What are your favorite holdings now?
A. Among the companies we favor today are: Centerpoint Properties, an industrial
REIT; General Growth Properties, a mall REIT; Apartment Investment & Management
Company and Home Properties of New York, two apartment REITs; Boston Properties,
an office REIT; JDN Realty, a shopping center REIT; and Vornado, a diversified
REIT.(6)
These companies all have one thing in common: We believe they are superior
operators--and that is what real estate is all about today. Companies that know
how to operate not only in a development environment and in an acquisition
environment but also in an environment where raising rents and managing expenses
is critical are going to be the industry's real long-term winners.
Q. What concerns are continuing to hold back real estate stocks?
5
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER - CONTINUED
A. One of investors' biggest worries is that dividends may not be secure. The
REIT world as we know it today was born in 1991 at the end of the last major
downturn in real estate and has not yet gone through a complete economic cycle.
People are concerned that when the next recession comes, real estate will be
besieged by the same problems it suffered in the late 1980s and early 1990s.
Here's why we don't believe that will happen. The last time the economy went
into recession we had a huge amount of new real estate supply coming on stream,
primarily due to incentives provided in the tax code. What turned a recession
into such a calamity for real estate was that we had that excess supply to fill
just as the economy was slowing and demand plummeting.
This time if we go into a recession, demand will still slow. But we don't have
nearly the excess supply of prior cycles because the tax laws have been changed.
In fact, real estate markets across the country are now, for the most part, in
equilibrium. We think that should give people confidence that the next downturn
in the economy will not be so severe for real estate. If this is the case,
dividends on real estate stocks should, for the most part, be secure through the
next economic cycle.
Q. What is your long-term outlook?
A. While investors still have fears, we believe that these stocks will
ultimately trade better. In other words, their multiples will improve. We think
the real estate stocks we own are extremely attractive, and not just from an
income standpoint. Their growth rates are more secure than they have ever been.
Their managements are more seasoned and smarter. And their balance sheets look
good. The one drawback is that the stocks haven't been public long enough to
have proven their mettle through a full cycle. But we think they will come
through the cycle in fine form.
When you add together all the positives for real estate, you're getting
somewhere between an 11% and 15% potential total return from stocks that are
trading at around 9 times earnings. In our book that makes for a great value,
particularly when the S&P 500 is trading at about 30 times next year's earnings.
We expect real estate stocks will perform the best when market psychology turns
more cautious than it is today. However, that is really a matter of timing,
which has never been our focus at the Davis Funds. We are most concerned with
how the earnings of our portfolio companies are performing, and in that regard,
we are completely satisfied. Earnings of these companies have been up in the
double-digit range on average for the last five years--and that includes 1998
when their stock prices slumped. If you believe earnings are ultimately what
drive the value of stocks--and we do--you can't ignore real estate.
6
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
DAVIS CONVERTIBLE SECURITIES FUND
PERFORMANCE OVERVIEW
o The Davis Convertible Securities Fund's Class A shares delivered a total
return on net asset value of 13.14% for the six-month period and 10.83% for
the one-year period ended June 30, 1999.(2) In comparison, the funds
included in Lipper Analytical Services' convertible securities funds
category provided average returns of 11.03% and 8.80%, respectively, for
the latest six-month and one-year periods.(3)
o The Fund's Class A shares generated an average annual return on net asset
value of 19.64% for the latest three-year period and 18.10% for the latest
five-year period, ranking the Fund in the top 20% of all convertible
securities funds tracked by Lipper for those time periods.(10)
o Since the Fund's inception on May 1, 1992, it is the #2 ranked fund (out of
18 funds) its Lipper category.(10)
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER
Q. Looking at this year compared to last year in the convertibles market, what
lessons can be learned?
A. Over the past 18 months we've seen that convertible securities, like any
investment, can be subject to volatility in the near term, but we believe over
longer periods of time that the concept behind convertibles works. Convertible
securities can be exchanged for shares of the underlying common stock and,
therefore, combine features of both stocks and bonds. The Fund's goal is to
allow investors to participate in a substantial portion of equity market total
returns with a degree of downside protection.
Convertibles have looked much more attractive in 1999 primarily because they
performed so poorly relative to the equity markets in 1998. Ideally, with
convertibles, you want to receive as large a yield as possible while paying as
small a premium as you can over the price at which the securities are
convertible into common stock. Convertibles did not participate in the 1998
stock market advance because they were expensive--that is, their yields were
fairly low while their premiums were too high. With the stock market advancing
strongly last year while convertibles lagged, premiums naturally shrank but
yields did not change. As a result, convertible investors today are earning
better yields for the premiums they are paying.
The Davis Convertible Securities Fund has made a good start in 1999. At the same
time, we recognize we could have improved our performance in 1998 if we had
acted on our belief that the convertible market was overpriced and built up the
Fund's cash position. But market timing is not part of the long-term Davis
investment philosophy. Nor does our value-oriented approach allow us to chase
the sort of speculative investments, like Internet companies, that performed
well during 1998, and that hampered our results in the short run.
Q. What is your strategy for managing the Fund this year?
A. The stronger showing of the convertible market overall coupled with our
investments in several attractive industry groups have paved the way for good
Fund results this year. These groups include the financial, technology and real
estate sectors as well as selected energy positions.
7
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER - CONTINUED
Moreover, in 1999, we have reduced the number of positions and increased the
percentage of assets in the Fund's top 20 holdings, which we feel represent
exceptional values.(6) For example, Hewlett-Packard has been a large holding of
the Fund for some time and we made it an even larger position this year. This
turned out to be a smart move as both the stock and the convertible have enjoyed
excellent gains so far in 1999. Other strong performers among the Fund's top
names have been Motorola, American Express, American International Group, Devon
Energy and Premier Parks.(6)
Q. What is the Fund's investment discipline?
A. We have consistently employed a rigorous three-step investment process:
o First, we look for convertibles that represent good value by evaluating
more than 500 convertibles according to such factors as their break-even
time, call protection, yield advantage and conversion premium.
o Second, we analyze the investment potential of the underlying companies
using the time-tested Davis investment discipline to uncover strong,
well-managed companies with solid growth prospects.
o Third, having identified bargain convertibles with attractive underlying
stocks, we apply the 80%/50% rule. If we think the convertible can deliver
80% or more of the stock's upside potential while avoiding at least 50% of
its downside risk, that security is a candidate for purchase.(12)
This Fund is really about equity ownership. Some people think convertibles are a
"toe-in-the-water" kind of equity investment. But, with the Fund, our exposure
to equities is much greater. Instead of just having our toe in the water, we
have really gone in up to our waist.
Q. Looking ahead, what are your expectations for convertibles?
A. What we worry about the most is something we cannot control--namely, when
will we have the long-expected stock market correction. That is why we are being
so careful about what we pay for investments. Even in the event of sharp price
declines, we do not want to say let's sell them. We want to say let's buy more
because these are the kind of companies we want to own and these are the prices
we want to pay.
As an asset class, we believe that well-chosen convertibles can play an
important role in any portfolio by providing a reasonable proxy to the equity
market with a degree of downside protection.
MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS GROWTH OPPORTUNITY FUND
PERFORMANCE OVERVIEW
o The Davis Growth Opportunity Fund's Class A shares delivered a total return
on net asset value of 9.84% for the six-months ended June 30, 1999.(2) The
S&P 500 Index returned 12.38% over the same time period.(9)
o For the one-year period ending on the same date, the Fund's Class A shares
provided a total return on net asset value of 5.23% versus a return of
22.76% for the S&P 500.
8
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
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MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, MEMBER OF THE RESEARCH AND MANAGEMENT
TEAM
Q. Could you provide some perspective on the Fund's performance so far in 1999?
A. As we outlined in our most recent annual report to shareholders, 1999 will be
a year of transition for the Growth Opportunity Fund, and the long-term
performance results of this transition will not be known for some time. However,
since the Davis research team has taken on the management of the Fund, we are
all pleased with the quality of the companies we have purchased and the prices
at which these companies were acquired.
An important consequence of this transition has been the unlocking of capital
gains that had been accrued by shareholders over many years. Given the fairly
large amount of these gains, we felt it was appropriate to pay a special capital
gains distribution of $4.35 per share in July, 1999.
Q. Turning to the portfolio as it stands today, how have you managed the Fund so
far this year?
A. The Growth Opportunity Fund is comprised of the best small and mid-sized
companies that we on the research team know. The industries represented include
technology and communications as well as specialty finance and media. The Fund
continues to hold positions in larger companies that we have owned for many
years, including Fannie Mae (the Federal National Mortgage Association), Philip
Morris and Intel.(6) As we mentioned in our last report to shareholders, it is
generally our intention to buy only companies in the range of $1 to $10 billion
in size. But we will not sell a company out of the Fund simply because it has
outgrown this parameter.
The sectors that we own mirror the expertise of our research analysts in
specific areas and industries. For example, many of our holdings in technology
reflect the knowledge of our analyst Dwight Blazin. Some of our holdings in the
pharmaceutical and medical area reflect the input of Danton Goei. Likewise, we
have the expertise of my partner Ken Feinberg to thank for the companies we own
in the financial sector.
Based on the size and type of companies owned in the Growth Opportunity Fund, we
would expect results to be more volatile than in many of our other funds. This
is because we are seeking out companies with more aggressive growth prospects or
with less time-tested track records. However, we remain absolutely focused on
management quality, and it is our hope that many of the small and mid-cap names
that now make up the Growth Opportunity Fund will be the blue chips of tomorrow.
Q. What is your long-term outlook?
A. While we believe that much of the portfolio transition is now completed,
investors should be aware that the level of capital gains distributions will
remain quite high through the balance of the year. Our next scheduled
distribution is expected to be paid in November or December and will consist of
net long-term capital gains (if any) which may be realized since our July
distribution.
The entire research team remains very excited about owning in the Growth
Opportunity Fund many of the smaller and more aggressive companies that may not
yet be appropriate for our larger, more conservative mutual funds. As we
complete this transition period, we all look forward to reporting to you not
about the past but about the future.
9
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DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
DAVIS GOVERNMENT BOND FUND
PERFORMANCE OVERVIEW
o The Davis Government Bond Fund (Class A shares at net asset value) declined
2.50% for the six-months ended June 30, 1999.(2) Over the same time frame,
the 126 funds included in Lipper Analytical Services' intermediate U.S.
government fund category fell an average of 1.82%.(3)
o For the one-year period ending on the same date, the Fund's Class A shares
generated a total return of 0.78% on net asset value versus the average
return of 2.29% provided by the 123 intermediate U.S. government funds
tracked by Lipper.
A NEW PORTFOLIO MANAGER EFFECTIVE AUGUST 1, 1999
Effective August 1, 1999, Creston A. King, Chartered Financial Analyst, has been
named the portfolio manager of the Davis Government Bond Fund. Prior to joining
Davis Selected Advisers on June 30, 1999, he was a portfolio manager for U.S.
Global Investors, Inc. where he managed two Morningstar four-star bond funds and
a top-ranked money market fund. We are proud to offer the investment
capabilities of Mr. King to our shareholders.
Carolyn Spolidoro, the previous portfolio manager has retired. We would like to
express our appreciation to her for effectively serving our shareholders since
she joined Davis Selected Advisers in 1985.
AN INTERVIEW WITH CAROLYN SPOLIDORO, PORTFOLIO MANAGER
Q. What key factors influenced the Fund's performance?
A. In the first half of 1999, the bond market was gripped by concerns about
inflation and concerns that the Federal Reserve would tighten the money supply.
Although there were little or no signs of actual inflation, years of strong
economic growth have left a nagging sense among investors that inflation could
surge upward again and that the Fed may look to proactively control growth in
order to mitigate inflationary forces.
In May, the Fed changed its bias toward higher rates and then followed through
at the end of June by raising the target federal funds rate .25% to 5.0% in a
preemptive strike against inflation. The Fed indicated that it must be
particularly vigilant of the emergence or potential emergence of inflationary
pressures. The Fed surprised the market by changing its bias back to neutral
following the announcement of the rate hike--an indication that just one rate
change may be sufficient for now. However, the consensus among investors is that
the Fed's future course of action is not preordained. Signs that the economy is
continuing to power ahead could ultimately lead the Fed to reconsider its bias
and impose a second round of tightening.
Against this backdrop, the yield on 10-year U.S. Treasury bonds increased from
4.60% to 5.80% over the first half of the year while the bonds' total return
fell by more than 5%. The Davis Government Bond Fund outperformed 10-year
Treasuries because the Fund owns defensive positions in mortgage-backed
securities, which tend to decline less in an increasing interest rate
environment. At the same time, the Fund underperformed the average intermediate
U.S. government bond fund because it also holds positions in longer term U.S.
government agency securities that cannot be called in or redeemed by the issuer
before maturity. These securities are more sensitive to interest rate changes,
meaning that when interest rates increase and bond prices fall, they tend fall
in line with the market.
10
<PAGE>
DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CAROLYN SPOLIDORO, PORTFOLIO MANAGER - CONTINUED
Q. Could you explain the Fund's overall investment approach in a little more
detail?
A. Our strategy is to create a well-diversified portfolio holding many different
types of U.S. government securities with varying features. We try to buy
securities with a range of maturity dates, interest rates and call or prepayment
provisions because different kinds of securities react differently to interest
rate changes. In addition, agency securities tend to offer slightly higher
yields than comparable U.S. Treasury securities.
Currently approximately 49% of the portfolio is invested in mortgage-backed
securities, including pass-through securities and collateralized mortgage
obligations (CMOs), and approximately 45% in callable and non-callable U.S.
government agency notes. The portfolio's duration is 5.3 years and its average
life is 7.5 years.
We believe fixed-income investors should focus on a combination of risk and
return, not just on total return or yield. We hold a laddered portfolio of
securities with a fairly even distribution of maturities over the intermediate
range of the yield curve. This allows us to capture most of the yield and
potential return advantage of long-term bonds with potentially less risk. The
last six months have shown the advantage provided by owning a balanced
intermediate-term bond fund in a declining market as opposed to owning bonds
directly.
- ----------------------------
This Semi-Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of the Davis Series Funds which contains more
information about fees and expenses. Please read the prospectus carefully before
investing or sending money.
(1) Neither the Davis Investment Discipline nor any investment discipline can
guarantee a profit.
(2) Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results. Investment
return and principal value will vary so that, when redeemed, an investor's
shares may be worth more or less than when purchased. The following table lists
the average annual total returns for Class A shares for the periods ended June
30, 1999.
*(WITHOUT a 4.75% sales charge taken into consideration)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------- ------ ------ ------ ---------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davis Financial Fund A 10.23% 30.69% 28.91% 25.49% - 05/01/91
- -----------------------------------------------------------------------------------------------------------
Davis Real Estate Fund A (6.50%) 12.05% 11.64% 12.63% - 01/03/94
- -----------------------------------------------------------------------------------------------------------
Davis Convertible Securities Fund A 10.83% 19.64% 18.10% 16.00% - 05/01/92
- -----------------------------------------------------------------------------------------------------------
Davis Growth Opportunity Fund A 5.23% 17.37% N/A 21.38% - 12/01/94
- -----------------------------------------------------------------------------------------------------------
Davis Government Bond Fund A 0.78% 5.30% N/A 5.82% - 12/01/94
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*(WITH a 4.75% sales charge taken into consideration)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR INCEPTION
- --------- ------ ------ ------ ---------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davis Financial Fund A 4.99% 28.58% 27.65% 24.76% - 05/01/91
- -----------------------------------------------------------------------------------------------------------
Davis Real Estate Fund A (10.93%) 10.25% 10.55% 11.63% - 01/03/94
- -----------------------------------------------------------------------------------------------------------
Davis Convertible Securities Fund A 5.58% 17.72% 16.95% 15.22% - 05/01/92
- -----------------------------------------------------------------------------------------------------------
Davis Growth Opportunity Fund A 0.22% 15.47% N/A 20.10% - 12/01/94
- -----------------------------------------------------------------------------------------------------------
Davis Government Bond Fund A (3.96%) 3.57% N/A 4.69% - 12/01/94
- -----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
(3) Lipper Analytical Services' rankings and comparisons are based on total
returns unadjusted for commissions.
