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SEMI-ANNUAL REPORT
JUNE 30, 2000
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.)
[DAVIS FUNDS LOGO]
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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Dear Fellow Shareholder,
We are optimists at heart and we believe that stocks offer the best means of
creating wealth over the long term. Historically, stocks have won over time
because they represent claims on growth, not a fixed promise to pay a fixed
amount, which is the case with bonds.(1) As gross domestic product (GDP) and
corporate profits grow, so does the valuation floor for stocks.
With that as a backdrop, every day when we come to work we try to do four
things. First, we seek out businesses that will grow, preferably ones that need
little new capital because that means they are the most self-sufficient.
Second, we evaluate the judgment, vision and integrity of management. We want to
get a good feel for what management plans to do with the free cash flows
generated by the business--be it making new investments, acquiring other
businesses or increasing dividends.
Third, we value those businesses against the alternatives, seeking to determine
what "mystery" coupon or rate of return the business will produce for its
stockowners. In other words, we determine what we would be willing to pay for
the business in order to provide us with a better projected rate of return than
the coupon rate on risk-free alternatives such as 10-year Treasury bonds, and we
try to buy the companies when they are attractively valued.
Fourth, we consider this analysis within the context of where we are in the
stock market cycle. We know we are on a long journey. If equities will grow at a
rate of around 7% a year over the next 30 years, which is a little less than
their long term average, that would take the Dow Jones Industrial Average from
around 10,000 to 80,000 by 2030.(2) At the same time, we are mindful that road
conditions will not always be favorable and that there will be checkpoints along
the way because different eras create different risk profiles.
Looking ahead over the next few years, we recognize that we are unlikely to
continue enjoying the big drivers of stock performance that we have had over the
past 15 to 20 years--namely, dramatically rising corporate profits, steeply
falling interest rates and sharply higher price/earnings (P/E) valuations.
Inflation and interest rates have plateaued at best and may be increasing, which
means caution lights are flashing on the road ahead. If inflation keeps
climbing, the Federal Reserve will take concerted action after the presidential
election, raising interest rates even further and therefore the risk-free hurdle
rate against which all stocks have to compete. As for corporate profits, they
still have a green light, but they have been inflated by various accounting
practices and cannot keep growing their share of GDP forever.
All of this leads us to believe that the market could be in a 30% to 50% trading
range over the next 5 to 10 years before there is a big break out again. That is
a lot of movement in points, but not much in percentage terms, particularly when
you consider the market went up tenfold (from 1,000 to 10,000) over the past 20
years. Although the rate of growth may be slowing, we still anticipate a fairly
favorable environment for stocks. The Federal Reserve is doing its job right by
trying to prolong the cycle, deflate a bubble and prevent a boom/bust scenario.
Even if we stay in a trading-range market for some time, there should always be
opportunities for stock picking.
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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We think multinationals may be a fertile area to investigate whether they are in
the technology, drug or financial sector. For several years, these companies
have been fighting headwinds related to various financial crises around the
world, the strength of the dollar and the market's fixation on Internet
companies. Now high-quality multinationals with proven management teams may move
into the spotlight because they have flexibility to allocate capital around the
globe to wherever it may earn the best return, and with a world population of
around six billion, their potential customer base is huge.
Contrary to what some people may believe, we are not against technology.
Particularly in a difficult market when you have to be a good stock picker, it
is useful to identify a theme. Over the next decade, technology is almost
certain to be a key investment trend, whether it be the inventors of technology
or traditional companies that successfully apply technology in their business
models. American Express(3) is one example of a company that is likely to
benefit as consumers buy more and more over the Internet, charging purchases on
their credit cards. In addition, there are a number of financial and other
companies that will use the Internet to drive down their costs or to leverage
their brand power and broaden their marketing reach. If these companies are also
multinational, so much the better because they can do this all over the world.
Of course, no one knows for sure exactly what the next few years will bring. But
regardless of election results, inflation, interest rates or profit trends, we
will continue to manage money according to the same generational philosophy we
have applied for decades in all types of markets. Investing is a batting average
business, full of strikeouts and mistakes as well as home runs. Rest assured
that we will try to do sensible things every day when we come to work and do the
best we can because our money is invested side by side with our fellow
shareholders. We continue to believe that stocks are the best way to build
long-term wealth. Staying invested puts time on our side and gives compounding
the opportunity to work for us all.(4)
Sincerely,
/s/ Shelby M.C. Davis
Shelby M.C. Davis
Senior Research Adviser
August 4, 2000
2
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS FINANCIAL FUND
PERFORMANCE OVERVIEW
The Davis Financial Fund's Class A shares provided a total return on net asset
value of 7.40% for the six-month period and (2.47)% for the one-year period
ended June 30, 2000.(5) Over the same time frames, the Standard & Poor's 500
Index returned (0.43)% and 7.25%, respectively(6), while the Financial Services
Funds tracked by Lipper Analytical Services' averaged returns of (1.93)% and
(10.14)%, respectively.(7)
According to Morningstar, "This fund's steady Eddie behavior has made it an
appealing option among financial funds.... The fund's steadiness partly owes to
co-managers Chris Davis and Ken Feinberg's disciplined strategy. They focus on
well-managed firms with sound financials, and they like to buy stocks that are
under a cloud.... Davis and Feinberg's focus on risk control has helped produce
a solid risk/return profile over the long haul. The fund's annual returns have
generally been above average, while its risk scores are below the group's norm.
Fairly low expenses and seasoned management add to this offering's allure,
making it a solid choice in the category."(8)
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS
Q. Could you recap the performance of the Fund and financial stocks during the
first half of 2000?
A. After a disappointing 1999, we are pleased to report to shareholders that the
Fund's return of 7.40% outpaced the S&P 500's return of (0.43)% during the first
six months of 2000. Although these short-term results are clearly more fun for
us to write about, as investors we all know it is the long-term result that
matters. As stewards of your capital, Chris and I feel that our performance
should be evaluated in two ways, both measured over a holding period of five
years or more: First, how has our Fund performed versus the S&P 500? Second, how
does the Fund stack up versus its peer group of financial sector funds? We would
also encourage shareholders to compare the returns they receive on an after-tax
basis, although this information is often a bit more difficult to obtain. The
Fund delivered an average annual total return of 22.80% for the five-year period
ended June 30, 2000 and 22.10% since its inception on May 1, 1991. In comparison
the S&P 500 provided returns of 23.77% and 18.39%, respectively, over the same
time periods.
As we wrote to you in January, financial stocks often lead the market down
during periods of Federal Reserve tightening, but then rally and lead the market
up once investors sense that the central bank has nearly finished its job of
slowing down the overall economy in order to keep inflationary pressures from
accelerating. Therefore, we expected the environment for financial stocks would
remain volatile until there was greater clarity regarding the direction of
inflation and interest rates. It is fair to say that we are pleasantly surprised
at how quickly investor sentiment toward financial stocks has improved, despite
the fact that it is still unclear whether inflation has been contained and that
the central bank remains poised to continue raising short-term interest rates if
necessary.
3
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
Q. Have all financial stocks benefited from this improved investor sentiment?
A. No. We continue to believe that this is a market that will especially reward
careful stock picking. The combination of falling interest rates, subdued
inflation and a robust economy that has kept credit losses artificially low and
lifted the fortunes of most financial companies during the past decade is
unlikely to be repeated. In fact, bank stocks have been severely punished this
year for several reasons. First, revenue growth has been more difficult to
achieve. In addition, net interest margins have contracted as funding costs have
risen at the same time that competition has lowered the rates banks can charge
on loans. Finally, the impact of rising credit losses despite a continuing
healthy economy is now unfolding. The adverse effect of these developments can
be seen in the performance of well managed banks such as Wachovia and SunTrust,
which are down 18% and 32%, respectively, through July 17. While we do own a few
bank stocks such as Wells Fargo(3) and Fifth Third Bancorp, part of our Fund's
favorable relative performance has been due to significantly underweighting the
banking sector.
Conversely, we have been surprised by the strong performance of brokerage
stocks--particularly given the dramatic slowdown in many of their business
lines, including the high-margin initial public offering (IPO) market (hurt by
Internet stocks crashing back to earth), fixed-income issuance (hurt by rising
interest rates, which dampen the enthusiasm of both issuers and investors) and
merchant banking/venture capital operations (where gains were more difficult to
generate as technology stocks declined). We were glad to have some exposure to
the brokerage sector through quality firms such as Morgan Stanley Dean Witter,
Donaldson, Lufkin & Jenrette, Charles Schwab and Legg Mason. However, we admit
that we missed some big moves in companies such as Merrill Lynch that we
considered owning but were waiting for a more attractive entry price.
Q. What holdings were important contributors to performance?
A. We were fortunate to find several investment opportunities where we thought
the market was significantly undervaluing the true worth of the company. Two
examples worth mentioning are Kansas City Southern Industries (KSU) and Sun Life
Financial of Canada.
KSU is a holding company that, in addition to owning a small regional railroad,
also happened to own 82% of a fast-growing mutual fund company with over $300
billion in assets under management led by the Janus family of funds. In
addition, KSU held a 32% stake in an information-processing subsidiary called
DST Systems. KSU had been in the process of trying to boost shareholder value by
spinning off the mutual fund company and its interest in DST Systems into a
separately traded company called Stilwell Financial. However, KSU shares
remained quite depressed due to the well publicized and long-running dispute
between the management of the railroad company, which had effective control over
the mutual fund company through its 82% majority ownership of Janus, and the
management of Janus itself, which owned only 18% but was clearly responsible for
creating over 90% of the value of the KSU holding company.
4
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
The fear among many investors was that well regarded portfolio managers might
express their dissatisfaction by leaving the firm rather than work for a parent
that refused to give the senior management of Janus an appropriate stake in and
governance of the soon-to-be-spun-off Stilwell Financial. While the risk of
employee defections was a real possibility, we felt that KSU's incredibly cheap
stock price far more than compensated for this risk. After backing out the
expected value for the railroad company, we were in effect able to buy Stilwell
Financial at an extraordinarily favorable multiple of only 11 times our estimate
of 2001 earnings. This was not only a compelling absolute valuation, but also a
40% discount to several peer companies. We built the KSU position into one of
our top holdings. The spin-off of Stilwell Financial has finally occurred and
the price/earnings (P/E) multiple on the newly traded shares has expanded nicely
from the implied value when buried within the KSU holding company. Given the
strong share price performance, this position became a significant contributor
to our first-half returns to shareholders.
Sun Life of Canada is a mutual life insurance company that recently
"demutualized" to become a publicly traded company. Normally, we avoid IPOs in
financial services and for good reason. The company is usually dressed up for
sale to often naive investors as management has done everything possible to show
both near-term revenue and earnings growth, often at the expense of underwriting
discipline and accounting conservatism. Ultimately, however, chickens do come
home to roost. We have noticed over the years that when poor results begin to
materialize the share prices of insurance and consumer finance companies can
plummet as much as 90% from their IPO price. These are treacherous investments
even in the best of times.
However, Sun Life was different. We got to know senior management well and
determined that they were honest, focused on expanding their business and
genuinely interested in creating value for shareholders. Importantly, the
accounting was conservative and dramatically understated the true worth of Sun
Life since the reported book value of the company carried its ownership of the
high-quality MFS mutual fund family at cost. We thought the true value of MFS by
itself (which represented one-third of total company earnings) was worth almost
the IPO price of the entire company. Because of the poor performance of
financial stocks at the time of the March IPO, we were able to buy shares at a
price BELOW their reported book value (despite the much higher adjusted book
value for the MFS ownership) and at only eight times year 2000 earnings. Given
the fact that the share price has risen 100% in four months, the obvious
question is what were we thinking to not buy even more?
Q. Given the increased volatility in the market has turnover at the Fund
increased?
A. Not really, although the increasing number of momentum investors with
short-term performance goals will likely provide us greater opportunities going
forward to both sell holdings that become significantly overvalued and initiate
positions at temporarily depressed and, therefore, attractive prices. Volatility
can be an investor's friend, particularly if a well-informed long-term investor
can take advantage of market overreactions to short-term events.
5
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS - CONTINUED
During the second quarter, we were able to build large positions in two
outstanding, well managed nonfinancial companies, Costco Wholesale and Tellabs,
whose shares collapsed due to slightly disappointing near-term earnings. In both
cases, however, the earnings shortfall was more the result of ramping up
investment to support growth opportunities in the business rather than the
result of a fundamental deterioration in the company. We had followed both
companies for years and always wished to become shareholders. But the P/E
multiples never became cheap enough to establish a position as the market had
pushed the price of each company to 40 times earnings--clearly pricing each
business for perfection and leaving zero margin of safety for new owners.
Fortunately our patience was rewarded--it isn't always--as we received an entry
point at much lower prices. We expect to do very well as shareholders, given the
terrific no-nonsense, performance-oriented cultures, attractive business models
and long-term growth opportunities at both companies.
Q. How would you characterize your current outlook for financial stocks?
A. Chris and I remain optimistic about the long-term outlook for financial
companies. We continue to find well managed companies with valuable consumer
franchises, strong balance sheets and positive long-term growth opportunities
whose business fundamentals remain quite favorable in the current environment.
While we expect price volatility in financial stocks to continue, carefully
selected financial services companies should offer outstanding investment
opportunities for our shareholders.4
DAVIS GROWTH OPPORTUNITY FUND
PERFORMANCE OVERVIEW
The Davis Growth Opportunity Fund Class A shares delivered a total return on net
asset value of 7.80% for the six-month period and 29.02% for the one-year period
ended June 30, 2000(5), outpacing the performance of the average Multi-Cap Core
Fund tracked by Lipper Analytical Services' and the Standard & Poor's 500 Index.
The average Multi-Cap Core Fund rose 2.53% and 11.54%, respectively(7), over the
latest six-month and one-year periods while the S&P 500 returned (0.43)% and
7.25%, respectively, over the same time frames.(6)
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, MEMBER OF THE PORTFOLIO MANAGEMENT TEAM
Q. Could you provide some perspective on the Fund's performance so far in the
year 2000?
A. While the research team that manages the Davis Growth Opportunity Fund is
pleased with the relatively strong performance of the Fund over the latest six
month and one-year periods, we are reluctant to read too much into these results
as short-term price moves are rarely significant. In reviewing the portfolio's
performance and positioning, it may be helpful to look at broader market
conditions. The relative anemic change in the market averages so far this year
is deceptive in that it masks enormous price swings as investors moved
erratically from days of euphoria to days of despair. As you would expect,
smaller companies with less liquidity and often less diversified business models
saw greater price swings than their larger cap brethren.
6
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, MEMBER OF THE PORTFOLIO MANAGEMENT TEAM
- CONTINUED
In such an environment, portfolio managers must be particularly disciplined in
both buying and selling, recognizing that good businesses trading at high prices
do not necessarily make great investments. As a result, we continued to be net
sellers of companies whose market price reflected great optimism and allowed
little room for error. This was particularly true in the technology and health
care sectors, which are under the watchful eye of research analysts Dwight
Blazin and Danton Goei, respectively.
A distinguishing factor of the Davis Growth Opportunity Fund during these
volatile times has been that holdings in certain sectors have tended to move
contrary to holdings in others. For example, in the weeks and months where
technology fell from favor, our holdings in well-run financial companies, such
as Golden West Financial(3), acted as an anchor to windward.
It is also notable that by and large our investments in technology tend not to
be in the glamorous but difficult to value world of emerging concepts, but
instead in the workhorse manufacturers with real revenues and profits supporting
their valuations. One example is Tellabs, a supplier of telecommunications
equipment, which was purchased at a very reasonable valuation and has proved a
successful holding. Several of our software companies did not fare so well and
acted as a drag on our performance. Although most were purchased after they had
already suffered from a business slowdown (often the result of fears surrounding
Y2K), their sales have not recovered as quickly as we anticipated. We are
carefully reanalyzing each company to determine if this continuing weakness is
the temporary result of some product or timing delays or, more dangerously, the
result of product obsolescence or competitive disadvantage.
Q. What other market trends have had an impact on the portfolio this year?
A. Another interesting trend to note is that in an uncertain market investors
tend to overreact to short-term disappointments or unforeseen developments that
require more thorough analysis than simple stories. As a result, we made
investments in a number of companies where short-term concerns created buying
opportunities. As discussed above, purchases at such controversial times will
not always prove successful, and we all know we run the risk of looking foolish.
But importantly, we tend to invest after the bad news is already disclosed and
therefore, in our view, is often discounted in the stock price.
The Fund's purchase of Providian Financial Corp. is just such an example. We
invested after the San Francisco district attorney had filed a lawsuit against
the company. Although that lawsuit was subsequently settled, there was great
fear at the time of such suits spreading. Our purchase of Lexmark today is
equally controversial, as short-term disappointments and declining earnings
momentum have created an uncertain environment. We believe that this fine
manufacturer of computer printers will weather the storm and that in the future
investors will recognize the great value of the recurring consumables portion of
its business, namely the ink cartridges.
7
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, MEMBER OF THE PORTFOLIO MANAGEMENT TEAM
- CONTINUED
Although these companies could still prove to be disappointing investments if
bad news subsequently comes to light, we think both are illustrative of our
willingness to purchase companies opportunistically while others are anxiously
selling. Such decisions can only be made with conviction based on thorough and
independent research and on the recognition that short-term movements in stock
prices often reflect changes in psychology rather than changes in economics.
Another recent characteristic of the market has been a constant lowering of the
quality of reported earnings. As anyone who runs a business can attest,
perfectly predictable and consistent results can rarely be achieved in precise
12-week intervals. Yet Wall Street has come to place such a premium on
consistent results that increasingly corporate America is torturing accounting
policies to create the illusion of predictability and consistency in these short
quarterly periods. As a result, earnings are frequently not what they seem, and
reported results often include nonrecurring items such as favorable changes in
pension fund assumptions, gains on sales of operations or securities, expense
reductions from previously incurred restructuring charges and other financial
gimmicks. Thus, most companies' quarterly earnings must be scrutinized much more
intensively than ever before.