(4) Morningstar proprietary ratings reflect historical risk-adjusted performance
as of June 30, 1999. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's 3, 5 and 10-year average annual returns
(based on available track records) in excess of 90-day Treasury bill (T-bill)
returns, with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day T-bill returns. Ten percent of the funds in an
investment category receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars, and the last 10%
receive one star. The Class A shares of Davis Financial Fund received 5 stars
for the three-year period rated against 3,043 domestic equity funds. For the
five-year period it also received 5 stars when rated against 1,878 domestic
equity funds.
(5) Source: Morningstar Mutual Funds, March 6, 1999.
(6) Portfolio holdings and portfolio manager opinions cited in this material are
current as of the date of this report, but are subject to change. See each
Fund's Schedule of Investments for a detailed list of portfolio holdings.
(7) Past performance of the financial sector does not assure comparable results
in the future.
(8) Favorable current economics in the financial and real estate sectors do not
guarantee favorable future investment performance.
(9) The definitions of indices quoted in this semi-annual report appear below.
Investments cannot be made directly in either of these indices.
I. The Morgan Stanley REIT (Real Estate Investment Trust) Index is a
capitalization-weighted index with dividends reinvested, of the most
actively traded real estate investment trusts and is designed to be a
measure of real estate equity performance.
II. The S&P 500 Index is an unmanaged index of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The index is
adjusted for dividends, weighted towards stocks with large market
capitalizations, and represents approximately two-thirds of the total
market value of all domestic common stocks.
12
<PAGE>
DAVIS SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
(10) Lipper Analytical Services rankings are based on total returns without
adjustment for sales charges.
For the one, three and five-year period ended 6/30/99, Davis Real
Estate Fund (Class A shares) was ranked as follows: 52 out of 118
funds, 16 out of 52 funds, and 7 out of 18 funds, respectively, in the
Lipper "Real Estate Funds" category.
For the one, three and five-year period ended 6/30/99, Davis
Convertible Securities Fund (Class A shares) was ranked as follows: 22
out of 56 funds, 7 out of 37 funds, and 5 out of 27 funds,
respectively, in the Lipper "Convertible Securities Funds" category.
(11) Source: Morningstar Mutual Funds, March 19, 1999.
(12) While Davis Convertible Securities Fund seeks convertible securities
meeting the 80%/50% rule, there can be no assurance that the convertible
securities which the Fund purchases will actually perform in line with our
expectations.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
13
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GROWTH OPPORTUNITY FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - (102.99%)
ADVERTISING AGENCIES - (4.48%)
560,000 WPP Group PLC .............................................................. $ 4,740,983
-------------
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (0.56%)
6,000 Golden West Financial Corp..................................................... 588,000
-------------
BUILDING MATERIALS - (7.96%)
40,000 Martin Marietta Materials, Inc................................................. 2,360,000
160,000 Masco Corp..................................................................... 4,620,000
30,000 Vulcan Materials Co............................................................ 1,447,500
-------------
8,427,500
-------------
CAPITAL EQUIPMENT - (11.18%)
107,800 ASM Lithography Holding N.V.*.................................................. 6,383,781
80,000 Novellus Systems, Inc.*........................................................ 5,457,500
-------------
11,841,281
-------------
CONSULTING SERVICES - (0.97%)
50,000 Gartner Group, Inc. Class A *.................................................. 1,025,000
-------------
CONSUMER PRODUCTS - (5.16%)
30,000 Fortune Brands, Inc............................................................ 1,241,250
105,000 Philip Morris Cos., Inc........................................................ 4,219,688
-------------
5,460,938
-------------
DIVERSIFIED - (1.20%)
185,000 Crescent Operating, Inc.* (b).................................................. 1,266,094
-------------
ELECTRONICS - (10.05%)
15,000 Dallas Semiconductor Corp...................................................... 757,500
51,500 Intel Corp..................................................................... 3,062,641
50,000 Micron Technology, Inc.*....................................................... 2,015,625
130,000 Molex, Inc..................................................................... 4,801,875
-------------
10,637,641
-------------
FINANCIAL SERVICES - (11.45%)
78,000 Capital One Financial Corp..................................................... 4,343,625
42,700 Fannie Mae .................................................................... 2,919,613
52,000 Providian Financial Corp....................................................... 4,862,000
-------------
12,125,238
-------------
HOTELS & MOTELS - (3.53%)
100,000 Marriott International, Inc.................................................... 3,737,500
-------------
INDUSTRIAL - (3.68%)
60,000 Sealed Air Corp.*.............................................................. 3,892,500
-------------
LIFE INSURANCE - (4.56%)
41,500 AFLAC Inc...................................................................... 1,986,813
30,000 ReliaStar Financial Corp....................................................... 1,312,500
28,000 UNUM Corp...................................................................... 1,533,000
-------------
4,832,313
-------------
</TABLE>
14
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GROWTH OPPORTUNITY
FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
PHARMACEUTICALS - (2.51%)
32,800 Sepracor, Inc.*................................................................ $ 2,660,900
-------------
PROPERTY/CASUALTY INSURANCE - (16.67%)
25,000 Ace Limited.................................................................... 706,250
60,000 Cincinnati Financial Corp...................................................... 2,250,000
60,000 FPIC Insurance Group, Inc.*.................................................... 2,902,500
100,000 Horace Mann Educators Corp..................................................... 2,718,750
6,000 Markel Corp.*.................................................................. 1,122,000
20,000 Progressive Corp. (Ohio)....................................................... 2,900,000
20,000 RLI Corp. (b).................................................................. 775,000
57,000 Transatlantic Holdings, Inc.................................................... 4,271,438
-------------
17,645,938
-------------
PUBLISHING - (4.54%)
25,000 Dow Jones & Company, Inc....................................................... 1,326,563
40,000 Tribune Co..................................................................... 3,485,000
-------------
4,811,563
-------------
TECHNOLOGY - (8.16%)
500 Ask Jeeves, Inc.*.............................................................. 7,000
24,000 Lexmark International Group, Inc.*............................................. 1,585,500
60,000 Novell, Inc.*.................................................................. 1,590,000
30,000 Parametric Technology Corp.*................................................... 417,188
45,000 Symantec Corp.*................................................................ 1,148,906
100,000 Unisys Corp.*.................................................................. 3,893,750
-------------
8,642,344
-------------
TELECOMMUNICATIONS - (4.42%)
200,000 Globalstar Telecommunications Limited*......................................... 4,631,250
2,500 Network Plus Corp.*............................................................ 52,262
-------------
4,683,512
-------------
TOYS - (0.79%)
30,000 Hasbro, Inc.................................................................... 838,125
-------------
WASTE MANAGEMENT SERVICES - (1.12%)
60,000 Allied Waste Industries, Inc.*................................................. 1,185,000
-------------
Total Common Stock - (identified cost $84,236,302).................. 109,042,370
-------------
Total Investments - (102.99%) - (identified cost $84,236,302) - (a)............ 109,042,370
Liabilities Less Other Assets - (2.99%)........................................ (3,169,301)
-------------
Net Assets - (100%)................................................. $ 105,873,069
=============
</TABLE>
15
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GROWTH OPPORTUNITY
FUND - CONTINUED
VALUE
(NOTE 1)
================================================================================
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $84,236,302. At June 30,
1999 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation............................... $ 25,934,646
Unrealized depreciation............................... (1,128,578)
--------------
Net unrealized appreciation ................. $ 24,806,068
==============
(b) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is an affiliate, as defined in the Investment
Company Act of 1940, at or during the six months ended June 30, 1999. The
aggregate fair value of the securities of affiliated companies held by the Fund
as of June 30, 1999 amounts to $2,041,094. Transactions during the period in
which the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1998 Additions Reductions June 30, 1999 Income
- -------- ----------------- --------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C>
Crescent Operating, Inc. - 185,000 - 185,000 -
RLI Corp. - 20,000 - 20,000 5,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
FANNIE MAE - MORTGAGE POOLS - ( 8.90%)
$ 30,599 9.75%, 02/01/04........................................................... $ 31,713
112,202 10.25%, 10/01/09............................................................. 121,809
63,482 10.75%, 07/01/13............................................................. 70,793
190,089 9.25%, 10/01/16............................................................. 203,157
65,945 7.436%, 09/01/19(b)......................................................... 67,978
26,893 7.72%, 03/01/24(b).......................................................... 28,142
423,501 7.50%, 01/01/27............................................................. 427,998
1,879,439 6.00%, 03/01/28............................................................. 1,764,906
2,916,727 6.00%, 09/01/28............................................................. 2,738,982
-------------
Total Fannie Mae - (identified cost $5,661,964)..................... 5,455,478
-------------
FREDDIE MAC - MORTGAGE POOLS - (15.91%)
10,978 9.00%, 07/01/01............................................................. 11,164
129,568 8.50%, 08/01/01............................................................. 131,663
38,739 9.00%, 08/01/02............................................................. 39,894
4,767 8.50%, 12/01/02............................................................. 4,862
2,769 9.00%, 06/01/03............................................................. 2,812
651,325 6.50%, 01/01/04............................................................. 645,828
85,131 9.25%, 01/01/04............................................................. 87,738
1,702 9.25%, 11/01/07............................................................. 1,740
56,035 9.25%, 09/01/08............................................................. 58,959
56,576 10.00%, 07/01/09............................................................. 60,802
837,122 6.50%, 07/01/11............................................................. 826,399
2,151,777 5.50%, 09/01/13............................................................. 2,035,452
17,618 9.00%, 07/01/16............................................................. 18,664
126,126 9.00%, 08/01/16............................................................. 134,009
147,536 9.00%, 01/01/17............................................................. 156,297
127,273 9.00%, 03/01/17............................................................. 135,705
30,245 9.00%, 08/01/17............................................................. 32,135
17,489 9.50%, 12/01/19............................................................. 18,757
27,077 9.50%, 02/01/20............................................................. 28,676
1,814,307 6.00%, 06/01/26............................................................. 1,712,814
1,904,910 6.00%, 07/01/28............................................................. 1,791,206
1,937,723 6.00%, 07/01/28............................................................. 1,822,060
-------------
Total Freddie Mac - (identified cost $10,133,528)................... 9,757,636
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - MORTGAGE POOLS - (13.88%)
2,946,521 6.00% with various maturities to 2028....................................... 2,756,824
3,288,312 6.50% with various maturities to 2028....................................... 3,168,867
48,690 6.375% with various maturities to 2024(b)................................... 49,464
819,389 7.00% with various maturities to 2026....................................... 808,893
637,194 8.50% with various maturities to 2022....................................... 665,409
454,841 9.00% with various maturities to 2017....................................... 487,535
68,332 10.00% with various maturities to 2020....................................... 73,342
</TABLE>
17
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GOVERNMENT BOND FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - MORTGAGE POOLS - CONTINUED
$ 6,088 10.25% with various maturities to 2016....................................... $ 6,621
102,420 10.50% with various maturities to 2016....................................... 113,796
185,662 11.25% with various maturities to 2011....................................... 201,094
123,507 11.50% with various maturities to 2015....................................... 139,262
26,591 13.00% with various maturities to 2014....................................... 31,095
8,207 14.75% with various maturities to 2001....................................... 8,234
-------------
Total GNMA - (identified cost $8,736,290)........................... 8,510,436
-------------
MEDIUM TERM NOTES - (46.03%)
1,000,000 Fannie Mae, 5.72%, 03/13/01.................................................. 998,870
1,650,000 Fannie Mae, 6.57%, 08/22/07.................................................. 1,660,940
1,000,000 Fannie Mae, 6.39%, 09/24/07.................................................. 995,320
1,400,000 Fannie Mae, 5.75%, 02/15/08.................................................. 1,336,524
1,000,000 Fannie Mae, 7.15%, 11/03/10.................................................. 987,280
1,000,000 Federal Farm Credit Bank, 5.90%, 02/05/08.................................... 953,800
2,000,000 Federal Home Loan Bank, 5.125%, 09/15/03..................................... 1,924,540
2,000,000 Federal Home Loan Bank, 5.40%, 03/01/04...................................... 1,933,140
4,000,000 Federal Home Loan Bank, 6.12%, 08/26/08...................................... 3,842,280
2,000,000 Federal Home Loan Bank, 5.038%, 10/14/08..................................... 1,783,900
2,000,000 Federal Home Loan Bank, 5.54%, 10/15/08...................................... 1,853,180
1,500,000 Federal Home Loan Bank, 5.95%, 03/16/09...................................... 1,428,450
1,000,000 Freddie Mac, 6.66%, 12/05/05................................................. 996,930
2,000,000 Freddie Mac, 6.28%, 03/06/06................................................. 1,990,700
2,000,000 Freddie Mac, 6.04%, 09/09/08................................................. 1,912,540
3,000,000 Freddie Mac, 5.125%, 10/15/08................................................ 2,714,970
900,000 Freddie Mac, 8.00%, 06/20/11................................................. 917,235
-------------
Total Medium Term Notes - (identified cost $29,855,357)............. 28,230,599
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS & REAL ESTATE MORTGAGE
INVESTMENT CONDUITS - (12.23%)
1,000,000 Fannie Mae, 1993-30 PL, 7.00%, 07/25/20...................................... 986,350
1,000,000 Fannie Mae, 1993-155TC, 7.00%, 03/25/23...................................... 1,001,100
1,250,000 Fannie Mae, 1993-120N, 7.00%, 07/25/23....................................... 1,186,350
97,273 Freddie Mac, 1606 LC, 6.07%, 05/15/08(b)..................................... 97,914
1,000,000 Freddie Mac, 1552 HB, 6.50%, 11/15/22........................................ 962,770
825,000 Freddie Mac, 1627 PJ, 6.00%, 03/15/23........................................ 782,950
1,120,000 Freddie Mac, 2078 PD, 6.25%, 12/15/26........................................ 1,066,778
1,500,000 GNMA, 1998-23V, 6.25%, 09/20/13.............................................. 1,414,380
-------------
Total CMOs & REMICs - (identified cost $7,679,537).................. 7,498,592
-------------
</TABLE>
18
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GOVERNMENT BOND FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
SHORT TERM - (5.48%)
$ 3,360,000 State Street Bank and Trust Co. Repurchase Agreement, 4.85%, 07/01/99, dated
06/30/99, repurchase value of $3,360,453 (collateralized by $3,475,000 par
value Fannie Mae, 5.51%, 05/29/01, market value $3,462,146)
- (identified cost $3,360,000)............................................... $ 3,360,000
--------------
Total Investments - (102.43%) - (identified cost $65,426,676) (a)............ 62,812,741
Liabilities Less Other Assets - (2.43 %).................................. (1,488,172)
--------------
Net Assets - (100%) ............................................... $ 61,324,569
==============
</TABLE>
(a) Aggregate cost for Federal Income Tax purposes is $65,426,676. At June 30,
1999 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Unrealized appreciation...................................................... $ 159,596
Unrealized depreciation...................................................... (2,773,531)
--------------
Net unrealized depreciation......................................... $ (2,613,935)
==============
</TABLE>
(b) The interest rates on floating rate securities, shown as of June 30, 1999,
may change monthly or less frequently and are based on indices of market
interest rates.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
FANNIE MAE - (26.38%)
$ 5,045,000 4.86%, 07/15/99 Discount Note................................................ $ 5,035,465
4,820,000 4.89%, 07/19/99 Discount Note................................................ 4,808,215
11,400,000 4.85%, 07/21/99 Discount Note................................................ 11,369,283
11,410,000 4.70%, 08/05/99 Discount Note................................................ 11,357,863
11,405,000 4.78%, 08/06/99 Discount Note................................................ 11,350,484
24,590,000 4.84%, 08/10/99 Discount Note................................................ 24,457,760
14,910,000 4.77%, 08/17/99 Discount Note................................................ 14,817,148
13,520,000 4.70%, 08/18/99 Discount Note................................................ 13,435,275
15,000,000 4.88%, 09/01/99 Discount Note................................................ 14,873,933
10,165,000 4.88%, 09/03/99 Discount Note................................................ 10,076,813
6,200,000 4.74%, 09/16/99 Discount Note................................................ 6,137,142
10,000,000 4.86%, 09/16/99 Discount Note................................................ 9,896,050
-------------
Total Fannie Mae - (identified cost $137,615,431)................... 137,615,431
-------------
FEDERAL HOME LOAN BANK - (3.79%)
20,000,000 4.557%, 09/24/99 Discount Note - (identified cost $19,784,808)............... 19,784,808
-------------
FREDDIE MAC - (62.68%)
16,365,000 4.753%, 07/01/99 Discount Note............................................... 16,365,000
12,465,000 4.76%, 07/06/99 Discount Note................................................ 12,456,759
12,795,000 4.76%, 07/09/99 Discount Note................................................ 12,781,466
11,150,000 4.70%, 07/12/99 Discount Note................................................ 11,133,987