While we hope not to own many of the most flagrant offenders in the Davis Growth
Opportunity Fund, we would expect that over the next several years the
newspapers will be full of companies forced to come clean when their bag of
accounting tricks is empty. Once a company starts down this path, it is
difficult to stop as inflated results in the current quarter become increasingly
difficult comparisons for future quarters.
Q. What final thoughts would you like to leave with your fellow shareholders?
A. While these observations may sound pessimistic, I am reminded of my father's
comment last year that our goal is to be neither optimistic nor pessimistic, but
to do our best to be realistic. As we have said in the past, the reality is that
returns in the next decade are unlikely to be near the levels enjoyed in the
last two decades. The danger is that as investors move from a position of almost
universal optimism to a more realistic stance equity valuations could suffer
significantly. It is the tendency of markets, like pendulums, not to move to the
middle ground and stop, but instead to swing markedly to the other side. While
such a significant correction would create many buying opportunities, it is
unlikely that investors would have the stomach to pursue them. Therein lies the
biggest danger facing investors.
This danger was illustrated in the March issue of Mutual Funds magazine, which
featured the following statistic. According to the magazine, "Between 1984 and
the end of 1998, the average stock fund gained 509%, or 12.8% per year over 15
years. Meanwhile, the typical mutual fund investor, whose average holding period
was less than three years, earned just 186% or 7.25% a year." This staggering
underperformance of the average fund investor was self-inflicted as it came from
money flowing into the funds with great short-term performance and then flowing
out of those funds when future results were disappointing.
8
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, MEMBER OF THE PORTFOLIO MANAGEMENT TEAM
- CONTINUED
If we on the research team can leave any message with our fellow shareholders,
it is to fight the very human tendency to feel elated and optimistic when prices
are high (as they are today) and discouraged and pessimistic when prices are
low. Now when times are good is the right time to sound the cautious note. In
doing so, we hope that we will all be better positioned to be optimistic and
opportunistic when times look more bleak.(4)
DAVIS CONVERTIBLE SECURITIES FUND
PERFORMANCE OVERVIEW
The Davis Convertible Securities Fund's Class A shares delivered a total return
on net asset value of 7.70% for the six-month period and 7.52% for the one-year
period ended June 30, 2000.(5) By way of comparison, the Convertible Securities
Funds tracked by Lipper Analytical Services' provided average returns of 6.30%
and 25.73%, respectively, over the same time periods.(7) Since the Fund's
inception on May 1, 1992, its Class A shares have generated an average annual
return on net asset value of 14.93%. According to an analysis of the Fund by The
Value Line Mutual Fund Survey, "Risk-conscious investors seeking current income
and capital appreciation via a convertible offering should consider it."(9)
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER
Q. Looking at this year compared to last, how would you describe the performance
of the Fund and the convertible securities market?
A. The Fund is enjoying a good year in part due to the fact that investors have
begun to return to a more rational model of investing than we saw in 1999 when a
go-go, Internet-dominated mania seemed to grip the marketplace. The bottom line
is that companies with solid earnings and good growth prospects--the types of
companies in which the Davis Funds invest--are at last getting investor
recognition, rather than dot.com companies that have yet to achieve
profitability and may never do so.
The Fund is also benefiting from the fact that the convertibles as a group have
been performing better, thanks to a flat to slightly declining interest rate
environment, and from the fact that four of the largest sectors in which the
Fund invests have generated good returns so far this year. These sectors include
technology, energy, real estate and selected financial positions.
In terms of turnover and new names added, while the number of positions in the
portfolio has decreased a bit, we have been mindful of keeping the portfolio's
equity sensitivity in line with the 80%/50% rule--one of the Fund's guiding
investment principles. Under this rule, the Fund targets convertibles that can
deliver 80% or more of the underlying stock's upside potential while avoiding at
least 50% of the downside risk if the stock price falls.(10) In some cases this
year, this has meant buying a little of the underlying stock along with the
convertible in order to improve upside potential. In others, it has meant
lightening up on some of the stocks we own because the shares have performed so
well and convertible premiums have shrunk so much that the downside risk was
above acceptable levels.
9
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER - CONTINUED
Q. What are some convertible issues you favor now?
A. One favorite name is Devon Energy.(3) One of the Fund's largest holdings is a
bond convertible into Devon Energy. This stock provided only a so-so return in
1999, gaining about 8%. However, as of the end of June 2000, the stock had
advanced 71%. Devon Energy is the kind of core investment that the Fund is
willing to be patient with and hold on to, even when the stock is not in favor
with other investors. While the company's returns are more cyclical in nature
because of their connection with oil and gas prices, Devon provides an excellent
example of how a premier management team with the right strategy can grow a
business even in a cyclical industry like the energy industry.
Another favorite investment is American Tower, and I must particularly
acknowledge the contribution of my colleague Jason Voss in the purchase of this
company. American Tower is a leading developer of broadcast towers on which the
transmitters for digital and cellular phones hang. Once a tower is up, it tends
to become a monopoly because people do not want them in their backyards, and
generally only one tower is built for a particular area. Moreover, the company
is in a tremendous growth industry. Cellular traffic is growing, digital traffic
is growing, personal communications services are growing, and the wireless Web
is coming--making it a great time to own this kind of business. The stock was up
just 3% in 1999, but gained more than 36% in the first half of 2000--proving yet
again that it pays to be patient with a company that has a good business model
and the best management team in the industry.
One large holding that has not yet performed well but for which I still have
great expectations is Six Flags, formerly known as Premier Parks, which is one
of the largest theme park owners in the country. The company has a knack for
making money by acquiring old amusement parks that may be a bit rundown,
redeveloping them, adding good rides, sometimes rebranding them as a Six Flags
park, and in the process, dramatically improving profit margins. I believe the
company will achieve strong growth in terms of new attendance and marketing
initiatives, leading to strong margin and earnings growth this year and next.
One recent investment made after the stock had declined signficantly is Costco.
I have always admired Costco's business, its management team and their strategy,
but been reluctant to invest because of the price. However, after the company
announced that its earnings results would be disappointing, the stock price
dropped nearly in half. That gave the Fund what we believe will prove to be a
quintessential Shelby Cullom Davis entry point into a great company whose shares
were temporarily under a cloud and selling at a discount to what the business is
worth.
Q. What final thoughts would you like to leave with your fellow shareholders?
A. 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. However, convertible investing is
not a one-year or two-year business. It is really a five-year or 10-year
business. Over that time frame, our experience has been that convertibles rarely
disappoint, although they may in shorter time periods.
10
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER - CONTINUED
Convertibles combine some of the benefits of stocks (long-term growth potential)
with some of the benefits of bonds (regular interest payments). The Fund applies
the time-tested Davis investment discipline to the convertible securities market
and may be an appropriate diversification alternative for investors seeking a
defensive investment well suited to a variety of market conditions.
Looking forward, I remain optimistic about the outlook for the Davis Convertible
Securities Fund and the opportunities that lie ahead for the businesses we own.
The Fund holds a portfolio of top-flight companies purchased at attractive
valuations that have a track record of delivering earnings growth in line with
or better than expectations.(4)
DAVIS REAL ESTATE FUND
PERFORMANCE OVERVIEW
The Davis Real Estate Fund's Class A shares generated a total return on net
asset value of 12.82% for the six-month period and 0.08% for the one-year period
ended June 30, 2000.(5) By way of comparison, the Morgan Stanley REIT (Real
Estate Investment Trust) Index provided average returns of 13.31% and 3.37%,
respectively, over the same time periods.(6) Since the Fund's inception on
January 3, 1994, its Class A shares have delivered an average annual return on
net asset value of 10.60%, ranking the Fund #2 out of the 12 funds in Lipper's
Real Estate Fund category.(7) According to Morningstar, "...investors can bank
on this fund for the long term."(11)
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER
Q. Could you provide some perspective on the performance of real estate so far
in the year 2000?
A. The real estate sector is much more in favor than it was last year and is
performing better and better as the days go by. The last phase of what I think
will be the full recovery of real estate stock prices will occur when the higher
growth, smaller cap companies start to climb, and I believe we may be nearing or
at that point now.
Typically, when real estate stocks first begin to rally, non-real-estate equity
funds and other large investors return to the sector by purchasing the biggest,
most liquid names in order to obtain exposure to real estate. That tends to
drive up the prices of these larger companies, even though their growth rates
might be only average or below average in some cases. Then, as the rally
continues and investors as a whole look seriously at the group, they recognize
that it makes little sense to buy a company with an 8% earnings growth rate at a
multiple of 10 times earnings when they can find companies whose earnings are
growing at a 13% rate for the same multiple. After all, earnings always drive
stock prices in the long run.