14,970,000 4.73%, 07/13/99 Discount Note................................................ 14,946,397
6,035,000 4.75%, 07/14/99 Discount Note................................................ 6,024,648
10,460,000 4.83%, 07/16/99 Discount Note................................................ 10,438,949
13,595,000 4.80%, 07/19/99 Discount Note................................................ 13,562,372
14,945,000 4.81%, 07/20/99 Discount Note................................................ 14,907,060
20,000,000 4.75%, 07/23/99 Discount Note................................................ 19,941,944
5,955,000 4.71%, 08/09/99 Discount Note................................................ 5,924,615
8,000,000 4.73%, 08/09/99 Discount Note................................................ 7,959,007
8,670,000 4.795%, 08/11/99 Discount Note............................................... 8,622,653
6,430,000 4.706%, 08/12/99 Discount Note............................................... 6,394,697
15,000,000 4.86%, 08/12/99 Discount Note................................................ 14,914,950
10,000,000 4.73%, 08/13/99 Discount Note................................................ 9,943,503
3,360,000 4.78%, 08/16/99 Discount Note................................................ 3,339,478
10,000,000 4.81%, 08/16/99 Discount Note................................................ 9,938,539
13,865,000 4.805%, 08/19/99 Discount Note............................................... 13,774,321
15,245,000 4.70%, 08/20/99 Discount Note................................................ 15,145,484
5,575,000 4.74%, 08/23/99 Discount Note................................................ 5,536,096
10,000,000 4.79%, 08/23/99 Discount Note................................................ 9,929,481
10,930,000 4.79%, 08/24/99 Discount Note................................................ 10,851,468
4,830,000 4.73%, 08/25/99 Discount Note................................................ 4,795,097
7,250,000 4.74%, 08/26/99 Discount Note................................................ 7,196,543
</TABLE>
20
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS GOVERNMENT MONEY MARKET FUND-CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
FREDDIE MAC - CONTINUED
$ 13,520,000 4.79%, 08/27/99 Discount Note................................................ $ 13,417,462
15,000,000 4.79%, 09/02/99 Discount Note................................................ 14,874,263
4,870,000 4.90%, 09/03/99 Discount Note................................................ 4,827,577
6,375,000 4.74%, 09/08/99 Discount Note................................................ 6,317,083
890,000 4.70%, 09/15/99 Discount Note................................................ 881,169
10,000,000 5.02%, 09/23/99 Discount Note................................................ 9,882,868
10,000,000 7.125%, 07/21/99 Medium Term Note............................................ 10,010,328
--------------
Total Freddie Mac - (identified cost $327,035,264)................. 327,035,264
--------------
SALLIE MAE - (4.41%)
5,000,000 5.469%, 07/15/99 Floating Rate Note (b)...................................... 5,000,000
8,000,000 5.239%, 09/15/99 Floating Rate Note (b)...................................... 8,000,000
10,000,000 5.159%, 12/16/99 Floating Rate Note (b)...................................... 10,000,000
--------------
Total Sallie Mae - (identified cost $23,000,000)................... 23,000,000
--------------
Total Investments - (97.26%) - (identified cost $507,435,503) - (a).......... 507,435,503
Other Assets Less Liabilities - (2.74%)...................................... 14,321,391
--------------
Net Assets - (100%)................................................. $ 521,756,894
==============
</TABLE>
(a) Aggregate cost for Federal Income Tax Purposes is $507,435,503.
(b) The interest rates on floating rate securities, shown as of June 30, 1999,
may change monthly or less frequently and are based on indices of market
interest rates.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS FINANCIAL FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - (99.96%)
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (16.52%)
543,168 Bank of America Corp......................................................... $ 39,821,004
276,726 Bank of East Asia Ltd........................................................ 700,857
810,000 Bank of New York Co., Inc.................................................... 29,716,875
180,000 Bank One Corp................................................................ 10,721,250
60,000 Fifth Third Bancorp.......................................................... 3,995,625
24,000 Golden West Financial Corp................................................... 2,352,000
326,099 Lloyds TSB Group PLC......................................................... 4,428,225
90,000 State Street Corp............................................................ 7,683,750
520,000 U.S. Bancorp ................................................................ 17,680,000
1,326,330 Wells Fargo Co............................................................... 56,700,608
-------------
173,800,194
-------------
BUILDING MATERIALS - (5.42%)
598,300 Martin Marietta Materials, Inc............................................... 35,299,700
750,800 Masco Corp................................................................... 21,679,350
-------------
56,979,050
-------------
CONSUMER PRODUCTS - (3.97%)
1,040,000 Philip Morris Cos., Inc...................................................... 41,795,000
-------------
DIVERSIFIED - (3.92%)
597 Berkshire Hathaway, Inc. (Class A)*.......................................... 41,133,300
24 Berkshire Hathaway, Inc. (Class B)*.......................................... 53,760
-------------
41,187,060
-------------
DIVERSIFIED MANUFACTURING - (2.70%)
300,000 Tyco International Ltd....................................................... 28,425,000
-------------
FINANCIAL SERVICES - (60.27%)
INSURANCE - (26.00%)
310,000 Ace, Ltd..................................................................... 8,757,500
180,000 The Allstate Corp............................................................ 6,457,500
181,225 American International Group, Inc............................................ 21,214,652
155,100 Chubb Corp................................................................... 10,779,450
517,500 Cincinnati Financial Corp.................................................... 19,406,250
140,000 ESG Re Ltd. ............................................................... 2,086,875
20,000 Executive Risk Inc........................................................... 1,701,250
337,300 FPIC Insurance Group, Inc.*.................................................. 16,316,888
654,500 Horace Mann Educators Corp................................................... 17,794,219
185,000 Leucadia National Corp. ..................................................... 4,694,375
7,500 Markel Corp.*................................................................ 1,402,500
24,000 Mercury General Corp......................................................... 816,000
1,509 Nuernberger Beteil AGAKT LITA................................................ 1,446,664
212,000 Orion Capital Corp........................................................... 7,605,500
210,000 Progressive Corp. (Ohio)..................................................... 30,450,000
655,900 ReliaStar Financial Corp..................................................... 28,695,625
</TABLE>
22
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS FINANCIAL FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES/PRINCIPAL SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
FINANCIAL SERVICES - CONTINUED
INSURANCE - CONTINUED
86,000 Risk Capital Holdings, Inc.*................................................. $ 1,182,500
513,075 RLI Corp. (b)................................................................ 19,881,656
15,000 Stirling Cooke Brown Holdings Ltd............................................ 61,406
761,700 Transatlantic Holdings Inc................................................... 57,079,894
230,000 Travelers Property Casualty Corp. Class A.................................... 8,998,750
118,900 XL Capital Ltd. Class A...................................................... 6,717,850
---------------
273,547,304
---------------
OTHER FINANCIAL SERVICES - (34.27%)
673,000 American Express Co.......................................................... 87,574,125
365,000 Capital One Financial Corp................................................... 20,325,938
112,500 Charles Schwab Corp.......................................................... 12,360,938
1,162,500 Citigroup, Inc............................................................... 55,218,750
246,400 Donaldson, Lufkin & Jenrette Inc............................................. 14,845,600
220,000 Freddie Mac.................................................................. 12,760,000
1,239,500 Household International, Inc................................................. 58,721,313
330,000 Legg Mason, Inc.............................................................. 12,705,000
500,000 MBNA Corp.................................................................... 15,312,500
143,950 Morgan Stanley Dean Witter & Co.............................................. 14,754,875
597,500 Providian Financial Corp..................................................... 55,866,250
---------------
360,445,289
---------------
RESTAURANT & FOOD - (4.47%)
1,139,000 McDonald's Corp.............................................................. 47,054,933
---------------
TECHNOLOGY - (2.69%)
50,000 Hewlett-Packard Co........................................................... 5,025,000
180,000 International Business Machines Corp......................................... 23,265,000
---------------
28,290,000
---------------
Total Common Stock - (identified cost $762,596,530)................. 1,051,523,830
---------------
CONVERTIBLE BOND - (0.19%)
$ 750,000 Cincinnati Financial Corp., Sr. Deb., Conv., 5.50%, 05/01/02
- (identified cost $980,625)........................................ 1,980,938
---------------
Total Investments - (100.15%) - (identified cost $763,577,155) - (a)......... 1,053,504,768
Liabilities Less Other Assets - (0.15%)...................................... (1,581,899)
---------------
Net Assets - (100%) ............................................... $ 1,051,922,869
===============
</TABLE>
*Non-Income Producing Security.
23
<PAGE>
DAVIS SERIES, INC
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS FINANCIAL FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
==============================================================================================================
<S> <C> <C>
(a) Aggregate cost for Federal Income Tax purposes is $763,577,155. At June 30,
1999 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation...................................................... $ 303,733,905
Unrealized depreciation...................................................... (13,806,292)
--------------
Net unrealized appreciation......................................... $ 289,927,613
==============
</TABLE>
(b) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is an affiliate, as defined in the Investment
Company Act of 1940, at or during the six months ended June 30, 1999. The
aggregate fair value of the security of affiliated company held by the Fund as
of June 30, 1999 amounts to $19,881,656. Transactions during the period in which
the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1998 Additions Reductions June 30, 1999 Income
- -------- ----------------- --------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C>
RLI Corp. 513,075 - - 513,075 138,530
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
CONVERTIBLE PREFERRED STOCK - (37.34%)
COMMUNICATIONS - (1.83%)
102,400 Loral Space & Communications, Inc., 6.00%, Pfd. Conv. Ser. C................. $ 5,184,000
-------------
DIVERSIFIED (REIT) - (6.65%)
400,000 General Growth Properties, 7.25%, Cum. Conv. Pfd............................. 9,600,000
224,000 Glenborough Realty Trust, 7.75%, Ser. A Conv. Pfd............................ 4,256,000
98,000 Rouse Co., $3.00, Ser. B Conv. Pfd........................................... 3,932,250
21,700 Vornado Realty Trust, 6.50%, Ser. A Conv. Pfd................................ 1,095,850
-------------
18,884,100
-------------
ENERGY - (7.82%)
152,500 CalEnergy Capital Trust II, 6.25%, Conv. Pfd................................. 7,605,938
144,200 Devon Financing Trust, $3.25, Conv. Pfd...................................... 8,724,100
30,000 Devon Financing Trust, $3.25, Ser. 144A Conv. Pfd. (b)....................... 1,815,000
59,600 Tosco Financing Trust, 5.75%, Conv. Pfd...................................... 2,920,400
22,800 Tosco Financing Trust, 5.75%, Ser. 144A Conv. Pfd. (b)....................... 1,117,200
-------------
22,182,638
-------------
HOTELS - (0.41%)
27,900 Host Marriott Financial Trust, 6.75%, Ser. 144A Conv. Pfd. (b)............... 1,168,313
-------------
INDUSTRIAL - (5.35%)
242,900 Sealed Air Corp., $2.00, Ser. A Cum. Conv. Pfd............................... 15,181,250
-------------
MULTI-FAMILY HOUSING (REITS) - (1.55%)
128,900 Equity Residential Properties Trust, 7.00%, Ser. E Conv. Pfd................. 3,254,725
48,100 Equity Residential Properties Trust, 7.25%, Ser. G Cum. Conv. Pfd............ 1,145,381
-------------
4,400,106
-------------
OFFICE/INDUSTRIAL (REIT) - (7.04%)
160,000 Crescent Real Estate Equities, 6.75%, Ser. A Conv. Pfd....................... 2,740,000
153,000 Equity Office Properties Trust, 5.25%, Ser. B Cum. Conv. Pfd................. 6,540,750
230,000 Reckson Assoc. Realty, 7.625%, Ser. A Cum. Conv. Pfd......................... 5,246,875
240,000 SL Green Realty Corp., 8.00%, Cum. Conv. Pfd................................. 5,445,000
-------------
19,972,625
-------------
RESTAURANT (REITS) - (1.81%)
248,100 U.S. Restaurant Properties, 7.72%, Ser. A Cum. Conv. Pfd..................... 5,132,569
-------------
THEME PARKS - (3.57%)
149,000 Premier Parks, Inc., 7.50%, Cum. Conv. Pfd................................... 10,132,000
-------------
TRANSPORTATION - (1.31%)
70,000 Union Pacific Cap. Trust, 6.25%, Ser. 144A Cum. Conv. Pfd. (b)............... 3,718,750
-------------
Total Convertible Preferred Stock - (identified cost $111,105,025).. 105,956,351
-------------
</TABLE>
25
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL/SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
CONVERTIBLE BONDS - (33.43%)
ENERGY - (2.71%)
$ 11,415,000 Valhi Inc., Conv. Sub. Deb., Zero Cpn., 10/20/07 (e)......................... $ 7,690,856
-------------
FINANCIAL SERVICES - (11.62%)
500,000 Alex Brown, Inc., Conv. Sub. Deb., 5.75%, 06/12/01........................... 2,180,000
10,000,000 American Express Credit, Conv. Notes, 1.125%, 02/19/03....................... 12,562,500
1,816,000 Bank One Corp. Conv. Deb., 12.75%, 12/01/00.................................. 5,829,360
3,300,000 Bell Atlantic Financial Services, Series 144A, 5.75%, 04/01/03 (b)........... 3,312,375
7,998,000 Republic National Bank NY, Conv. Sr. Notes, 1.875%, 08/12/02................. 9,077,730
-------------
32,961,965
-------------
HOTELS - (1.32%)
4,100,000 Hilton Hotels Corp., Conv. Sub. Notes, 5.00%, 05/15/06....................... 3,761,750
-------------
INDUSTRIAL - (5.33%)
7,570,000 IMAX Corp., Conv. Sub. Deb., 5.75%, 04/01/03................................. 8,998,838
9,600,000 Xerox Corp., 144A Conv. Sub. Notes, Zero Cpn., 04/12/18 (b) (e).............. 6,120,000
-------------
15,118,838
-------------
INSURANCE - (2.42%)
3,000,000 American International Group, Inc., Conv. Notes, 2.25%, 07/30/04............. 4,216,890
1,000,000 Cincinnati Financial Corp. Conv. Sub. Deb., 5.50%, 05/01/02.................. 2,641,250
-------------
6,858,140
-------------
MULTI-FAMILY HOUSING (REIT) - (0.21%)
500,000Camden Property Trust, Conv. Sub. Deb., 7.33%, 04/01/01........................... 590,000
-------------
MULTIMEDIA - (2.70%)
10,700,000News America Holdings, Conv. Sub. Deb., Zero Cpn., 03/11/13 (e)................... 7,677,250
-------------
RETAIL (REIT) - (0.14%)
350,000 Mid-Atlantic Realty Trust, Conv. Sub. Deb., 7.625%, 09/15/03................. 387,188
-------------
TECHNOLOGY - (6.97%)
8,199,000 Hewlett-Packard Co., 144A Conv. Sub. Notes, Zero Cpn., 10/14/17 (b) (e)...... 5,360,096
1,400,000 Micron Technology, Inc., Conv. Sub. Notes, 7.00%, 07/01/04................... 1,438,500
6,620,000 Motorola, Inc., Conv. Sub. Deb., Zero Cpn., 09/27/13 (e)..................... 7,116,500
5,400,000 Waste Management, Inc., Conv. Sub. Notes, 2.00%, 01/24/05.................... 5,865,750
-------------
19,780,846
-------------
TRANSPORTATION - (0.01%)
500,000 Florida West Airlines, Inc., 8.00%, 03/25/99+ (c)............................ 40,000
-------------
Total Convertible Bonds - (identified cost $82,322,979)............. 94,866,833
-------------
COMMON STOCK - (27.35%)
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (0.69%)
32,976 Bank One Corp................................................................ 1,964,133
-------------
BUILDING MATERIALS - (0.96%)
94,606 Masco Corp................................................................... 2,731,748
-------------
</TABLE>
26
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES/PRINCIPAL SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
DIVERSIFIED FINANCIAL SERVICES - (1.90%)
113,716 Citigroup, Inc............................................................... $ 5,401,510
-------------
DIVERSIFIED (REITS) - (0.30%)
48,600 Glenborough Realty Trust, Inc................................................ 850,500
-------------
ENERGY - (1.40%)
82,000 Devon Energy Corp............................................................ 2,931,500
30,000 MidAmerican Energy Holdings Co............................................... 1,038,750
-------------
3,970,250
-------------
FINANCIAL SERVICES - (0.62%)
13,400 American Express Co.......................................................... 1,743,675
-------------
HOTELS - (0.53%)
106,000 Hilton Hotels Corp........................................................... 1,503,875
-------------
INSURANCE - (4.60%)
111,499 American International Group, Inc............................................ 13,052,352
-------------
OFFICE /INDUSTRIAL (REITS/REOCS) - (0.91%)
58,156 Centerpoint Properties Corp.................................................. 2,129,964
17,770 Equity Office Properties Trust............................................... 455,356
-------------
2,585,320
-------------
REAL ESTATE DEVELOPMENT (REIT) - (3.80%)
305,200 Vornado Realty Trust......................................................... 10,777,375
-------------
SELF STORAGE (REIT) - (1.60%)
162,121 Public Storage, Inc.......................................................... 4,539,386
-------------
TECHNOLOGY - (9.83%)
132,700 Hewlett -Packard Co.......................................................... 13,336,350
58,000 Intel Corp................................................................... 3,449,188
36,000 Micron Technology, Inc.*..................................................... 1,451,250
20,000 Motorola, Inc................................................................ 1,895,000
103,000 SAP AG....................................................................... 3,566,375
28,958 Texas Instruments, Inc....................................................... 4,198,910
-------------
27,897,073
-------------
TELECOMMUNICATIONS - (0.21%)
32,800 Loral Space & Communications, Ltd.*.......................................... 590,400
-------------
Total Common Stock - (identified cost $47,904,152).................. 77,607,597
-------------
SHORT TERM - (1.41%)
$ 3,985,000 State Street Bank and Trust Co. Repurchase Agreement, 4.85%, 07/01/99, dated
06/30/99, repurchase value $3,985,537 (collateralized by $4,070,000 par
value Fannie Mae MTN , 5.86%, 11/07/00, market value $4,108,270)
- (identified cost $3,985,000).............................................. 3,985,000
-------------
</TABLE>
27
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
==============================================================================================================
<S> <C> <C>
Total Investments - (99.53%) - (identified cost $245,317,156) - (a).......... $ 282,415,781
Other Assets Less Liabilities - (0.47%)...................................... 1,333,215
-------------
Net Assets - (100%) ................................................ $283,748,996
=============
</TABLE>
*Non-Income Producing Security.