11
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER - CONTINUED
For the first quarter of 2000, 85% to 90% of the companies in the real estate
sector reported earnings in-line or better than expectations. I expect that
number to be the same or higher for the second quarter, with very few or no
surprises. Real estate just continues along, and it is finally getting some
notice from investors.
Q. What do you believe has caused the turnaround in real estate stocks?
A. I believe that a key reason for the improved performance may simply be that
the industry has a little more history under its belt. 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. But every quarter that
goes by where these companies perform better and better--whether the economy is
surging or slowing, whether interest rates are rising or falling--simply
increases their credibility, and every bit of added credibility adds to their
multiples.
I think the better companies in the industry should trade at a multiple of 10 to
11 times earnings because they should be able to grow their earnings at a rate
in the low to mid teens. I am optimistic that real estate will continue to be
what I call a growth cyclical business where every new top is hopefully a little
higher than the last top and every bottom is a little higher than the last
bottom.
Perhaps the most important difference in this real estate cycle versus other
cycles historically has been the absence of overbuilding. This is a big positive
for the industry because it means when the economy turns down as it inevitably
will and demand slows, real estate companies will not be burdened by excess new
supply as they were in the late 1980s and early 1990s. Instead, the real estate
industry should enter the next recession in good shape relative to supply and
demand, and that can make a huge difference in the long-term rate of return in
any business. I think we will continue to see greater consistency in company
earnings, and consistency is a virtue highly valued by investors.
Q. What are your favorite holdings now?
A. The Fund has enjoyed good returns from Avalon Bay Communities(3), an
apartment REIT, and Boston Properties, an office REIT, which are two of its
largest holdings. The performance of two other big positions, Apartment
Investment & Management Company and Alexandria Real Estate Equities, another
office REIT, has not yet lived up to expectations. While these stocks are up for
the year, they are not up enough given the superior growth rates of these two
fine companies. However, I feel confident that these companies will receive the
investor recognition they deserve.
Another favored holding is Centerpoint Properties, an industrial REIT that the
Fund has owned for some time. The company has grown its earnings 15% annually,
year after year, but its stock price performance last year was disappointing.
Although the stock has done much better in the year 2000, recently hitting a new
high, we expect even more from the shares.
12
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER - CONTINUED
The Fund also looks for opportunities in companies that are essentially a play
on real estate even though they do not operate as REITs. An example is Six
Flags, formerly known as Premier Parks, a leading theme park developer and also
an important holding in the Davis Convertible Securities Fund. While the stock
has underperformed dramatically this year, I have high hopes for the company
because of its track record in acquiring and turning around troubled amusement
parks.
Q. What is your outlook for real estate?
A. Real estate is not only the largest asset class in this country, it has
historically been one of the least volatile asset classes, and its performance
is not closely correlated with the S&P 500. Given today's high stock prices,
real estate can help to diversify and anchor a well-balanced portfolio.
While the performance of real estate as a whole is better, I think the best is
yet to come as investors increasingly recognize that real estate is not the same
industry that it was in the past. Company balance sheets are stronger.
Managements are more seasoned and smarter, and they are operating with a new
business model that is producing superior returns relative to the old business
model.
I am pleased with the quality of the companies we hold in the Davis Real Estate
Fund. These are well-run businesses purchased at attractive valuations that are
capable of generating steadily increasing rental income and solid returns on
capital over time.(4)
DAVIS GOVERNMENT BOND FUND
PERFORMANCE OVERVIEW
The Davis Government Bond Fund's Class A shares provided a total return on net
asset value of 2.54% for the six-month period and 1.52% for the one-year period
ended June 30, 2000.(5) The Fund's benchmark, the Lehman Brothers Intermediate
Term U.S. Treasury Securities Index, returned 3.54% and 4.67%, respectively,(6)
over the same time periods while the Intermediate U.S. Government Funds tracked
by Lipper Analytical Services' provided average returns of 3.35% and 3.53%,
respectively.(7)
AN INTERVIEW WITH CRESTON A. KING, PORTFOLIO MANAGER
Q. What key factors influenced the Fund's performance in the first half of this
year?
13
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CRESTON A. KING, PORTFOLIO MANAGER - CONTINUED
A. The bond market rallied nicely in the first quarter of the year, sold off in
April and May, and then rallied again in June. The Fund underperformed relative
to its peer group for two reasons. First, the portfolio's average maturity was
shorter than its peer group's in the first quarter of 2000 and so trailed
dramatically when the market rallied. In addition, the Fund had a larger
position in mortgage-backed securities than its peer group funds, and when the
Federal Reserve began raising interest rates, those securities underperformed
U.S. Treasury securities.
Moreover, the Fund's U.S. government agency investments were held back by the
fact that agency securities traded poorly relative to Treasuries. Ongoing debate
about reining in the growth of Fannie Mae and Freddie Mac, two
government-sponsored enterprises charged with maintaining the availability of
funds for mortgage lending, and proposed Congressional legislation that would
increase regulatory oversight of both entities has had a dampening effect on
this sector of the market.
At the start of the second quarter, we anticipated the market sell-off and
raised cash, shortening the maturity of the Fund's portfolio even more, so that
we could take advantage of the rising interest rates we expected. Cash
outperformed longer term alternatives for the first two months of the quarter
because interest rates were rising and there were concerns that further rate
increases were in store from the Federal Reserve. As a result, the Fund's
returns were much improved in the second quarter, even though the portfolio
underperformed in June. At that time, the market rallied following the Fed's
aggressive 50 basis-point hike in short-term rates in May because investors
began to believe that the Fed had finished raising rates, and the Fund did not
participate fully in the rally because of its larger cash position.
Q. What is your general strategy in managing the Fund?
A. Our goal is to provide investors with a well diversified portfolio that
allows them to participate in the returns and security of U.S. government bonds.
The Fund's research process focuses on evaluating U.S. economic and interest
rate trends, which essentially drive bond market performance. Our strategy is to
diversify among different types of government securities, maturity lengths, call
provisions and interest rate coupons. Specifically, by emphasizing investments
in the intermediate maturity range, the Fund seeks to smooth out performance and
provide stability in a variety of market climates. We are also committed to a
long-term investment approach intended to reduce portfolio turnover.
The Davis Government Bond Fund is designed to create a strong foundation for any
long-term investment plan. The Fund provides potentially higher monthly income
than most short-term investments and can offer investors an excellent means of
balancing equity holdings with fixed-income securities of the highest credit
quality.(4)
14
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
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 risks, fees and expenses. Please read the prospectus carefully
before investing or sending money.
(1) Historically, common stocks have outperformed both bonds and cash. There is
no assurance that this will continue to be true in the future.
(2) This hypothetical example illustrates the power of compounding over a
30-year period, and is not intended to be indicative of future investment
results, which may be higher or lower than the assumed 7% rate.
(3) See each Fund's Schedule of Investments for a detailed list of portfolio
holdings.
(4) This report reflects the professional opinions of Shelby M.C. Davis and the
Davis Funds' portfolio managers. All investments involve some degree of risk,
and there can be no assurance that the Funds' investment strategies will be
successful. Prices of shares will vary so that, when redeemed, an investor's
shares could be worth more or less than their original cost.
Because Davis Financial Fund concentrates its investments in the banking and
financial sectors it may be subject to greater risks than a fund that does not
concentrate its investments in a particular sector. The Fund's investment
performance, both good and bad, is expected to reflect the economic performance
of the banking and financial sectors much more than a fund that does not
concentrate its portfolio.
Because Davis Real Estate Fund concentrates its investments in the real estate
sector it may be subject to greater risks than a fund that does not concentrate
its investments in a particular sector. The Fund's investment performance, both
good and bad, is expected to reflect the economic performance of the real estate
sector much more than a fund that does not concentrate its portfolio.
(5) 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 ending June
30, 2000.
*(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 (2.47%) 12.92% 22.80% 22.10% - 05/01/91
---------------------------------------------------------------------------------------------------------------
Davis Real Estate 0.08% 0.29% 11.41% 10.60% - 01/03/94
---------------------------------------------------------------------------------------------------------------
Davis Convertible Securities 7.52% 11.10% 16.92% 14.93% - 05/01/92
---------------------------------------------------------------------------------------------------------------
Davis Growth Opportunity 29.02% 16.41% 18.56% 22.72% - 12/01/94
---------------------------------------------------------------------------------------------------------------
Davis Government Bond 1.52% 3.39% 4.12% 5.03% - 12/01/94
---------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
*(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 (7.11%) 11.10% 21.62% 21.45% - 05/01/91
---------------------------------------------------------------------------------------------------------------
Davis Real Estate (4.69%) (1.33%) 10.33% 9.77% - 01/03/94
---------------------------------------------------------------------------------------------------------------
Davis Convertible Securities 2.42% 9.31% 15.78% 14.25% - 05/01/92
---------------------------------------------------------------------------------------------------------------
Davis Growth Opportunity 22.90% 14.53% 17.41% 21.65% - 12/01/94
---------------------------------------------------------------------------------------------------------------
Davis Government Bond (3.32%) 1.71% 3.10% 4.12% - 12/01/94
---------------------------------------------------------------------------------------------------------------
</TABLE>
(6) The definitions of indices quoted in this annual report appear below.