+This security is in default and is not currently paying interest.
(a) Aggregate cost for Federal Income Tax purposes is $245,317,156. At June 30,
1999 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Unrealized appreciation...................................................... $ 50,003,395
Unrealized depreciation...................................................... (12,904,770)
-------------
Net unrealized appreciation......................................... $ 37,098,625
=============
</TABLE>
(b) These securities are subject to Rule 144A. The Board of Directors of the
Fund has determined that there is sufficient liquidity in these securities to
realize current valuations. These securities amounted to $22,611,734 and 7.97%
of the Fund's total net assets as of June 30, 1999.
(c) Illiquid security. See Note 7 of the Notes to Financial Statements.
(d) As of June 30, 1999, zero coupon bonds represented $33,964,702 or 11.97% of
the Fund's net assets. Because zero coupon bonds pay no interest and compound
semi-annually at the fixed rate at the time of reissuance, their value is
generally more volatile than the value of other debt securities.
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS REAL ESTATE FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - (89.78%)
APARTMENTS (REITS) - (22.92%)
446,031 Apartment Investment & Management Co......................................... $ 19,067,825
679,900 Archstone Communities Trust.................................................. 14,915,306
364,567 Avalon Bay Communities, Inc.................................................. 13,488,979
1,455,600 Boardwalk Equities, Inc.*.................................................... 14,729,259
488,300 Gables Residential Trust..................................................... 11,780,238
749,900 Home Properties of New York, Inc. ........................................... 20,715,988
-------------
94,697,595
-------------
DIVERSIFIED - (0.81%)
489,115 Crescent Operating, Inc.* (c)................................................ 3,347,381
-------------
DIVERSIFIED (REITS) - (12.56%)
456,300 Glenborough Realty Trust, Inc................................................ 7,985,250
421,600 Rouse Co..................................................................... 10,698,100
400,000 Spieker Properties, Inc...................................................... 15,550,000
499,500 Vornado Realty Trust......................................................... 17,638,594
-------------
51,871,944
-------------
GOLF (REITS) - (3.02%)
510,400 Golf Trust of America, Inc. (c).............................................. 12,472,900
-------------
HEALTH CARE (REITS) - (1.96%)
619,100 Meditrust Cos................................................................ 8,086,994
-------------
HOTELS & LODGING - (12.72%)
796,900 Hilton Hotels Corp........................................................... 11,306,019
304,700 Marriott International, Inc.................................................. 11,388,163
561,500 MeriStar Hospitality Corp. (REIT)............................................ 12,598,656
564,500 Starwood Hotels & Resorts Worldwide, Inc..................................... 17,252,531
-------------
52,545,369
-------------
INDUSTRIAL (REITS) - (5.99%)
270,300 Centerpoint Properties Corp.................................................. 9,899,738
300,000 Centerpoint Properties Corp. Private (b)..................................... 10,712,813
176,400 Prentiss Properties Trust.................................................... 4,145,400
-------------
24,757,951
-------------
MALLS (REITS) - (0.43%)
50,000 General Growth Properties, Inc............................................... 1,775,000
-------------
OFFICE SPACE (REITS) - (13.84%)
563,200 Alexandria Real Estate Equities, Inc......................................... 17,600,000
487,900 Boston Properties, Inc....................................................... 17,503,413
342,600 Crescent Real Estate Equities Co............................................. 8,136,750
140,002 Equity Office Properties Trust............................................... 3,587,551
312,600 Parkway Properties Inc....................................................... 10,354,875
-------------
57,182,589
-------------
REAL ESTATE DEVELOPMENT - (3.33%)
886,800 Catellus Development Corp.*............................................... 13,745,400
-------------
</TABLE>
29
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS REAL ESTATE FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES/PRINCIPAL SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
RESORTS/THEME PARKS - (1.33%)
207,600 Vail Resorts, Inc.* ......................................................... $ 3,633,000
106,761 Vail Resorts, Inc. Private * (b)............................................. 1,868,318
--------------
5,501,318
--------------
RESTAURANT ORIENTED - (0.42%)
29,700 U.S. Restaurant Properties, Inc. (REIT)...................................... 1,714,875
--------------
SHOPPING CENTERS - (3.87%)
715,000 JDN Realty Corp. (REIT)...................................................... 15,998,125
--------------
STORAGE (REITS) - (6.58%)
570,000 Public Storage, Inc.......................................................... 15,960,000
352,400 Storage USA Inc.............................................................. 11,232,750
--------------
27,192,750
--------------
Total Common Stock - (identified cost $377,293,637)................. 370,890,191
--------------
CONVERTIBLE PREFERRED STOCK - (9.15%)
DIVERSIFIED - (0.25%)
20,000 Vornado Realty Trust, 6.50%, Ser. A Conv. Pfd................................ 1,010,000
--------------
MALLS - (3.02%)
520,000 General Growth Properties, 7.25%, Conv. Pfd.................................. 12,480,000
--------------
OFFICE - (1.92%)
350,300 SL Green Realty Corp., 8.00%, Conv. Pfd...................................... 7,947,431
--------------
RESORTS/THEME PARKS - (3.96%)
240,600 Premier Parks Inc. 7.50%, Conv. Pfd.......................................... 16,360,800
--------------
Total Convertible Preferred Stock - (identified cost $37,449,684)... 37,798,231
--------------
SHORT TERM - (1.06%)
$ 4,380,000 State Street Bank and Trust Co. Repurchase Agreement, 4.85%, 07/01/99, dated
06/30/99, repurchase value $4,380,590 (collateralized by $4,470,000 par
value Fannie Mae MTN, 5.86%, 11/07/00, market value $4,512,031)
- (identified cost $4,380,000).............................................. 4,380,000
--------------
Total Investment - (99.99%) - (identified cost $ 419,123,321) - (a).......... 413,068,422
Other Assets Less Liabilities - (0.01%)...................................... 44,050
--------------
Net Assets - (100%)................................................. $ 413,112,472
==============
</TABLE>
30
<PAGE>
DAVIS SERIES, INC.
SCHEDULE OF INVESTMENTS At June 30, 1999 (Unaudited)
DAVIS REAL ESTATE FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $419,123,321. At June 30,
1999 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation...................................................... $ 20,366,151
Unrealized depreciation..................................................... (26,421,050)
--------------
Net unrealized depreciation ........................................ $ (6,054,899)
==============
</TABLE>
(b) Restricted security. See Note 7 of the Notes to Financial Statements.
(c) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is an affiliate, as defined in the Investment
Company Act of 1940, at or during the six months ended June 30, 1999. The
aggregate fair value of the securities of affiliated companies held by the Fund
as of June 30, 1999 amounts to $15,820,281. Transactions during the period in
which the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1998 Additions Reductions June 30, 1999 Income
- -------- ----------------- --------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C>
Crescent Operating, Inc. 21,740 467,375 - 489,115 -
Golf Trust of America, Inc. 225,100 289,100 3,800 510,400 450,824
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
DAVIS SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES
At June 30, 1999 (Unaudited)
================================================================================
<TABLE>
<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>
ASSETS:
Investments in securities, at
value * (see accompanying
Schedules of Investments)
Unaffiliated companies......... $107,001,276 $62,812,741 $507,435,503 $1,033,623,112 $282,415,781 $ 397,248,141
Affiliated companies........... 2,041,094 - - 19,881,656 - 15,820,281
Cash.............................. - 33,372 37,640 - 214,555 4,990
Receivables:
Dividends and interest......... 98,968 661,668 563,865 1,333,215 1,383,047 2,427,412
Capital stock sold............. 109,656 161,961 16,893,783 1,472,940 521,443 1,086,494
Investments sold............... - - - 1,387,292 - -
Prepaid expenses............... 36,212 6,976 41,077 124,031 31,700 76,310
------------ ----------- ------------- -------------- ------------ -------------
Total assets........... 109,287,206 63,676,718 524,971,868 1,057,822,246 284,566,526 416,663,628
------------ ----------- ------------- -------------- ------------ -------------
LIABILITIES:
Cash Overdraft.................... 188,385 - - 2,019,066 - -
Payables:
Investment securities
purchased............ 47,500 - - 35,000 - 1,972,771
Capital stock reacquired....... 2,981,667 2,181,116 2,829,269 2,048,032 366,990 887,091
Accrued expenses.................. 105,295 112,284 363,956 918,879 253,963 384,093
Commissions payable to
distributor (Note 3)......... 91,290 58,749 - 878,400 196,577 307,201
Distributions payable............. - 21,749 - - -
------------ ----------- ------------- -------------- ------------ -------------
Total liabilities........ 3,414,137 2,352,149 3,214,974 5,899,377 817,530 3,551,156
------------ ----------- ------------- -------------- ------------ -------------
NET ASSETS (NOTE 5)............... $105,873,069 $61,324,569 $ 521,756,894 $1,051,922,869 $283,748,996 $ 413,112,472
============ =========== ============= ============== ============ =============
NET ASSETS CONSIST OF:
Undistributed net
investment
income (deficit)................ (476,741) (251,794) - 1,035,168 1,958,964 4,324,196
Par value of shares of
capital Stock..................... 44,724 109,804 5,217,569 332,637 106,774 193,325
Additional paid-in capital...... 60,461,700 64,839,928 516,539,325 747,983,161 239,205,350 440,240,307
Accumulated net realized
gain (loss)....................... 21,037,318 (759,434) - 12,644,290 5,379,283 (25,590,457)
Net unrealized appreciation
(depreciation) on
investments..................... 24,806,068 (2,613,935) - 289,927,613 37,098,625 (6,054,899)
------------ ----------- ------------- -------------- ------------ -------------
$105,873,069 $ 61,324,569 $521,756,894 $1,051,922,869 $283,748,996 $ 413,112,472
============ =========== ============= ============== ============ =============
</TABLE>
* Including repurchase agreements of $3,360,000, $3,985,000 and $4,380,000 for
Davis Government Bond Fund, Davis Convertible Securities Fund and Davis Real
Estate Fund, respectively, and cost of $84,236,302, $65,426,676, $507,435,503,
$763,577,155, $245,317,156 and $419,123,321 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.
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
DAVIS SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES - Continued
At June 30, 1999 (Unaudited)
================================================================================
<TABLE>
<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>
CLASS A SHARES
Net assets...................... $54,742,929 $21,890,679 $480,632,266 $485,326,396 $131,789,919 $196,749,493
Shares outstanding.............. 2,269,511 3,915,381 480,632,266 15,163,903 4,944,014 9,200,978
Net asset value and
redemption price per share
(net assets/shares
outstanding)................. $ 24.12 $ 5.59 $ 1.00 $ 32.01 $ 26.66 $ 21.38
======= ======= ======= ======= ======== ========
Maximum offering price
per share (100/95.25 of net
asset value)................. $ 25.32 $ 5.87 $ 1.00 $ 33.61 $ 27.99 $ 22.45
======= ======= ======= ======= ======== ========
CLASS B SHARES
Net assets...................... $47,862,962 $32,792,914 $34,103,561 $452,315,834 $ 94,592,661 $130,827,231
Shares outstanding.............. 2,065,282 5,878,935 34,103,561 14,494,239 3,588,185 6,150,464
Net asset value,
offering and redemption price
per share (net assets/shares
outstanding) (Note 3)......... $ 23.18 $ 5.58 $ 1.00 $ 31.21 $ 26.36 $ 21.27
======= ======= ======= ======= ======== ========
CLASS C SHARES
Net assets...................... $ 3,218,187 $ 6,623,394 $ 7,021,067 $104,308,830 $ 23,408,474 $ 37,267,468
Shares outstanding.............. 135,548 1,182,966 7,021,067 3,295,178 876,370 1,739,545
Net asset value,
offering and redemption price
per share (net assets/shares
outstanding) (Note 3) ....... $ 23.74 $ 5.60 $ 1.00 $ 31.65 $ 26.71 $ 21.42
======= ======= ======= ======= ======== ========
CLASS Y SHARES
Net assets...................... $ 48,991 $ 17,582 - $ 9,971,809 $ 33,957,942 $ 48,268,280
Shares outstanding.............. 2,026 3,124 - 310,352 1,268,817 2,241,495
Net asset value, offering and
redemption price per share
(net assets/shares
outstanding) ................. $ 24.18 $ 5.63 - $ 32.13 $ 26.76 $ 21.53
======= ======= ======= ======= ======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
DAVIS SERIES, INC.