Investments cannot be made directly in either of these indices.
I. 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.
II. 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.
III. The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is a
recognized unmanaged index of U.S. Government Securities performance.
(7) Lipper Analytical Services' investment performance, rankings and comparisons
are based on total returns unadjusted for commissions.
For the one-year period, five-year period and life of the Fund (01/03/94) ended
06/30/00, Lipper Analytical Services ranked Davis Real Estate Fund Class A as
follows: 106 out of 140 funds, 8 out of 36 funds, and 2 out of 12 funds,
respectively, in the Lipper "Real Estate Funds" category.
(8) Source: Morningstar Mutual Funds, May 10, 2000.
(9) Source: Value Line, May 23, 2000.
(10) While Davis Convertible Securities Fund seeks convertible securities
meeting the 80%/50% rule, there can be no assurance that the convertible
securities that the Fund purchases will actually perform in line with our
expectations.
(11) Source: Morningstar Mutual Funds, March 30, 2000.
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.
16
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GROWTH OPPORTUNITY FUND
<TABLE>
<CAPTION>
VALUE
SECURITY (NOTE 1)
================================================================================
<S> <C> <C>
COMMON STOCK - (98.21%)
ADVERTISING AGENCIES - (4.68%)
500,000 WPP Group PLC ................................ $ 7,300,706
-------------
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (2.85%)
109,000 Golden West Financial Corp....................... 4,448,563
-------------
BUILDING MATERIALS - (4.98%)
40,000 Martin Marietta Materials, Inc................... 1,617,500
270,000 Masco Corp....................................... 4,876,875
30,000 Vulcan Materials Co.............................. 1,280,625
-------------
7,775,000
-------------
CAPITAL EQUIPMENT - (3.53%)
44,000 ASM Lithography Holding N.V.*.................... 1,940,125
63,000 Novellus Systems, Inc.*.......................... 3,565,406
-------------
5,505,531
-------------
COMPUTER NETWORKING SYSTEMS- (2.55%)
85,000 NCR Corp.*....................................... 3,309,688
6,000 Sycamore Networks, Inc.*......................... 662,438
-------------
3,972,126
-------------
COMPUTER SOFTWARE - (12.31%)
51,000 Advent Software, Inc.*........................... 3,303,844
141,000 BMC Software, Inc.*.............................. 5,142,094
70,000 CheckFree Holdings Corp.*........................ 3,615,938
5,000 MatrixOne, Inc.*................................. 203,281
247,500 Novell, Inc.*.................................... 2,293,242
1,000 Precise Software Solutions Ltd.* ................ 24,115
72,500 SAGA SYSTEMS, Inc.*.............................. 901,719
150,000 The Santa Cruz Operation, Inc.*.................. 960,938
3,500 StorageNetworks, Inc.*........................... 315,927
45,000 Symantec Corp.*.................................. 2,428,594
-------------
19,189,692
-------------
ELECTRONICS - (9.06%)
26,000 Agilent Technologies, Inc.*...................... 1,917,500
58,000 Dallas Semiconductor Corp........................ 2,363,500
60,000 Micron Technology, Inc.*......................... 5,283,750
76,000 Molex, Inc....................................... 3,662,250
35,000 St. Assembly Test Services Ltd.* ................ 903,438
-------------
14,130,438
-------------
FINANCIAL SERVICES - (9.93%)
103,000 Capital One Financial Corp....................... 4,596,375
63,000 Donaldson, Lufkin & Jenrette, Inc................ 2,673,563
42,700 Fannie Mae ...................................... 2,228,406
</TABLE>
17
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GROWTH OPPORTUNITY FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
FINANCIAL SERVICES - CONTINUED
36,000 Household International, Inc..................... $ 1,496,250
50,000 Providian Financial Corp......................... 4,500,000
-------------
15,494,594
-------------
HOTELS & MOTELS - (1.85%)
80,000 Marriott International, Inc...................... 2,885,000
-------------
INDUSTRIAL - (2.01%)
60,000 Sealed Air Corp.*................................ 3,142,500
-------------
LIFE INSURANCE - (1.22%)
41,500 AFLAC Inc........................................ 1,906,406
-------------
PHARMACEUTICAL & HEALTH CARE - (10.92%)
40,000 Alza Corp.*...................................... 2,365,000
63,000 Bristol-Myers Squibb Co.......................... 3,669,750
25,000 Genzyme Corp.*................................... 1,488,281
100,000 IMS Health Inc. ................................ 1,800,000
107,000 Sybron International Corp.*...................... 2,119,938
53,000 Vertex Pharmaceuticals Inc.*..................... 5,583,219
-------------
17,026,188
-------------
PROPERTY/CASUALTY INSURANCE - (7.86%)
60,000 Cincinnati Financial Corp........................ 1,888,125
42,000 Everest Reinsurance Holdings, Inc................ 1,380,750
60,000 FPIC Insurance Group, Inc.* ..................... 943,125
75,000 Horace Mann Educators Corp....................... 1,125,000
6,000 Markel Corp.*.................................... 849,750
17,500 Progressive Corp. (Ohio)......................... 1,295,000
57,000 Transatlantic Holdings, Inc...................... 4,773,750
-------------
12,255,500
-------------
PUBLISHING - (2.12%)
25,000 Dow Jones & Co., Inc............................. 1,831,250
42,000 Tribune Co....................................... 1,470,000
-------------
3,301,250
-------------
TECHNOLOGY - (7.27%)
40,000 Intel Corp....................................... 5,346,250
89,000 Lexmark International Group, Inc. Class A*....... 5,985,250
-------------
11,331,500
-------------
TELECOMMUNICATIONS - (7.12%)
2,000 Exfo Electro-Optical Engineering Inc.* .......... 87,865
80,000 Globalstar Telecommunications Ltd*............... 715,000
79,000 Lucent Technologies Inc.......................... 4,680,750
82,000 Tellabs, Inc.*................................... 5,614,438
-------------
11,098,053
-------------
</TABLE>
18
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GROWTH OPPORTUNITY FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES /PRINCIPAL SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
THEME PARKS - (1.87%)
128,200 Premier Parks Inc.*............................................................ $ 2,916,550
--------------
TRANSPORTATION - (6.08%)
107,000 Kansas City Southern Industries, Inc........................................... 9,489,563
--------------
Total Common Stock - (identified cost $127,833,334)................. 153,169,160
--------------
PREFERRED STOCK - (1.83%)
235,294 LogicVision, Inc. Pfd Class I* (b) - (identified cost $1,000,000).............. 2,863,528
--------------
SHORT TERM INVESTMENTS - (2.48%)
$ 3,869,000 State Street Corporation Repurchase Agreement, 6.60%, 07/03/00, dated
6/30/00, repurchase value of $3,871,128 (collateralized by: $3,910,000
par value Federal Home Loan Bank, 7.00%, 08/28/01,
market value $3,980,200) - (identified cost $3,869,000)...................... 3,869,000
--------------
Total Investments - (102.52%) - (identified cost $132,702,334) - (a)........... 159,901,688
Liabilities Less Other Assets - (2.52%)........................................ (3,937,065)
--------------
Net Assets - (100%)................................................. $ 155,964,623
==============
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $132,702,334. At June 30,
2000 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation...................................................... $ 41,565,704
Unrealized depreciation..................................................... (14,366,350)
--------------
Net unrealized appreciation......................................... $ 27,199,354
==============
</TABLE>
(b) Restricted security. See Note 7 of the Notes to Financial Statements.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
MORTGAGES - (14.45%)
FANNIE MAE - MORTGAGE POOLS - (7.93%)
$ 822,981 5.50%, 02/01/09 Pool No. 252317.............................................. $ 773,602
1,997,888 8.50%, 05/01/30 Pool No. 253365.............................................. 2,038,985
-------------
Total Fannie Mae - (identified cost $2,802,711)........................ 2,812,587
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
- MORTGAGE POOLS - (6.52%)
2,295,915 8.00%, 08/20/29 Pool No. 2799 - (identified cost $2,280,857)................. 2,309,552
-------------
Total Mortgages - (identified cost $5,083,568)...................... 5,122,139
-------------
U.S. TREASURY - (25.04%)
5,000,000 United States Treasury Notes, 5.625%, 09/30/01............................... 4,948,500
4,000,000 United States Treasury Notes, 5.875%, 11/15/05............................... 3,931,400
-------------
Total U.S. Treasury - (identified cost $8,981,544).................. 8,879,900
-------------
GOVERNMENT AGENCY - (48.61%)
2,000,000 Fannie Mae, 7.125%, 03/15/07................................................. 2,004,540
2,000,000 Fannie Mae, 6.625%, 09/15/09................................................. 1,931,520
2,000,000 Federal Home Loan Bank, 7.20%, 03/13/03...................................... 2,001,580
500,000 Federal Home Loan Bank, 6.10%, 11/05/04...................................... 481,835
2,000,000 Freddie Mac, 6.43%, 09/21/01 (b)............................................. 1,999,630
3,000,000 Freddie Mac, 5.50%, 05/15/02................................................. 2,925,150
3,000,000 Freddie Mac, Zero Cpn., 07/30/07............................................. 1,779,690
2,000,000 Freddie Mac, 6.625%, 09/15/09................................................ 1,928,900
1,000,000 Freddie Mac, 7.00%, 03/15/10................................................. 991,780
4,500,000 Freddie Mac, Zero Cpn., 01/02/19............................................. 1,191,510