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999 (Unaudited)
<TABLE>
<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>
INVESTMENT INCOME
(LOSS):
Income:
Dividends
Unaffiliated companies.............. $ 436,328 $ - $ - $ 8,305,799 $ 4,453,603 $10,301,403
Affiliated companies................ 5,400 - - 138,530 - 450,824
Interest............................. 27,612 1,981,494 12,671,914 28,546 1,475,602 74,178
---------- ----------- ----------- ----------- ------------ -----------
Total income*................ 469,340 1,981,494 12,671,914 8,472,875 5,929,205 10,826,405
---------- ----------- ----------- ----------- ------------ -----------
Expenses:
Management fees (Note 2)............. 406,879 159,163 1,221,998 3,109,090 1,004,864 1,401,669
Custodian fees....................... 29,558 29,772 54,708 98,299 36,236 59,503
Transfer agent fees
Class A........................... 43,480 23,789 91,254 315,881 56,614 170,283
Class B........................... 66,076 38,593 48,683 401,999 71,091 136,711
Class C........................... 7,138 7,827 10,451 89,243 18,832 30,646
Class Y........................... 51 244 - 7,546 2,357 3,878
Audit fees........................... 4,207 6,814 11,636 16,532 6,668 7,843
Legal fees........................... 2,457 2,721 23,527 36,910 7,638 8,220
Accounting fees (Note 2)............. 3,252 1,248 18,750 7,248 3,750 4,752
Reports to s hareholders............. 12,621 29,339 87,627 159,380 44,456 60,150
Directors' fees and expenses ....... 3,799 3,771 35,017 56,821 11,286 12,425
Registration and filing fees ........ 32,596 51,612 105,447 112,233 54,276 58,432
Miscellaneous........................ 323 3,838 8,555 3,351 4,999 869
Distribution plan payments (Note 3)
Class A........................... 63,054 27,401 - 415,096 124,958 219,029
Class B........................... 254,746 170,248 - 2,131,612 446,773 649,425
Class C........................... 16,228 36,220 - 480,272 119,621 172,613
---------- ----------- ----------- ----------- ------------ -----------
Total expenses...... 946,465 592,600 1,717,653 7,441,513 2,014,419 2,996,448
Expenses paid indirectly
(Note 6).................... (384) (97) (482) (3,806) (3,792) (3,151)
---------- ----------- ----------- ----------- ------------ -----------
Net expenses................. 946,081 592,503 1,717,171 7,437,707 2,010,627 2,993,297
---------- ----------- ----------- ----------- ------------ -----------
Net investment
income (loss).......... (476,741) 1,388,991 10,954,743 1,035,168 3,918,578 7,833,108
---------- ----------- ----------- ----------- ------------ -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from
investment transactions.............. 21,037,318 31,493 - 14,398,574 5,353,686 (19,909,704)
Net change in unrealized
appreciation/(depreciation) of
investments.......................... (10,737,054) (3,191,572) - 69,863,483 23,591,907 26,319,667
---------- ----------- ----------- ----------- ------------ -----------
Net realized and unrealized
gain (loss) on investments............ 10,300,264 (3,160,079) - 84,262,057 28,945,593 6,409,963
---------- ----------- ----------- ----------- ------------ -----------
Net increase (decrease) in
net assets resulting from
operations............................ $ 9,823,523 $ (1,771,088) $10,954,743 $85,297,225 $932,864,171 $14,243,071
=========== ============= =========== =========== ============ ===========
*Net of foreign taxes
withheld as follows:................. $ 1,716 $ - $ - $ 10,492 $ 1,461 $ 294
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
DAVIS SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1999 (Unaudited)
===============================================================================
<TABLE>
<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>
OPERATIONS:
Net investment income (loss) $ (476,741) $ 1,388,991 $10,954,743 $ 1,035,168 $3,918,578 $ 7,833,108
Net realized gain (loss) from
investment transactions............ 21,037,318 31,493 - 14,398,574 5,353,686 (19,909,704)
Net change in unrealized
appreciation/(depreciation)
of investments..................... (10,737,054) (3,191,572) - 69,863,483 23,591,907 26,319,667
------------ ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in
net assets resulting from
operations......................... 9,823,523 (1,771,088) 10,954,743 85,297,225 32,864,171 14,243,071
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A............................ - (628,970) (10,024,177) - (1,006,048) (1,793,779)
Class B............................ - (831,195) (765,753) - (533,399) (997,047)
Class C............................ - (172,796) (164,813) - (141,437) (266,211)
Class Y............................ - (7,824) - - (278,730) (451,875)
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net
assets resulting from capital
share transactions (Note 5)
Class A............................ (2,482,075) 1,798,327 7,755,376 (15,930,841) (15,389,851) (6,532,698)
Class B............................ (17,248,697) (1,383,108) (1,362,470) (2,718,332) (16,162,873) (6,428,834)
Class C............................ (707,710) (1,175,957 890,357 3,694,404 (5,652,039) 1,955,111
Class Y............................ (28,204) (323,28) - (1,329,787) (309,216) 9,407,103
------------ ----------- ----------- ------------ ----------- -----------
Total increase (decrease)
in net assets.................. (10,643,163) (4,495,891) 7,283,263 69,012,669 3,124,617 (599,198)
NET ASSETS:
Beginning of period.................. 116,516,232 65,820,460 514,473,631 982,910,200 280,624,379 413,711,670
------------ ----------- ----------- ------------ ----------- -----------
End of period........................ $105,873,069 $61,324,569 $521,756,894 $1,051,922,869 $ 283,748,996 $413,112,472
============ =========== ============ ============== ============= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
DAVIS SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
Year ended December 31, 1998
<TABLE>
<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>
OPERATIONS:
Net investment income (loss) $ (1,002,598) $ 1,935,171 $24,003,183 $ (632,007) $7,885,939 $12,331,188
Net realized gain (loss) from
investment transactions........ 6,203,448 52,416 - (1,754,284) 3,179,282 (5,680,753)
Net change in unrealized
appreciation/(depreciation)
of investments................. (4,643,587) 97,364 - 94,092,422 (18,721,504) (78,469,955)
------------ ------------ -------------- -------------- ------------ ------------
Net increase (decrease) in
net assets resulting from
operations..................... 557,263 2,084,951 91,706,131 (7,656,283) (71,819,520) 24,003,183
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A........................ - (1,011,026) (22,555,142) - (4,305,724) (6,590,346)
Class B........................ - (824,586) - (1,892,880) (3,781,620) (1,203,998)
Class C........................ - (117,098) (244,043) - (530,204) (700,728)
Class Y........................ - (3,500) - - (1,157,131) (1,258,494)
Realized gains from investment
transactions
Class A........................ (2,392,175) - - - (1,495,013) -
Class B........................ (2,818,423) - - - (1,025,386) -
Class C........................ (167,105) - - - (293,996) -
Class Y........................ (3,289) - - - (339,290) -
Return of capital
Class A........................ - (128,856) - - (32,807) (290,164)
Class B........................ - (105,094) - - (14,423) (166,501)
Class C........................ - (14,924) - - (4,040) (30,852)
Class Y........................ - (446) - - (8,818) (55,416)
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease) in net
assets resulting from capital
share transactions (Note 5)
Class A........................ 5,761,804 3,704,166 20,572,302 119,526,856 51,865,638 91,841,839
Class B........................ 1,813,973 23,364,964 24,543,979 190,577,787 61,511,162 60,704,983
Class C........................ 1,312,781 8,011,305 4,412,062 66,688,051 21,650,844 31,122,949
Class Y........................ 3,484 354,057 - 5,775,012 (3,323,361) 16,688,859
------------ ------------ -------------- -------------- ------------ ------------
Total increase in net assets... 4,068,313 35,313,913 49,528,343 474,273,837 112,142,109 116,471,168
NET ASSETS:
Beginning of period.............. 112,447,919 30,506,547 464,945,288 508,636,363 168,482,270 297,240,502
------------ ------------ -------------- -------------- ------------ ------------
End of period.................... $116,516,232 $ 65,820,460 $514,473,631 $998,910,200 $280,624,379 $413,711,670
============ ============ ============== ============== ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS
At June 30, 1999 (Unaudited)
===============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Davis Series, Inc. (the Company) 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 issuing shares of common stock in the following
six series (collectively "the Funds"):
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. It 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
Fund's 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. Each series offers shares in four classes, Class A, Class B, Class
C and Class Y (except for Davis Government Money Market Fund, which does not
offer Class Y shares). 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. Class B and C shares are sold at net asset value and may be
subject to a contingent deferred sales charge upon redemption. Class Y shares
are sold at net asset value and are not subject to any contingent deferred sales
charge. Class Y shares are only available to certain qualified investors.
Income, expenses (other than those attributable to a specific class) and gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by each class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class. 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 Funds
in the preparation of their financial statements.
37
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
===============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
A. VALUATION OF SECURITIES - Portfolio 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 in good faith by the Board of Directors.
Short-term obligations are valued at amortized cost which approximates fair
value. The valuation procedures are reviewed and subject to approval 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 Funds 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 Funds as an unrealized gain or loss. When the forward
currency contract is closed, the Funds record 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 Funds to risks resulting from unanticipated movements
in foreign currency exchange rates or failure of the counter-party to the
agreement to perform in accordance with the terms of the contract.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
D. FEDERAL INCOME TAXES - It is the Funds' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of their taxable income to
shareholders. Therefore, no provision for federal income or excise tax is
required. At June 30, 1999, Davis Government Bond Fund had approximately
$790,900 of capital loss carryovers available to offset future capital gains
which expire in 1999, 2001, 2002 and 2003. At June 30, 1999, Davis Financial
Fund had approximately $1,754,284 of capital loss carryovers available to offset
future capital gains, if any, which will expire in 2006. At June 30, 1999, Davis
Real Estate Fund had approximately $5,680,753 of capital loss carryovers
available to offset future capital gains, if any, which will expire in 2006.
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 and disclosure of contingent 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.
38
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
===============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
F. SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME - Securities
transactions are accounted for on the trade date (date the order to buy or sell
is executed) with realized gain or loss on the sale of securities being
determined based upon identified cost. Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend date. Discounts
and premiums on debt securities are amortized over the lives of the respective
securities in accordance with the requirements of the Internal Revenue Code.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions to
shareholders are recorded on the ex-dividend date. The character of the
distributions made during the year from net investment income may differ from
its ultimate characterization for federal income tax purposes. Also, due to the
timing of distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which income or gain was recorded by the Funds.
The Funds adjust the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations.
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 0.50% of the first $250 million of average net assets, 0.45% of
the next $250 million of average net assets and 0.40% of average net assets in
excess of $500 million. The fee for the Davis Government Bond Fund is 0.50%
average net assets. The fee for each of the Davis Growth Opportunity Fund, Davis
Financial Fund, Davis Convertible Securities Fund and Davis Real Estate Fund is
0.75% of the average net assets for the first $250 million, 0.65% of the average
net assets on the next $250 million, and 0.55% of the average net assets in
excess of $500 million.
The Adviser is paid for registering fund shares for sale in various states.
The fee for the six months ended June 30, 1999 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 $4,998 for each fund. Boston Financial Data Services is the Funds'
primary transfer agent. The Adviser is also paid for certain transfer agent
services. The fee for these services for the six months ended June 30, 1999 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 $11,784, $3,602, $8,865, $78,738, $12,718 and
$29,340, respectively. State Street Bank & Trust Company ("State Street Bank")
is the Funds' primary accounting provider. Fees for such services are included
in the custodian fee as State Street Bank also serves as the Funds' custodian.
The Adviser is also paid for certain accounting services. The fee for the six
months ended June 30, 1999 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 $3,252,
$1,248, $18,750, $7,248, $3,750 and $4,752, respectively. Certain directors and
officers of the Funds are also directors and officers of the general partner of
the Adviser.
Davis Selected Advisers-NY, Inc. ("DSA-NY"), a wholly-owned subsidiary of
the Adviser, acts as sub-adviser to the Funds. DSA-NY performs research and
portfolio management services for the Funds under a Sub-Advisory Agreement with
the Adviser. The Funds pay no fees directly to DSA-NY.
Each fund has adopted procedures to treat Shelby Cullom Davis & Co. ("SCD")
as an affiliate of the Adviser. During the six months ended June 30, 1999, SCD
received $19,347 and $1,800 in commissions on the purchases and sales of
portfolio securities in the Davis Growth Opportunity Fund and Davis Financial
Fund, respectively.
39
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
===============================================================================
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).
During the six months ended June 30, 1999 , Davis Distributors, LLC, the
Funds' Underwriter (the "Underwriter" or "Distributor") received $28,462,
$22,643, $796,026, $128,706 and $239,381 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
Fund, respectively, of which $4,287, $3,511, $125,620, $19,355 and $36,937 was
retained by the Underwriter and the remaining $24,175, $19,132, $670,406,
$109,351 and $202,444 was re-allowed to investment dealers. The Underwriter paid
the costs of prospectuses in excess of those required to be filed as part of the
Funds' 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 service fee
with respect to Class A shares sold by dealers which remain outstanding during
the period. The service 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 service 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 six months ended June 30, 1999 was
$63,054, $27,401, $415,096, $124,958 and $219,029, 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) pay a distribution fee to reimburse the Distributor for commission
advances on the sale of each Fund's Class B shares. The National Association of
Securities Dealers Inc. (the "NASD"), limits the percentage of each fund's
average annual net assets attributable to Class B shares which may be used to
reimburse the Distributor. The limit is 1%, 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 rate 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.
40
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
===============================================================================
NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
During the six months ended June 30, 1999, 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 distribution fees of $193,414, $128,257, $1,604,138,
$335,962 and $489,156, respectively and service fees of $61,332, $41,991,
$527,474, $110,811 and $160,269, respectively.
Commission advances by the Distributor during the six months ended June 30,
1999 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 $68,819, $142,696, $1,358,994, $266,359
and $533,993 of which $57,302, $74,208, $1,330,722, $251,534 and $521,299 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
$401,865, $383,619, $11,966,280, $3,584,077 and $6,485,944, respectively,
representing the cumulative commission advances by the Distributor on the sale
of the Funds' Class B shares, plus interest, reduced by cumulative distribution
fees 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 six months
ended June 30, 1999 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 $129,444, $97,294, $874,813, $204,017 and $470,409, respectively.
CLASS C SHARES OF DAVIS GROWTH OPPORTUNITY FUND, DAVIS GOVERNMENT BOND
FUND, DAVIS FINANCIAL FUND, DAVIS CONVERTIBLE SECURITIES FUND AND DAVIS REAL
ESTATE FUND
Class C shares of the Funds are sold at net asset value and are redeemed at
net asset value less a contingent deferred sales charge of 1% if redeemed within
one year of purchase. The Funds pay the Distributor 1% of the Funds' average
annual net assets attributable to Class C shares, of which 0.75% may be used to
pay distribution expenses and 0.25% may be used to pay shareholder service fees.
41
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
During the six months ended June 30, 1999, Class C shares of the Davis
Growth Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis
Convertible Fund and Davis Real Estate Fund made distribution payments of
$16,228, $36,220, $480,272, $119,621 and $172,613, respectively. During the six
months ended June 30, 1999, the Distributor received $2,792, $10,892, $88,863,
$31,895 and $31,283 in contingent deferred sales charges from Class C shares of
Davis Growth Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund,
Davis Convertible Securities and Davis Real Estate Fund, 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.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities) during the six months ended June 30, 1999 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>
<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..... $ 81,812,517 $ 3,495,060 $ 80,803,205 $ 37,124,304 $129,255,523
Proceeds of sales..... $ 97,061,441 $ 3,356,938 $ 96,058,483 $ 63,433,498 $131,260,432
</TABLE>
NOTE 5 - CAPITAL STOCK
At June 30, 1999 there were 10 billion shares of capital stock ($0.01 par
value per share) authorized of which 550 million shares each are designated to
the Davis Growth Opportunity Fund, Davis Government Bond Fund, Davis Financial
Fund, Davis Convertible Securities Fund and Davis Real Estate Fund. 5.1 million
shares are designated to Davis Government Money Market Fund. Transactions in
capital stock were as follows:
42
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
CLASS A (UNAUDITED)
---------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold........................ 764,396 2,125,101 219,295,551 1,889,223 836,072 2,760,497
Shares issued in reinvestment
of distributions.............. 186 75,019 10,354,111 608 60,730 83,307
---------- ------------ ------------ ----------- ----------- -----------
764,582 2,200,120 229,649,662 1,889,831 896,802 2,843,804
Shares redeemed.................... (873,143) (1,891,105) (221,894,286) (2,441,607) (1,544,043) (3,208,237)
---------- ------------ ------------ ----------- ----------- -----------
Net increase (decrease) ...... (108,561) 309,015 7,755,376 (551,776) (647,241) (364,433)
========== ============ ============ =========== =========== ===========
Proceeds from shares sold.......... $17,128,249 $ 12,095,322 $219,295,551 $57,178,384 $20,777,390 $ 56,938,771
Proceeds from shares issued in
reinvestment of distributions.. 4,051 430,658 10,354,111 17,814 1,455,763 1,585,440
---------- ------------ ------------ ----------- ----------- -----------
17,132,300 12,525,980 229,649,662 57,196,198 22,233,153 58,524,211
Cost of shares redeemed............ (19,614,375) (10,7227,653) (221,894,286) (73,127,039) (37,623,004) (65,056,909)
---------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) $(2,482,075) $ 1,798,327 $ 7,755,376 $(15,930,841) $(15,389,851) $ (6,532,698)
========== ============ ============ =========== =========== ===========
<CAPTION>
YEAR ENDED
CLASS A DECEMBER 31, 1998
----------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................... 868,064 3,160,162 539,737,311 12,668,316 3,736,408 8,062,035
Shares issued in reinvestment
of distributions.......... 130,667 141,050 22,137,587 138 211,983 275,560
---------- ------------- ----------- ------------ ----------- ------------
998,731 3,301,212 561,874,898 12,668,454 3,948,391 8,337,595
Shares redeemed................ (943,806) (2,689,218) (541,302,595) (8,327,667) (1,924,393) (4,577,513)
---------- ------------- ----------- ------------ ----------- ------------
Net increase.............. 54,925 611,994 20,572,303 4,340,787 2,023,998 3,760,082
========== ============= =========== ============ =========== ============
Proceeds from shares sold...... $19,480,204 $ 18,668,243 $539,737,311 $343,611,116 $93,013,319 $188,681,546
Proceeds from shares issued
in reinvestment of
distributions.............. 2,708,838 828,828 22,137,587 3,438 5,077,907 6,083,772
---------- ------------- ----------- ------------ ----------- ------------
22,189,042 19,497,071 561,874,898 343,614,554 98,091,226 194,765,318
Cost of shares redeemed........ (20,375,069) (15,792,905) (541,302,596) (224,087,698) (46,225,588) (102,923,479)
---------- ------------- ----------- ------------ ----------- ------------
Net increase.............. $1,813,973 $ 3,704,166 $20,572,302 $119,526,856 $51,865,638 $ 91,841,839
========== ============= =========== ============ =========== ============
</TABLE>
43
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
===============================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
CLASS B (UNAUDITED)
---------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold................. 158,611 2,452,333 35,183,282 1,545,439 331,999 714,968
Shares issued in reinvestment
of distributions....... 148 74,169 650,071 9 14,341 33,914
------------- -------------- ------------ ----------- ----------- ------------
158,759 2,526,502 35,833,353 1,545,448 346,340 748,882
Shares redeemed............. (954,377) (2,768,206) (37,195,823) (1,649,390) (615,737) (1,566,207)
------------- -------------- ------------ ----------- ----------- ------------
Net increase (decrease) (795,618) (241,704) (1,362,470) (103,942) (269,397) (817,325)
============= ============== ============ =========== =========== ============
Proceeds from shares sold... $ 3,422,025 $ 14,086,534 $835,183,282 $ 45,794,421 $ 8,198,156 $ 14,675,872
Proceeds from shares issued
in reinvestment of
distributions.......... 3,126 424,688 650,071 290 339,731 643,427
------------- -------------- ------------ ----------- ----------- ------------
3,425,151 14,511,222 35,833,353 45,794,711 8,537,887 15,319,299
Cost of shares redeemed..... (20,673,848) (15,894,330) (37,195,823) (48,513,043) (14,966,721) (31,482,172)
------------- -------------- ------------ ----------- ----------- ------------
Net increase (decrease) $(17,248,697) $ (1,383,108) $(1,362,470) $(2,718,332) $(6,428,834) $(16,162,873)
============= ============== ============ =========== =========== ============
<CAPTION>
YEAR ENDED
CLASS B DECEMBER 31, 1998
----------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold................. 868,064 7,172,861 95,164,634 9,271,722 2,999,720 4,400,784
Shares issued in reinvestment
of distributions....... 130,667 93,650 1,056,722 177 95,158 125,670
----------- ----------- ----------- ----------- ----------- -----------
998,731 7,266,511 96,221,356 9,271,899 3,094,878 4,526,454
Shares redeemed............. (943,806) (3,313,729) (71,677,377) (2,293,408) (657,019) (2,072,314)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........... 54,925 3,952,782 24,543,979 6,978,491 2,437,859 2,454,140
=========== ============ =========== ============ =========== ===========
Proceeds from shares sold... $19,480,204 $ 42,278,281 $95,164,634 $249,847,256 $73,963,154 $104,063,066
Proceeds from shares issued
in reinvestment of
distributions.......... 2,708,838 549,153 1,056,722 4,293 2,243,009 2,757,015
----------- ----------- ----------- ----------- ----------- -----------
22,189,042 42,827,434 96,221,356 249,851,549 76,206,163 106,820,081
Cost of shares redeemed..... (20,375,069) (19,462,470) (71,677,377) (59,273,762) (15,501,180) (45,308,919)
----------- ----------- ----------- ----------- ----------- -----------
Net increase........... $ 1,813,973 $ 23,364,964 $24,543,979 $190,577,787 $60,704,983 $61,511,162
=========== ============ =========== ============ =========== ===========
</TABLE>
44
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
===============================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
CLASS C (UNAUDITED)
---------------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............. 31,497 590,502 10,638,252 641,757 88,069 481,711
Shares issued
in reinvestment
of distributions.... (4) 9,993 137,998 1 3,507 9,555
---------- ----------- ------------ ----------- ----------- ------------
31,493 600,495 10,776,250 641,758 91,576 491,266
Shares redeemed.......... (63,818) (803,325) (9,885,893) (523,251) (321,973) (401,597)
---------- ----------- ------------ ----------- ----------- ------------
Net increase (decrease) (32,325) (202,830) 890,357 118,507 (230,397) 89,669
========== =========== ============ =========== =========== ============
Proceeds from shares sold $ 699,629 $ 3,398,826 $ 10,638,252 $19,362,012 $ 2,239,542 $ 9,901,268
Proceeds from shares issued in
reinvestment of
distributions....... (82) 57,349 137,998 46 84,164 182,503
---------- ----------- ------------ ----------- ----------- ------------
699,547 3,456,175 10,776,250 19,362,058 2,323,706 10,083,771
Cost of shares redeemed.. (1,407,257) (4,632,132) (9,885,893) (15,667,654) (7,975,745) (8,128,660)
---------- ----------- ------------ ----------- ----------- ------------
Net increase (decrease) $ (707,710) $(1,175,957) $ 890,357 $ 3,694,404 $(5,652,039) $ 1,955,111
========== =========== ============ =========== =========== ============
<CAPTION>
YEAR ENDED
CLASS C DECEMBER 31, 1998
----------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............. 151,917 2,106,807 22,054,854 2,982,995 1,106,813 1,702,090
Shares issued
in reinvestment
of distributions.... 7,636 9,341 203,415 - 25,053 23,551
---------- ----------- ----------- ------------ ----------- -----------
159,553 2,116,148 22,258,269 2,982,995 1,131,866 1,725,641
Shares redeemed.......... (106,932) (766,851) (17,846,207) (565,286) (273,399) (402,275)
---------- ----------- ----------- ------------ ----------- -----------
Net increase........ 52,621 1,349,297 4,412,062 2,417,709 858,467 1,323,366
========== =========== =========== ============ =========== ===========
Proceeds from
shares sold......... $3,480,079 $12,473,788 $22,054,854 $ 81,536,806 $27,554,478 $39,481,196
Proceeds from shares
issued in
reinvestment of
distributions....... 162,272 55,001 203,415 - 597,272 511,436
---------- ----------- ----------- ------------ ----------- -----------
3,642,351 12,528,789 22,258,269 81,536,806 28,151,750 39,992,632
Cost of shares
redeemed............ (2,329,570) (4,517,484) (17,846,207) (14,848,755) (6,500,906) (8,869,683)
---------- ----------- ----------- ------------ ----------- -----------
Net increase........ $1,312,781 $ 8,011,305 $ 4,412,062 $66,688,051 $21,650,844 $31,122,949
========== =========== =========== ============ =========== ===========
</TABLE>
45
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
===============================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
CLASS Y
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
-------------------------------------------------------------------------------
DAVIS DAVIS DAVIS DAVIS
GROWTH GOVERNMENT DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Shares sold.................... 1,297 4,288 65,869 19,135 488,841
Shares issued in reinvestment
of distributions.......... - 1 - 10,873 26,273
--------- ---------- ------------ ---------- ------------
1,297 4,289 65,869 30,008 515,114
Shares redeemed................ (2,617) (60,684) (111,069) (42,234) (49,973)
--------- ---------- ------------ ---------- ------------
Net increase (decrease)... (1,320) (56,395) (45,200) (12,226) 465,141
========= ========== ============ ========== ============
Proceeds from shares sold...... $ 30,004 $ 24,947 $ 2,011,599 $ 461,739 $ 9,923,786
Proceeds from shares issued in
reinvestment of
distributions............. - 3 - 260,728 511,478
--------- ---------- ------------ ---------- ------------
30,004 24,950 2,011,599 722,467 10,435,264
Cost of shares redeemed........ (58,208) (348,230) (3,341,386) (1,031,683) (1,028,161)
--------- ---------- ------------ ---------- ------------
Net increase (decrease)... $ (28,204) $ (323,280) $ (1,329,787) $ (309,216) $ 9,407,103
========= ========== ============ ========== ============
<CAPTION>
CLASS Y SEPTEMBER 1,
1998 (INCEPTION
YEAR ENDED OF CLASS) THROUGH YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
----------------- ------------------ ----------------------------------------------
DAVIS DAVIS DAVIS DAVIS
GROWTH GOVERNMENT DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Shares sold.................... 4,004 64,225 384,619 83,627 754,373
Shares issued in reinvestment
of distributions.......... 153 259 - 59,589 52,922
--------- --------- ------------ ----------- ------------
4,157 64,484 384,619 143,216 807,295
Shares redeemed................ (4,997) (4,965) (304,192) (177,312) (93,138)
--------- --------- ------------ ----------- ------------
Net increase (decrease)... (840) 59,519 207,307 (160,976) 714,157
========= ========= ============ =========== ============
Proceeds from shares sold...... $ 101,885 $ 381,919 $ 10,496,605 $ 2,093,815 $ 17,553,545
Proceeds from shares issued in
reinvestment of
distributions............. 3,290 1,533 - 1,437,986 1,168,974
--------- --------- ------------ ----------- ------------
105,175 383,452 10,496,605 3,531,801 18,722,519
Cost of shares redeemed........ (101,691) (29,395) (4,721,593) (6,855,162) (2,033,660)
--------- --------- ------------ ----------- ------------
Net increase (decrease)... $ 3,484 $ 354,057 $ 5,775,012 $(3,323,361) $ 16,688,859
========= ========= ============ =========== ============
</TABLE>
46
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1999 (Unaudited)
================================================================================
NOTE 6 - CUSTODY FEES
Under an agreement with the custodian bank, custody fees are reduced by
credits for cash balances. Such reductions amounted to $384, $97, $482, $3,806,
$3,792 and $3,151 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, during the six months
ended June 30, 1999.
NOTE 7 - RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are not registered under the Securities Act of 1933
and may have contractual restrictions on resale. They are valued under methods
approved by the Board of Directors as reflecting fair value. The aggregate value
of restricted securities in Davis Real Estate Fund was $12,581,131, or 3.05% of
the Fund's net assets as of June 30, 1999. Securities may be considered illiquid
if they lack a readily available market or if valuation has not changed for a
certain period of time. The aggregate value of illiquid securities in Davis
Convertible Securities Fund was $40,000, or 0.01% of the Fund's net assets as of
June 30, 1999. Information concerning restricted and illiquid securities is as
follows:
<TABLE>
<CAPTION>
Valuation per Unit
Fund Security Acquisition Date Cost per Unit as of June 30, 1999 Shares/Par
- ---- -------- ---------------- ------------- -------------------- ----------
<S> <C> <C> <C> <C> <C>
Davis Centerpoint Properties 04/02/98 $ 33.375 $ 35.709 300,000
Real Estate Corp. Private
Davis
Real Estate Vail Resorts 07/10/98 $ 29.828 $ 17.50 106,761
Davis
Convertible Florida West Airlines,
Securities Inc., 8.00%, 03/25/99 03/23/94 $ 100.00 $ 8.00 500,000
</TABLE>
47
<PAGE>
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
<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
ENDED -----------------YEAR ENDED------------------ ENDED
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................ $ 21.96 $ 22.49 $ 18.93 $ 17.25 $ 12.83 $ 13.70
------- ------- ------- ------- -------- --------
Income (Loss) From Investment Operations
Net Investment Loss.............................. (0.06) (0.09) (0.10) (0.13) (0.11) (0.01)
Net Realized and Unrealized Gains (Losses)....... 2.22 0.59 5.34 3.37 6.08 (0.29)
------- ------- ------- ------- -------- --------
Total From Investment Operations. 2.16 0.50 5.24 3.24 5.97 (0.30)
------- ------- ------- ------- -------- --------
Distributions
Distributions from Realized Gains................ - (1.03) (1.68) (1.55) (1.55) (0.57)
Return of Capital................................ - - - (0.01) - -
------- ------- ------- ------- -------- --------
Total Distributions.......................... - (1.03) (1.68) (1.56) (1.55) (0.57)
------- ------- ------- ------- -------- --------
Net Asset Value, End of Period...................... $ 24.12 $ 21.96 $ 22.49 $ 18.93 $ 17.25 $ 12.83
======= ======= ======= ======= ======== ========
Total Return(1) .................................... 9.84% 2.32% 27.70% 18.73% 46.65% (2.21)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).......... $54,743 $52,212 $48,386 $27,158 $22,890 $12,455
Ratio of Expenses to Average Net Assets.......... 1.31%* 1.32% 1.27% 1.49%(2) 1.51% 1.42%*
Ratio of Net Investment Loss to
Average Net Assets............................. (0.44)%* (0.38)% (0.58)% (0.76)% (0.71)% (0.08)%*
Portfolio Turnover Rate(3)....................... 75.57% 18.03% 19.33% 30.55% 30.07% 37.31%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) 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 expense ratios.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
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
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -----------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994(2)
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 21.18 $ 21.88 $ 18.58 $ 17.08 $ 12.82 $ 14.67
------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Loss......................... (0.16) (0.26) (0.25) (0.27) (0.26) (0.12)
Net Realized and Unrealized
Gains (Losses)............................ 2.16 0.59 5.23 3.33 6.07 (1.11)
------- ------- ------- ------- ------- -------
Operations.......................... 2.00 0.33 4.98 3.06 5.81 (1.23)
------- ------- ------- ------- ------- -------
Distributions
Distributions from Realized Gains........... - (1.03) (1.68) (1.55) (1.55) (0.62)
Return of Capital........................... - - - (0.01) - -
------- ------- ------- ------- ------- -------
Total Distributions..................... - (1.03) (1.68) (1.56) (1.55) (0.62)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period................. $ 23.18 $ 21.18 $ 21.88 $ 18.58 $ 17.08 $ 12.82
======= ======= ======= ======= ======= =======
Total Return(1) ............................... 9.44% 1.61% 26.82% 17.86% 45.44% (8.45)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)..... $47,863 $60,587 $61,383 $39,343 $35,326 $36,087
Ratio of Expenses to Average Net Assets.... 2.16%* 2.10% 2.09%(3) 2.25%(3) 2.30% 2.15%
Ratio of Net Investment Loss to Average
Net Assets................................ (1.29)%* (1.16)% (1.40)% (1.52)% (1.50)% (0.81)%
Portfolio Turnover Rate(4).................. 75.57% 18.03% 19.33% 30.55% 30.07% 37.31%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
(2) 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.