-------------
Total Government Agency - (identified cost $17,290,495)............. 17,236,135
-------------
SALLIE MAE - (2.61%)
930,612 6.585%, 04/25/06 Asset Backed Security (b) - (identified cost $929,837)...... 926,517
-------------
</TABLE>
20
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GOVERNMENT BOND FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (9.40%)
$ 3,334,000 State Street Corporation Repurchase Agreement, 6.60%, 07/03/00, dated
06/30/00, repurchase value of $3,335,834 (collateralized by: $3,370,000
par value Federal Home Loan Bank, 7.00%, 08/28/01,
market value $3,437,400) - (identified cost $3,334,000)...................... $ 3,334,000
-------------
Total Investments - (100.11%) - (identified cost $35,619,444) (a)............ 35,498,691
Liabilities Less Other Assets - (0.11%)...................................... (39,502)
-------------
Net Assets - (100%) ............................................... $ 35,459,189
=============
(a) Aggregate cost for Federal Income Tax purposes is $35,619,444. At June 30,
2000 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation...................................................... $ 87,114
Unrealized depreciation...................................................... (207,867)
-------------
Net unrealized depreciation......................................... $ (120,753)
=============
</TABLE>
(b) The interest rates on floating rate securities, shown as of June 30, 2000,
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.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
FANNIE MAE - (18.15%)
$ 1,000,000 5.67%, 07/21/00.............................................................. $ 999,915
3,832,000 5.50%, 07/26/00.............................................................. 3,831,140
4,000,000 6.62%, 08/09/00 (b).......................................................... 3,999,785
8,000,000 5.95%, 08/17/00 Discount Note................................................ 7,937,856
11,000,000 6.435%, 08/24/00 Discount Note............................................... 10,893,823
6,500,000 6.664%, 09/06/00 (b)......................................................... 6,499,005
2,000,000 6.16%, 10/19/00 Discount Note................................................ 1,962,356
3,680,000 6.05%, 10/20/00.............................................................. 3,676,072
1,000,000 6.14%, 10/25/00.............................................................. 997,386
340,000 5.86%, 11/07/00.............................................................. 339,735
20,000,000 6.49%, 11/22/00 (b).......................................................... 19,998,396
500,000 6.28%, 11/27/00.............................................................. 498,523
8,000,000 6.426%, 12/08/00 (b)......................................................... 7,996,573
5,100,000 8.25%, 12/18/00.............................................................. 5,142,729
1,000,000 5.10%, 12/29/00.............................................................. 990,990
4,000,000 5.23%, 01/08/01.............................................................. 3,976,686
4,000,000 5.50%, 02/02/01.............................................................. 3,972,511
4,000,000 5.30%, 04/17/01.............................................................. 3,960,326
4,000,000 5.38%, 04/26/01.............................................................. 3,946,826
8,000,000 6.244%, 05/10/01(b).......................................................... 8,000,000
2,270,000 6.07%, 06/28/01.............................................................. 2,249,485
-------------
Total Fannie Mae - (identified cost $101,870,118)................... 101,870,118
-------------
FEDERAL FARM CREDIT BANK - (9.08%)
5,000,000 5.92%, 07/03/00.............................................................. 4,999,916
10,000,000 6.293%, 07/03/00 (b)......................................................... 9,999,837
3,000,000 6.43%, 07/10/00 Discount Note................................................ 2,995,178
8,000,000 6.481%, 09/01/00 (b) ........................................................ 7,999,593
5,000,000 6.68%, 09/01/00 (b).......................................................... 4,999,831
10,000,000 6.635%, 09/15/00 (b)......................................................... 9,999,391
10,000,000 5.65%, 12/29/00.............................................................. 9,962,665
-------------
Total Federal Farm Credit Bank - (identified cost $50,956,411)...... 50,956,411
-------------
FEDERAL HOME LOAN BANK - (30.70%)
2,300,000 5.50%, 07/14/00.............................................................. 2,299,036
18,000,000 5.56%, 07/14/00.............................................................. 17,998,134
10,000,000 6.62%, 08/03/00 (b).......................................................... 9,999,679
5,000,000 6.04%, 09/01/00 ............................................................. 4,999,967
3,500,000 5.875%, 09/07/00 ............................................................ 3,499,520
10,000,000 6.508%, 09/21/00 (b)......................................................... 9,999,338
8,000,000 6.13%, 10/04/00 (b).......................................................... 7,998,837
20,000,000 6.552%, 10/06/00 (b)......................................................... 20,010,573
18,000,000 6.04%, 10/25/00.............................................................. 17,957,886
</TABLE>
22
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GOVERNMENT MONEY MARKET FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
===============================================================================================================
<S> <C> <C>
FEDERAL HOME LOAN BANK - CONTINUED
$ 10,000,000 6.451%, 10/25/00 (b)......................................................... $ 9,996,251
10,000,000 6.09%, 11/03/00.............................................................. 9,990,076
1,500,000 4.98%, 11/17/00 ............................................................. 1,492,915
510,000 5.00%, 11/24/00.............................................................. 507,915
250,000 5.88%, 11/28/00.............................................................. 249,814
8,000,000 6.344%, 12/01/00 (b)......................................................... 7,998,997
4,000,000 5.50%, 12/22/00.............................................................. 3,972,292
4,000,000 6.60%, 02/22/01.............................................................. 3,999,798
1,750,000 6.75%, 03/01/01.............................................................. 1,749,442
6,100,000 6.76%, 03/13/01 ............................................................. 6,100,000
8,000,000 5.40%, 03/15/01.............................................................. 7,930,485
11,000,000 5.625%, 03/19/01............................................................. 10,900,761
8,000,000 6.194%, 04/12/01 (b)......................................................... 8,000,000
4,600,000 7.00%, 05/18/01 ............................................................. 4,588,464
-------------
Total Federal Home Loan Bank - (identified cost $172,240,180)....... 172,240,180
-------------
FREDDIE MAC - (10.97%)
20,000,000 6.056%, 01/10/01(b).......................................................... 19,989,981
8,000,000 5.35%, 01/26/01.............................................................. 7,912,466
8,175,000 6.46%, 06/21/01 Discount Note................................................ 7,654,230
8,000,000 7.125%, 07/13/01............................................................. 7,999,360
18,000,000 6.428%, 09/21/01(b).......................................................... 17,985,091
-------------
Total Freddie Mac - (identified cost $61,541,128)................... 61,541,128
-------------
SALLIE MAE - (11.75%)
8,000,000 6.045%, 11/03/00............................................................. 7,989,724
20,000,000 6.544%, 11/15/00 (b)......................................................... 19,996,332
470,000 5.70%, 11/30/00.............................................................. 469,238
4,000,000 5.90%, 12/01/00.............................................................. 3,991,186
32,000,000 6.284%, 03/09/01(b).......................................................... 31,989,827
1,500,000 6.294%, 06/08/01(b).......................................................... 1,501,019
-------------
Total Sallie Mae - (identified cost $65,937,326)................... 65,937,326
-------------
</TABLE>
23
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS GOVERNMENT MONEY MARKET FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
===============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (16.91%)
$ 94,897,000 Lehman Brothers Repurchase Agreement, 6.70%, 07/03/00, dated
06/30/00, repurchase value of $94,949,984 (collateralized by: $85,540,000
par value Fannie Mae, 5.72% - 6.63%, 03/08/01 - 08/15/04, market value
$86,468,108, and $10,625,000 par value Freddie Mac, 5.53%, 02/05/04,
market value $10,330,408) - (identified cost $94,897,000).................... $ 94,897,000
--------------
Total Investments - (97.56%) - (identified cost $547,442,163) - (a).......... 547,442,163
Other Assets Less Liabilities- (2.44%)....................................... 13,676,278
--------------
Net Assets - (100%)................................................. $ 561,118,441
==============
</TABLE>
(a) Aggregate cost for Federal Income Tax Purposes is $547,442,163.
(b) The interest rates on floating rate securities, shown as of June 30, 2000,
may change daily or less frequently and are based on indices of market interests
rates. For purposes of amortized cost valuation, the maturity dates of these
securities are considered to be the effective maturities, based on the reset
dates of the securities' variable rates.