(3) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement 2.08% and 2.24% for 1997 and 1996,
respectively. Prior to 1996, such reductions were reflected in the expense
ratios.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
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 C
<TABLE>
<CAPTION>
AUGUST 15, 1997
(COMMENCEMENT
SIX MONTHS YEAR OF OPERATIONS)
ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997
----------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............. $ 21.71 $ 22.43 $ 25.56
---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Loss........................... (0.17) (0.30) (0.04)
Net Realized and Unrealized Gains (Losses).... 2.20 0.61 (1.41)
---------- ---------- ----------
Total From Investment
Operations............................ 2.03 0.31 (1.45)
---------- ---------- ----------
Dividends and Distributions
Distributions from Realized Gains............. - (1.03) (1.68)
--------- ---------- -----------
Total Distributions....................... - (1.03) (1.68)
--------- ---------- ----------
Net Asset Value, End of Period................... $ 23.74 $ 21.71 $ 22.43
========== ========== ==========
Total Return(1) ................................. 9.35% 1.48% (5.66)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)...... $3,218 $3,644 $2,585
Ratio of Expenses to Average Net Assets....... 2.35%* 2.27% 2.19%*
Ratio of Net Investment Loss to
Average Net Assets......................... (1.48)%* (1.33)% (1.51)%*
Portfolio Turnover Rate(2).................... 75.57% 18.03% 19.33%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
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 Y
<TABLE>
<CAPTION>
SEPTEMBER 18, 1997
(COMMENCEMENT
SIX MONTHS YEAR OF OPERATIONS)
ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997
----------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 21.96 $ 22.52 $ 27.19
-------- -------- --------
Income (Loss) From Investment Operations
Net Investment Loss...................... (0.01) (0.14) -
Net Realized and Unrealized Gains (Losses) 2.23 0.61 (2.99)
-------- -------- --------
Total From Investment
Operations....................... 2.22 0.47 (2.99)
-------- -------- --------
Dividends and Distributions
Distributions from Realized Gains........ - (1.03) (1.68)
------- -------- --------
Total Distributions.................. - (1.03) (1.68)
------- -------- --------
Net Asset Value, End of Period.............. $ 24.18 $ 21.96 $ 22.52
======== ======== ========
Total Return(1) ............................ 10.11% 2.18% (10.98)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted). $49 $73 $94
Ratio of Expenses to Average Net Assets.. 1.10%* 1.33%(2) 1.01%*
Ratio of Net Investment Loss to
Average Net Assets.................... (0.23)%* (0.38)% (0.33)%*
Portfolio Turnover Rate(3)............... 75.57% 18.03% 19.33%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.32% for Class Y for 1998.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
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
<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
ENDED -------------YEAR ENDED-------------- ENDED
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 5.90 $ 5.87 $ 5.76 $ 6.00 $ 5.79 $ 5.78
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income................ 0.14 0.29 0.33 0.33 0.39 0.02
Net Realized and Unrealized Gains
(Losses)........................... (0.28) 0.07 0.11 (0.14) 0.27 (0.01)
-------- -------- -------- -------- -------- --------
Total From Investment Operations.. (0.14) 0.36 0.44 0.19 0.66 0.01
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income................ (0.17) (0.29) (0.33) (0.33) (0.36) -
Return of Capital.................... - (0.04) - (0.10) (0.09) -
-------- -------- -------- -------- -------- --------
Total Dividend and Distributions... (0.17) (0.33) (0.33) (0.43) (0.45) -
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.......... $ 5.59 $ 5.90 $ 5.87 $ 5.76 $ 6.00 $ 5.79
======== ======== ======== ======== ======== ========
Total Return (1)........................ (2.50)% 6.31% 7.92% 3.40% 11.82% (0.97)%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted).......................... $ 21,891 $ 21,285 $ 17,589 $ 18,129 $ 21,485 $ 20,035
Ratio of Expenses to Average Net
Assets............................ 1.37%* 1.43% 1.27%(2) 1.77% 1.74% 1.64%*
Ratio of Net Investment
Income to Average Net Assets...... 4.85%* 4.87% 5.82% 5.88% 6.54% 6.22%*
Portfolio Turnover Rate (3).......... 5.46% 18.40% 24.35% 45.50% 41.04% 62.17%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.26% for 1997. Prior to 1996, such
reductions were reflected in the expenses ratios.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
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
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 --------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 5.88 $ 5.86 $ 5.75 $ 5.98 $ 5.79 $ 6.33
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income................ 0.12 0.27 0.29 0.29 0.34 0.31
Net Realized and Unrealized Gains
(Losses)......................... (0.28) 0.04 0.11 (0.13) 0.26 (0.37)
-------- -------- -------- -------- -------- --------
Total From Investment Operations. (0.16) 0.31 0.40 0.16 0.60 (0.06)
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income................ (0.14) (0.27) (0.29) (0.29) (0.33) (0.37)
Return of Capital.................... - (0.02) - (0.10) (0.08) (0.11)
-------- -------- -------- -------- -------- --------
Total Dividend and Distributions. (0.14) (0.29) (0.29) (0.39) (0.41) (0.48)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.......... $ 5.58 $ 5.88 $ 5.86 $ 5.75 $ 5.98 $ 5.79
======== ======== ======== ======== ======== ========
Total Return (1)........................ (2.79)% 5.38% 7.12% 2.78% 10.62% (0.97)%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted)......................... $32,793 $36,005 $12,703 $12,959 $15,976 $19,241
Ratio of Expenses to Average Net
Assets........................... 2.13%* 2.18%2 2.01%(2) 2.53%(2) 2.51% 2.38%
Ratio of Net Investment Income
to Average Net Assets.............. 4.09%* 4.13% 5.07% 5.13% 5.77% 5.48%
Portfolio Turnover Rate (3).......... 5.46% 18.40% 24.35% 45.50% 41.04% 62.17%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.17%, 2.00% and 2.52% for 1998, 1997
and 1996, respectively. Prior to 1996, such reductions were reflected in the
expense ratios.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
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:
<TABLE>
<CAPTION>
-----------------CLASS C------------------ -----------CLASS Y-------------
AUGUST 19, 1997 SEPTEMBER 1, 1998
(INCEPTION (INCEPTION
SIX MONTHS YEAR OF CLASS) SIX MONTHS OF CLASS)
ENDED ENDED THROUGH ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998 1997 (UNAUDITED) 1998
----------- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 5.90 $ 5.88 $ 5.79 $ 5.92 $ 5.92
------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income (Loss)......... 0.11 0.27 0.08 0.12(4) 0.07
Net Realized and Unrealized Gains.... (0.27) 0.04 0.09 (0.23)(4) 0.02
------- -------- -------- -------- --------
Total From Investment Operations. (0.16) 0.31 0.17 (0.11) 0.09
------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income................ (0.14) (0.27) (0.08) (0.18) (0.07)
Return of Capital.................... - (0.02) - - (0.02)
------- -------- -------- -------- --------
Total Dividend and Distributions. (0.14) (0.29) (0.08) (0.18) (0.09)
------- -------- -------- -------- --------
Net Asset Value, End of Period.......... $ 5.60 $ 5.90 $ 5.88 $ 5.63 $ 5.92
========= ========= ========= ========= ========
Total Return (1)........................ (2.82)% 5.42% 2.97% (1.94)% 1.59%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted)........................ $ 6,623 $ 8,178 $ 215 $ 18 $ 352
Ratio of Expenses to Average Net
Assets.......................... 2.12%* 2.18% 1.97%*(2) 1.13%* 1.05%*
Ratio of Net Investment Income to
Average Net Assets............... 4.10%* 4.12% 5.11%* 5.09%* 5.25%*
Portfolio Turnover Rate(3)........... 5.46% 18.40% 24.35% 5.46% 18.40%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.96% for Class C for 1997.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(4) Per share information has been determined based on average shares
outstanding for the period.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
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.
CLASSES A, B & C
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1999 -----------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income............... .021 .048 .049 .047 .051 .034
Dividends
Net Investment Income............... (.021) (.048) (.049) (.047) (.051) (.034)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total Return(1) ........................ 2.10% 4.94% 5.02% 4.80% 5.25% 3.48%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted)....................... $521,757 $514,474 $464,459 $411,416 $360,290 $240,727
Ratio of Expenses to Average Net
Assets......................... 0.66%* 0.61% 0.57% 0.66% 0.73% 0.64%
Ratio of Net Investment Income to
Average Net Assets................. 4.23%* 4.84% 4.92% 4.72% 5.13% 3.43%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
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
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994(2)
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 29.32 $ 25.68 $ 18.06 $ 14.50 $ 10.68 $ 11.70
-------- --------- --------- --------- -------- --------
Income (Loss) From Investment
Operations
Net Investment Income................ 0.10 0.09 0.13 0.14 0.07 0.08
Net Realized and Unrealized Gains
(Losses)........................ 2.59 3.55 7.92 4.44 5.32 (0.61)
-------- --------- --------- --------- -------- --------
Total From Investment Operations. 2.69 3.64 8.05 4.58 5.39 (0.53)
-------- --------- --------- --------- -------- --------
Dividends and Distributions
Net Investment Income................ - - (0.13) (0.15) (0.07) (0.08)
Distributions from Realized Gains.... - - (0.30) (0.87) (1.50) (0.39)
Return of Capital.................... - - - - - (0.02)
-------- --------- --------- --------- -------- --------
Total Dividend and Distributions. - - (0.43) (1.02) (1.57) (0.49)
-------- --------- --------- --------- -------- --------
Net Asset Value, End of Period.......... $ 32.01 $ 29.32 $ 25.68 $ 18.06 $ 14.50 $ 10.68
======== ======== ======== ======== ======== ========
Total Return (1)........................ 9.17% 14.17% 44.53% 31.50% 50.51% (4.55)%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted)........................ $485,326 $460,799 $292,059 $107,579 $ 79,874 $ 57,670
Ratio of Expenses to Average Net
Assets.......................... 1.04%* 1.07%(3) 1.07% 1.15% 1.18% 1.24%
Ratio of Net Investment Income
to Average Net Assets........... 0.66%* 0.34% 0.77% 0.92% 0.53% 0.67%
Portfolio Turnover Rate(4)........... 8.05% 11.37% 6.23% 25.78% 41.89% 43.95%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
(2) Per share data has been restate to give effect to a 2 for 1 stock split to
shareholders of record as of the close of business on January 7.
(3) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.06% for 1998.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
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
<TABLE>
<CAPTION>
DECEMBER 27, 1994
(INCEPTION
SIX MONTHS OF CLASS)
ENDED ------------YEAR ENDED------------- THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 28.71 $ 25.36 $ 17.91 $ 14.41 $ 10.68 $ 11.22
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment
Operations
Net Investment Income (Loss)......... (0.03) (0.12) (0.01) 0.01 0.01 0.03
Net Realized and Unrealized Gains
(Losses)......................... 2.53 3.47 7.76 4.37 5.22 (0.13)
-------- -------- -------- -------- -------- --------
Total From Investment Operations 2.50 3.35 7.75 4.38 5.23 (0.10)
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income................ - - - (0.01) - (0.03)
Distributions from Realized Gains.... - - (0.30) (0.87) (1.50) (0.39)
Return of Capital.................... - - - - - (0.02)
-------- -------- -------- -------- -------- --------
Total Dividend and Distributions. (0.30) (0.88) (1.50) (0.44)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.......... $ 31.21 $ 28.71 $ 25.36 $ 17.91 $ 14.41 $ 10.68
======== ======== ======== ======== ======== ========
Total Return (1)........................ 8.71% 13.21% 43.25% 30.29% 49.00% (0.90)%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted)........................ $452,316 $419,145 $193,257 $ 8,213 $ 1,762 $ 28
Ratio of Expenses to Average Net
Assets.......................... 1.91%* 1.93%(2) 1.97% 2.04% 2.09% 2.04%*
Ratio of Net Income Investment
(Loss) to Average Net Assets....... (0.21)%* (0.52)% (0.12)% 0.19% (0.38)% (0.13)%*
Portfolio Turnover Rate (3).......... 8.05% 11.37% 6.23% 25.78% 41.89% 43.95%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.92% for 1998.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
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.