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS FINANCIAL FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
================================================================================
<S> <C> <C>
COMMON STOCK - (100.04%)
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (10.19%)
810,000 Bank of New York Co., Inc................... $ 37,665,000
60,000 Fifth Third Bancorp......................... 3,796,875
503,700 Golden West Financial Corp.................. 20,557,256
438,732 Lloyds TSB Group PLC........................ 4,142,394
90,000 State Street Corp........................... 9,545,625
377,330 Wells Fargo & Co............................ 14,621,538
-------------
90,328,688
-------------
BUILDING MATERIALS - (5.43%)
429,900 Martin Marietta Materials, Inc.............. 17,384,081
1,000,800 Masco Corp.................................. 18,076,950
298,000 Vulcan Materials Co......................... 12,720,875
-------------
48,181,906
-------------
DIVERSIFIED - (3.62%)
597 Berkshire Hathaway, Inc., Class A*.......... 32,118,600
-------------
DIVERSIFIED MANUFACTURING - (5.72%)
1,070,000 Tyco International Ltd...................... 50,691,250
-------------
FINANCIAL SERVICES - (36.39%)
2,019,000 American Express Co......................... 105,240,375
820,000 Capital One Financial Corp.................. 36,592,500
337,500 Charles Schwab Corp......................... 11,348,438
640,000 Citigroup, Inc.............................. 38,560,000
1,239,500 Household International, Inc................ 51,516,719
240,600 Legg Mason, Inc............................. 12,030,000
500,000 MBNA Corp................................... 13,562,500
597,500 Providian Financial Corp.................... 53,775,000
-------------
322,625,532
-------------
INVESTMENT FIRMS - (5.31%)
544,400 Donaldson, Lufkin & Jenrette, Inc........... 23,102,975
287,900 Morgan Stanley Dean Witter & Co............ 23,967,675
-------------
47,070,650
-------------
LIFE INSURANCE - (2.09%)
1,100,000 Sun Life Financial Services of Canada*...... 18,562,500
-------------
MULTI-LINE INSURANCE - (4.57%)
226,531 American International Group, Inc........... 26,617,393
854,500 Horace Mann Educators Corp.................. 12,817,500
7,500 Markel Corp.*............................... 1,062,188
-------------
40,497,081
-------------
</TABLE>
25
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS FINANCIAL FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
===============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
PROPERTY/CASUALTY INSURANCE - (12.40%)
647,500 Cincinnati Financial Corp.................................................... $ 20,376,016
378,600 Everest Reinsurance Holdings, Inc............................................ 12,446,475
337,300 FPIC Insurance Group, Inc.*.................................................. 5,301,934
109,000 Progressive Corp. (Ohio)..................................................... 8,066,000
761,700 Transatlantic Holdings, Inc.................................................. 63,792,375
--------------
109,982,800
--------------
TECHNOLOGY - (2.46%)
324,000 Lexmark International Group, Inc., Class A*.................................. 21,789,000
--------------
TELECOMMUNICATIONS - (3.94%)
510,000 Tellabs, Inc.*............................................................... 34,919,063
--------------
TRANSPORTATION - (5.13%)
513,000 Kansas City Southern Industries, Inc......................................... 45,496,688
--------------
WHOLESALE - (2.79%)
750,000 Costco Wholesale Corp.*...................................................... 24,773,435
--------------
Total Common Stock - (identified cost $636,793,420)................. 887,037,193
--------------
Total Investments - (100.04%) - (identified cost $636,793,420) - (a)......... 887,037,193
Liabilities Less Other Assets - (0.04%)...................................... (375,410)
--------------
Net Assets - (100%) ............................................... $ 886,661,783
==============
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $636,793,420. At June 30,
2000 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation...................................................... $ 274,399,799
Unrealized depreciation...................................................... (24,156,026)
--------------
Net unrealized appreciation......................................... $ 250,243,773
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND
<TABLE>
<CAPTION>
VALUE
SHARES/PRINCIPAL SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
CONVERTIBLE PREFERRED STOCK - (32.74%)
DIVERSIFIED (REIT) - (3.90%)
400,000 General Growth Properties, 7.25%, 07/15/08 Series Conv. Pfd.................. $ 8,700,000
21,700 Vornado Realty Trust, 6.50%, Ser. A Conv. Pfd................................ 1,124,331
-------------
9,824,331
-------------
ENERGY - (6.80%)
264,200 Kerr-McGee Corp. (convertible into Devon Energy),
5.50%, 08/02/04 Series, Conv. Pfd......................................... 13,143,950
59,600 Tosco Financing Trust, 5.75%, Conv. Pfd...................................... 2,898,050
22,800 Tosco Financing Trust, 5.75%, Ser. 144A Conv. Pfd. (b)....................... 1,108,650
-------------
17,150,650
-------------
HOTELS - (0.37%)
27,900 Host Marriott Financial Trust, 6.75%, Ser. 144A Conv. Pfd. (b)............... 927,675
-------------
INDUSTRIAL - (4.88%)
242,900 Sealed Air Corp., $2.00, Ser. A Cum. Conv. Pfd. New.......................... 12,296,812
-------------
MULTI-FAMILY HOUSING (REIT) - (1.75%)
171,500 Equity Residential Properties Trust, 7.00%, Ser. E Conv. Pfd................. 4,416,125
-------------
OFFICE/INDUSTRIAL (REIT) - (7.29%)
153,000 Equity Office Properties Trust, 5.25%, Ser. B Cum. Conv. Pfd................. 6,464,250
230,000 Reckson Assoc. Realty, 7.625%, Ser. A Cum. Conv. Pfd......................... 5,103,125
240,000 SL Green Realty Corp., 8.00%, 04/15/08 Series Cum. Conv. Pfd................. 6,795,000
-------------
18,362,375
-------------
RETAIL - (1.29%)
89,000 Kmart Financing I, 7.75%, 06/15/16 Series, Conv. Pfd......................... 3,242,938
-------------
TELECOMMUNICATIONS - (1.46%)
82,000 DECS Trust V (convertible into Crown Castle), 7.25%, 08/15/02 Series,
Conv. Pfd................................................................. 2,542,000
50,000 Loral Space & Communications, Inc., 6.00%, Ser. 144A Conv. Pfd.(b)........... 1,129,000
-------------
3,671,000
-------------
THEME PARKS - (3.37%)
191,000 Premier Parks, Inc., 7.50%, Cum. Conv. Pfd................................... 8,499,500
-------------
TRANSPORTATION - (1.63%)
30,500 Canadian National Railway Co., 5.25%, 06/30/29 Series, Conv. Pfd............. 1,372,500
70,000 Union Pacific Cap. Trust, 6.25%, Ser. 144A Cum. Conv. Pfd. (b)............... 2,747,500
-------------
4,120,000
-------------
Total Convertible Preferred Stock - (identified cost $85,954,760)... 82,511,406
-------------
CONVERTIBLE BONDS - (35.08%)
ENERGY - (3.27%)
$ 11,415,000 Valhi Inc. (convertible into Halliburton), Conv. Sub. Deb.