<TABLE>
<CAPTION>
------------CLASS C--------------------- ---------------CLASS Y----------------
AUGUST 12, 1997 MARCH 10, 1997
(INCEPTION (INCEPTION
SIX MONTHS YEAR OF CLASS) SIX MONTHS YEAR OF CLASS)
ENDED ENDED THROUGH ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31, JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 (UNAUDITED) 1998 1997
----------- ---- ---- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $ 29.12 $ 25.71 $ 23.76 $ 29.40 $ 25.66 $ 20.32
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment
Operations
Net Investment Income (Loss)....... (0.03) (0.10) - 0.14 0.14 0.09
Net Realized and Unrealized Gains.. 2.56 3.51 2.25 2.59 3.60 5.74
-------- -------- -------- -------- -------- --------
Total From Investment Operations 2.53 3.41 2.25 2.73 3.74 5.83
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income.............. - - - - - (0.19)
Distributions from Realized Gains.. - - (0.30) - (0.30)
-------- -------- -------- -------- -------- --------
-
Total Dividend and Distributions - - (0.30) - - (0.49)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period........ $ 31.65 $ 29.12 $ 25.71 $ 32.13 $ 29.40 $ 25.66
======== ======== ======== ======== ======== ========
Total Return (1)...................... 8.69% 13.26% 9.45% 9.29% 14.58% 28.66%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted).................... $104,309 $ 92,513 $ 19,515 $ 9,972 $ 10,453 $ 3,805
Ratio of Expenses to Average Net
Assets...................... 1.91%* 1.91% 1.93%* 0.88%*(2) 0.83%(2) 0.79%*
Ratio of Net Investment Income
(Loss) to Average Net Assets..... (0.21)%* (0.51)% (0.09)%* 0.83%* 0.58% 1.06%*
Portfolio Turnover Rate (3)........ 8.05% 11.37% 6.23% 8.05% 11.37% 6.23%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 0.87% and 0.82% for Class Y shares for
the six months ended June 30, 1999 and the year ended December 31, 1998,
respectively.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
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
<TABLE>
<CAPTION>
SIX MONTHS
ENDED --------------YEAR ENDED DECEMBER 31,------------
JUNE 30, 1999
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 23.76 $ 25.26 $ 21.22 $ 18.22 $ 15.57 $ 17.45
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income................ 0.41 0.77 0.67 0.71 0.67 0.67
Net Realized and Unrealized Gains
(Losses)..................... 2.69 (1.23) 5.33 4.56 3.42 (1.83)
-------- -------- -------- -------- -------- --------
Total From Investment
Operations................... 3.10 (0.46) 6.00 5.27 4.09 (1.16)
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income................ (0.20) (0.76) (0.67) (0.69) (0.66) (0.67)
Distributions from Realized Gains.... - (0.27) (1.22) (1.54) (0.78) (0.05)
Return of Capital.................... - (0.01) (0.07) (0.04) - -
-------- -------- -------- -------- -------- --------
Total Dividend and Distributions. (0.20) (1.04) (1.96) (2.27) (1.44) (0.72)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.......... $ 26.66 $ 23.76 $ 25.26 $ 21.22 $ 18.22 $ 15.57
======== ======== ======== ======== ======== ========
Total Return (1)........................ 13.14% (1.79)% 28.68% 29.46% 26.68% (6.72)%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted)..................... $131,790 $132,856 $ 90,107 $ 42,841 $ 59,757 $ 47,844
Ratio of Expenses to Average Net
Assets....................... 1.15%* 1.16%(2) 1.08%(2) 1.05% 1.14% 1.20%
Ratio of Net Investment Income
to Average Net Assets............. 3.23%* 3.27% 3.00% 3.34% 3.87% 4.06%
Portfolio Turnover Rate (3).......... 13.67% 14.43% 23.68% 43.16% 53.58% 45.15%
</TABLE>
(1) Assumes hypothetical investment on the business day before the first day of
the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales
charges are not reflected in total returns. Total returns are not annualized
for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.15% and 1.07% for 1998 and 1997,
respectively. Prior to 1996, such reductions were reflected in the expense
ratios.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
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
<TABLE>
<CAPTION>
FEBRUARY 3, 1995
(INCEPTION
SIX MONTHS OF CLASS)
ENDED -------------YEAR ENDED------------- THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996 1995
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........... $ 23.55 $ 25.03 $ 21.05 $ 18.14 $ 15.95
-------- -------- -------- -------- --------
Income (Loss) From Investment
Operations
Net Investment Income......... 0.29 0.56 0.44 0.59 0.54
Net Realized and Unrealized
Gains (Losses).............. 2.67 (1.22) 5.26 4.45 2.97
-------- -------- -------- -------- --------
Total From Investment
Operations.............. 2.96 (0.66) 5.70 5.04 3.51
-------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income........ (0.15) (0.54) (0.44) (0.56) (0.54)
Distributions from
Realized Gains.............. - (0.27) (1.22) (1.54) (0.78)
Return of Capital............ - (0.01) (0.06) (0.03) -
-------- -------- -------- -------- --------
Total Dividend and
Distributions.......... (0.15) (0.82) (1.72) (2.13) (1.32)
-------- -------- -------- -------- --------
Net Asset Value, End of Period... $ 26.36 $ 23.55 $ 25.03 $ 21.05 $ 18.14
======== ======== ======== ========= ========
Total Return (1)................. 12.63% (2.62)% 27.35% 28.21% 25.31%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)............... $94,593 $90,827 $35,536 $ 2,075 $ 378
Ratio of Expenses to
Average Net Assets.......... 2.02%* 2.04%(2) 2.11%(2) 2.01%(2) 2.01%*
Ratio of Net Investment Income
to Average Net Assets...... 2.36%* 2.39% 2.09% 2.40% 3.00%*
Portfolio Turnover Rate (3)...
13.67% 14.43% 23.68% 43.16 53.58%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.03%, 2.10% and 2.00% for 1998, 1997
and 1996, respectively. Prior to 1996, such reductions were reflected in the
expense ratios.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
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 C
<TABLE>
<CAPTION>
AUGUST 12, 1997
(INCEPTION
SIX MONTHS YEAR OF CLASS)
ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31 DECEMBER 31,
(UNAUDITED) 1998 1997
----------- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period............. $ 23.86 $ 25.36 $ 24.91
-------- -------- --------
Income (Loss) From Investment
Operations
Net Investment Income........... 0.31 0.59 0.11
Net Realized and Unrealized
Gains (Losses)................ 2.69 (1.26) 1.72
-------- -------- --------
Total From Investment
Operations................ 3.00 (0.67) 1.83
-------- -------- --------
Dividends and Distributions
Net Investment Income.......... (0.15) (0.55) (0.11)
Distributions from
Realized Gains................ - (0.27) (1.22)
Return of Capital.............. - (0.01) (0.05)
-------- -------- --------
Total Dividend and
Distributions............ (0.15) (0.83) (1.38)
-------- -------- --------
Net Asset Value, End of Period $ 26.71 $ 23.86 $ 25.36
======== ======== ========
Total Return (1)................... 12.64% (2.61)% 7.38%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)................. $ 23,408 $ 26,406 $ 6,296
Ratio of Expenses to
Average Net Assets............ 2.02%* 2.03%(2) 2.08%*(2)
Ratio of Net Investment Income
to Average Net Assets........ 2.36%* 2.40% 2.01%*
Portfolio Turnover Rate (3)..... 13.67% 14.43% 23.68%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 2.02% and 2.07% for 1998 and 1997,
respectively.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
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 Y
<TABLE>
<CAPTION>
NOVEMBER 13, 1996
(INCEPTION
SIX MONTHS OF CLASS)
ENDED -----------YEAR ENDED----------- THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31
(UNAUDITED) 1998 1997 1996
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........... $ 23.84 $ 25.34 $ 21.29 $ 21.39
-------- -------- -------- --------
Income (Loss) From Investment
Operations
Net Investment Income......... 0.44 0.89 0.69 0.07
Net Realized and Unrealized 2.70 (1.27) 5.35 1.44
-------- -------- -------- --------
Gains (Losses)..............
Total From Investment 3.14 (0.38) 6.04 1.51
-------- --------- -------- --------
Operations..............
Dividends and Distributions
Net Investment Income........ (0.22) (0.85) (0.69) (0.06)
Distributions from (0.27) (1.22) (1.54)
Realized Gains.............. -
Return of Capital............ - - (0.08) (0.01)
-------- -------- -------- --------
Total Dividend and (0.22) (1.12) (1.99) (1.61)
-------- -------- -------- --------
Distributions..........
Net Asset Value, End of Period... $ 26.76 $ 23.84 $ 25.34 $ 21.29
======== ======== ======== =======
Total Return (1)................. 13.28% (1.46)% 28.80% 7.01%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted)............... $33,958 $30,536 $36,543 $33,006
Ratio of Expenses to
Average Net Assets.......... 0.88%* 0.86%(2) 0.95% 0.98%*
Ratio of Net Investment Income
to Average Net Assets...... 3.50%* 3.57% 3.09% 3.11%*
Portfolio Turnover Rate(3).... 13.67% 14.43% 23.68% 43.16%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 0.85% for 1998.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
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
<TABLE>
<CAPTION>
JANUARY 3, 1994
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED ---------------YEAR ENDED-------------- THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996(1) 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $ 20.73 $ 25.41 $ 21.24 $ 16.44 $ 14.72 $ 14.29
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment
Operations
Net Investment Income.............. 0.44 0.74 0.74 0.71 0.82 0.62
Net Realized and Unrealized Gains
(Losses)........................ 0.41 (4.65) 4.51 5.22 1.71 0.55
-------- -------- -------- -------- -------- --------
Total From Investment Operations 0.85 (3.91) 5.25 5.93 2.53 1.17
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income.............. (0.20) (0.74) (0.74) (0.70) (0.81) (0.62)
Distributions from Realized Gains.. - - (0.27) (0.25) - (0.12)
Return of Capital.................. - (0.03) (0.07) (0.18) - -
-------- -------- -------- -------- -------- --------
Total Dividends and
Distributions............. (0.20) (0.77) (1.08) (1.13) (0.81) (0.74)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period........ $ 21.38 $ 20.73 $ 25.41 $ 21.24 $ 16.44 $ 14.72
======== ======== ======== ======== ======== ========
Total Return (2)...................... 4.22% (15.56)% 25.08% 37.05% 17.70% 8.18%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted).................. $196,749 $198,328 $147,488 $ 32,507 $ 29,320 $ 25,450
Ratio of Expenses to Average Net
Assets........................... 1.24%*(3) 1.21% 1.18% 1.32%(3) 1.43% 1.86%*
Ratio of Net Investment Income to
Average Net Assets............... 4.28%* 3.40% 3.40% 3.95% 5.44% 3.98%*
Portfolio Turnover Rate (4)........ 32.72% 19.14% 12.50% 18.60% 38.82% 35.80%
</TABLE>
(1) Per share calculations other than distributions were based on average shares
outstanding during the period.
(2) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
(3) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.23% and1.31% for the six months ended
June 30, 1999 and the year ended 1996, respectively. Prior to 1996, such
reductions were reflected in the expense ratios.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
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
<TABLE>
<CAPTION>
DECEMBER 27, 1994
(INCEPTION
SIX MONTHS OF CLASS)
ENDED ---------------YEAR ENDED------------------ THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996(1) 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $ 20.67 $ 25.32 $ 21.19 $ 16.41 $ 14.72 $ 14.73
-------- -------- -------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income.............. 0.35 0.56 0.54 0.56 0.68 0.02
Net Realized and Unrealized Gains
(Losses)....................... 0.41 (4.63) 4.47 5.21 1.70 0.11
-------- -------- -------- -------- -------- --------
Total From Investment
Operations.............. 0.76 (4.07) 5.01 5.77 2.38 0.13
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income.............. (0.16) (0.56) (0.54) (0.63) (0.69) (0.02)
Distributions from Realized Gains.. - - (0.27) (0.25) - (0.12)
Return of Capital.................. - (0.02) (0.07) (0.11) - -
-------- -------- -------- -------- -------- --------
Total Dividend and Distributions (0.16) (0.58) (0.88) (0.99) (0.69) (0.14)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period........ $ 21.27 $ 20.67 $ 25.32 $ 21.19 $ 16.41 $ 14.72
======== ======== ======== ======== ======== ========
Total Return (2)...................... 3.76% (16.21)% 23.88% 35.99% 16.59% 0.89%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted)...................... $130,827 $143,993 $114,283 $ 10,919 $ 414 $ 34
Ratio of Expenses to Average Net
Assets........................ 2.03%* 2.02% 2.04% 2.22% 2.39% 2.64%*
Ratio of Net Investment Income to
Average Net Assets................. 3.48%* 2.59% 2.60% 3.46% 4.48% 3.20%*
Portfolio Turnover Rate(3)......... 32.72% 19.14% 12.50% 18.60% 38.82% 35.80%
</TABLE>
(1) Per share calculations other than distributions were based on average shares
outstanding during the period.
(2) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
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 C
<TABLE>
<CAPTION>
AUGUST 13, 1997
(INCEPTION
SIX MONTHS YEAR OF CLASS)
ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997
----------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 20.81 $ 25.49 $ 23.41
-------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income........................... 0.37 0.53 0.18
Net Realized and Unrealized Gains (Losses).... 0.40 (4.62) 2.42
-------- -------- --------
Total From Investment Operations........... 0.77 (4.09) 2.60
-------- -------- --------
Dividends and Distributions
Net Investment Income........................... (0.16) (0.53) (0.18)
Distributions from Realized Gains............... - - (0.27)
Return of Capital............................... - (0.06) (0.07)
------- -------- --------
Total Dividend and Distributions............ (0.16) (0.59) (0.52)
-------- -------- --------
Net Asset Value, End of Period..................... $ 21.42 $ 20.81 $ 25.49
======== ======== ========
Total Return(1).................................... 3.79% (16.20)% 11.12%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)........ $37,267 $34,336 $8,322
Ratio of Expenses to Average Net Assets......... 2.00%* 2.02% 2.03%*
Ratio of Net Investment Income to Average Net
Assets...................................... 3.51%* 2.59% 2.56%*
Portfolio Turnover Rate(2)...................... 32.72% 19.14% 12.50%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
(2) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
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.
<TABLE>
<CAPTION>
CLASS Y
NOVEMBER 8,1996
(INCEPTION
SIX MONTHS OF CLASS)
ENDED --------YEAR ENDED--------- THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...... $ 20.86 $ 25.56 $ 21.37 $ 19.29
-------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income.................. 0.45 0.83 0.79 0.13
-------- -------- -------- --------
Net Realized and Unrealized Gains
(Losses)..................... 0.44 (4.67) 4.54 2.35
-------- -------- -------- --------
Total From Investment Operations.... 0.89 (3.84) 5.33 2.48
-------- -------- -------- --------
Dividends and Distributions
Net Investment Income.................. (0.22) (0.83) (0.79) (0.13)
Distributions from Realized Gains...... - - (0.27) (0.25)
Return of Capital...................... - (0.03) (0.08) (0.02)
-------- -------- -------- --------
Total Dividends and Distributions.. (0.22) (0.86) (1.14) (0.40)
-------- -------- -------- --------
Net Asset Value, End of Period............ $ 21.53 $ 20.86 $ 25.56 $ 21.37
======== ======== ======== ========
Total Return(1)........................... 4.40% (15.20)% 25.29% 12.89%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 48,268 $ 37,054 $ 27,147 $ 18,165
Ratio of Expenses to Average Net Assets 0.83%* 0.83%(2) 1.00% 1.18%*
Ratio of Net Investment Income to
Average Net Assets............... 4.68%* 3.79% 3.47% 4.22%*
Portfolio Turnover Rate(2)............. 32.72% 19.14% 12.50% 18.60%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the first
day of the fiscal period (or inception of offering), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 0.82% for 1998.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
66
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DAVIS SERIES, INC.
124 East Marcy Street Santa Fe, New Mexico 87501
DIRECTORS OFFICERS
Jeremy H. Biggs Jeremy H. Biggs
Wesley E. Bass, Jr. Chairman
Marc P. Blum Shelby M.C. Davis
Andrew A. Davis President
Christopher C. Davis Kenneth C. Eich
Jerry D. Geist Vice President
D. James Guzy Sharra L. Reed
G. Bernard Hamilton Vice President,
LeRoy E. Hoffberger Treasurer &
Laurence W. Levine Assistant Secretary
Christian R. Sonne Thomas D. Tays
Marsha Williams Vice President & Secretary
Christopher C. Davis
Vice President
Andrew A. Davis
Vice President
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
(800) 279-2279
DISTRIBUTOR
Davis Distributors, LLC
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
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
AUDITORS
KPMG LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
FOR MORE INFORMATION ABOUT DAVIS SERIES, INC. INCLUDING MANAGEMENT FEE, CHARGES
AND EXPENSES, SEE THE CURRENT PROSPECTUS WHICH MUST PRECEDE OR ACCOMPANY THIS
REPORT.
<PAGE>
DAVIS
FUNDS
"OVER 25 YEARS OF RELIABLE INVESTING"
DAVIS SELECTED ADVISERS, L.P.
124 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
1-800-279-0279
SEMI-ANNUAL REPORT