Zero Cpn., 10/20/07 (d)................................................... 8,247,337
-------------
</TABLE>
27
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL /SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
CONVERTIBLE BONDS - CONTINUED
FINANCIAL SERVICES - (3.89%)
$ 10,600,000 Exchangeable Certificate Corp. (convertible into American Express),
Series 144A, 0.625%, 03/02/05 (b)........................................ $ 9,818,250
-------------
INDUSTRIAL - (3.41%)
7,570,000 IMAX Corp., Conv. Sub. Deb., 5.75%, 04/01/03................................. 8,591,950
-------------
INSURANCE - (6.53%)
8,500,000 American International Group, Inc., Conv. Notes, 2.25%, 07/30/04............. 14,248,125
1,000,000 Cincinnati Financial Corp., Conv. Sub. Deb., 5.50%, 05/01/02................. 2,201,250
-------------
16,449,375
-------------
MULTIMEDIA - (4.71%)
10,700,000News America Holdings, Conv. Sub. Deb., Zero Cpn., 03/11/13 (d)................... 11,856,991
-------------
TECHNOLOGY - (5.71%)
8,199,000 Hewlett-Packard Co., 144A Conv. Sub. Notes, Zero Cpn., 10/14/17 (b)(d)....... 7,748,055
6,620,000 Motorola, Inc., Conv. Sub. Deb., Zero Cpn., 09/27/13 (d)..................... 6,653,100
-------------
14,401,155
-------------
TELECOMMUNICATIONS - (7.01%)
7,800,000 American Tower Corp., 144A Conv. Notes, 6.25%, 10/15/09 (b).................. 14,439,750
3,300,000 Bell Atlantic Financial Services (convertible into New Zealand Telecom),
Series 144A, 5.75%, 04/01/03 (b)....................................... 3,221,625
-------------
17,661,375
-------------
TRANSPORTATION - (0.02%)
500,000 Florida West Airlines, Inc., 8.00%, 03/25/99+ (c)............................ 40,000
-------------
WHOLESALE - (0.53%)
1,600,000 Costco Wholesale Corp., Conv. Sub. Notes, Zero Cpn., 08/19/17 (d)............ 1,326,000
-------------
Total Convertible Bonds - (identified cost $68,924,474)...................... 88,392,433
-------------
COMMON STOCK - (24.29%)
BUILDING MATERIALS - (0.68%)
94,606 Masco Corp................................................................... 1,708,821
-------------
DIVERSIFIED FINANCIAL SERVICES - (2.72%)
113,716 Citigroup, Inc............................................................... 6,851,389
-------------
DIVERSIFIED (REITS) - (4.21%)
305,200 Vornado Realty Trust......................................................... 10,605,700
-------------
ELECTRONICS - (0.57%)
19,489 Agilent Technologies, Inc.* ................................................. 1,437,314
-------------
FINANCIAL SERVICES - (2.33%)
112,650 American Express Co.......................................................... 5,871,881
-------------
MULTI-FAMILY HOUSING - (0.24%)
20,833 Camden Property Trust........................................................ 611,969
-------------
</TABLE>
28
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
OFFICE /INDUSTRIAL (REITS) - (1.14%)
58,156 Centerpoint Properties Corp.................................................. $ 2,369,857
17,770 Equity Office Properties Trust............................................... 489,786
-------------
2,859,643
-------------
SELF STORAGE (REIT) - (1.51%)
162,121 Public Storage, Inc.......................................................... 3,799,711
-------------
SHOPPING CENTERS (REIT) - (0.13%)
33,333 Mid-Atlantic Realty Trust.................................................... 333,330
-------------
TECHNOLOGY - (8.73%)
51,100 Hewlett -Packard Co.......................................................... 6,381,112
29,000 Intel Corp................................................................... 3,876,031
60,000 Motorola, Inc................................................................ 1,743,750
103,000 SAP AG-ADR................................................................... 4,834,563
75,032 Texas Instruments, Inc....................................................... 5,153,761
-------------
21,989,217
-------------
TELECOMMUNICATIONS - (0.09%)
32,800 Loral Space & Communications, Ltd.*.......................................... 227,550
-------------
THEME PARKS - (1.07%)
118,900 Premier Parks Inc.*.......................................................... 2,704,975
-------------
TRANSPORTATION - (0.41%)
35,600 Canadian National Railway Co. ............................................... 1,039,075
-------------
WHOLESALE - (0.46%)
35,000 Costco Wholesale Corp.*...................................................... 1,156,094
-------------
Total Common Stock - (identified cost $37,835,531).................. 61,196,669
-------------
</TABLE>
29
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (7.46%)
$ 18,807,000 Lehman Brothers Repurchase Agreement, 6.70%, 07/03/00, dated 06/30/00,
repurchase value $18,817,501 (collateralized by: $20,761,000 par value
Freddie Mac, 5.00% - 5.125%, 01/15/04 - 10/15/08,
market value $19,183,181) - (identified cost $18,807,000)................... $ 18,807,000
-------------
Total Investments - (99.57%) - (identified cost $211,521,765) - (a).......... 250,907,508
Other Assets Less Liabilities - (0.43%)...................................... 1,082,952
---------------
Net Assets - (100%) ................................................ $ 251,990,460
=============
*Non-Income Producing Security.
+This security is in default and is not currently paying interest.
(a) Aggregate cost for Federal Income Tax purposes is $211,539,376. At June 30,
2000 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation...................................................... $ 52,585,208
Unrealized depreciation...................................................... (13,217,076)
-------------
Net unrealized appreciation......................................... $ 39,368,132
=============
</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 $41,140,505 and 16.33%
of the Fund's net assets as of June 30, 2000.
(c) Illiquid security. See Note 7 of the Notes to Financial Statements.
(d) As of June 30, 2000 zero coupon bonds represented $35,831,483 or 14.22% 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
30
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS REAL ESTATE FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
================================================================================
<S> <C> <C>
COMMON STOCK - (86.09%)
APARTMENTS - (4.74%)
1,565,800 Boardwalk Equities, Inc.*...................... $ 14,811,620
-------------
APARTMENTS (REITS) - (25.88%)
390,331 Apartment Investment & Management Co........... 16,881,816
700,200 Archstone Communities Trust.................... 14,747,963
424,467 Avalon Bay Communities, Inc.................... 17,721,497
238,100 Equity Residential Properties Trust............ 10,952,600
530,100 Home Properties of New York, Inc. ............. 15,903,000
224,800 Summit Properties Inc. ........................ 4,720,800
-------------
80,927,676
-------------
DIVERSIFIED (REITS) - (15.74%)
531,600 Duke-Weeks Realty Corp......................... 11,894,550
163,500 Kilroy Realty Corp............................. 4,240,781
208,400 Liberty Property Trust......................... 5,405,375
263,500 Spieker Properties, Inc........................ 12,121,000
447,900 Vornado Realty Trust........................... 15,564,525
-------------
49,226,231
-------------
HOTELS & LODGING - (3.20%)
277,700 Marriott International, Inc.................... 10,014,556
-------------
INDUSTRIAL (REITS) - (7.86%)
189,400 AMB Property Corp.............................. 4,320,688
205,000 Centerpoint Properties Corp.................... 8,353,750
300,000 Centerpoint Properties Corp. Private (b)....... 11,919,375
-------------
24,593,813
-------------
MALLS (REITS) - (1.11%)
109,800 General Growth Properties, Inc................. 3,486,150
-------------
OFFICE SPACE (REITS) - (16.15%)
487,800 Alexandria Real Estate Equities, Inc........... 16,737,638
457,400 Boston Properties, Inc......................... 17,667,075
139,900 CarrAmerica Realty Corp........................ 3,707,350
328,853 Equity Office Properties Trust................. 9,063,999
109,000 Parkway Properties Inc......................... 3,324,500
-------------
50,500,562
-------------
REAL ESTATE DEVELOPMENT - (2.72%)
567,900 Catellus Development Corp.*................... 8,518,500
-------------
</TABLE>
31
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS REAL ESTATE FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
COMMON STOCK - CONTINUED
RESORTS/THEME PARKS - (1.70%)
154,800 Premier Parks Inc.*......................................................... $ 3,521,700
109,461 Vail Resorts, Inc.* ........................................................ 1,785,583
--------------
5,307,283
--------------
SHOPPING CENTERS (REITS) - (1.76%)
134,000 Kimco Realty Corp............................................................ 5,494,000
--------------
STORAGE (REITS) - (5.23%)
697,300 Public Storage, Inc.......................................................... 16,342,969
--------------
Total Common Stock - (identified cost $252,471,353)................. 269,223,360
--------------
CONVERTIBLE PREFERRED STOCK - (11.37%)
APARTMENTS (REITS) - (0.36%)
43,700 Equity Residential Properties Trust, 7.00%, Ser. E Conv. Pfd................. 1,125,275
--------------
DIVERSIFIED (REITS) - (0.33%)
20,000 Vornado Realty Trust, 6.50%, Ser. A Conv. Pfd................................ 1,036,250
--------------
MALLS (REITS) - (3.62%)
520,000 General Growth Properties, 7.25%, 07/15/08 Series, Conv. Pfd................. 11,310,000
--------------
OFFICE (REITS) - (2.87%)
316,500 SL Green Realty Corp., 8.00%, 04/15/08 Series Cum. Conv. Pfd................. 8,960,906
--------------
RESORTS/THEME PARKS - (3.08%)
216,500 Premier Parks Inc., 7.50%, Cum. Conv. Pfd.................................... 9,634,250
--------------
TELECOMMUNICATIONS- (1.11%)
112,400 DECS Trust V (convertible into Crown Castle, 7.25%, 8/15/02
Series, Conv. Pfd........................................................ 3,484,400
--------------
Total Convertible Preferred Stock - (identified cost $38,735,612)... 35,551,081
--------------
</TABLE>
32
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT JUNE 30, 2000 (Unaudited)
DAVIS REAL ESTATE FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL SECURITY (NOTE 1)
==============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (1.91%)
$ 5,982,000 State Street Corporation Repurchase Agreement, 6.60%, 07/03/00, dated
6/30/00, repurchase value of $5,985,290 (collateralized by: $6,045,000
par value Federal Home Loan Bank, 7.00%, 08/28/01,
market value $6,165,900) - (identified cost $5,982,000)...................... $ 5,982,000
--------------
Total Investment - (99.37%) - (identified cost $297,188,965) - (a)........... 310,756,441
Other Assets Less Liabilities - (0.63%)...................................... 1,969,305
--------------
Net Assets - (100%).......................................................... $ 312,725,746
===============
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $ 297,188,965. At June 30,
2000 unrealized appreciation (depreciation) of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation...................................................... $ 30,670,230
Unrealized depreciation..................................................... (17,102,754)
--------------
Net unrealized appreciation ........................................ $ 13,567,476
==============
</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, 2000. The
security listed below is not an affiliate as of June 30, 2000. Transactions
during the period in which the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1999 Additions Reductions June 30, 2000 Income
-------- ----------------- --------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C>
Golf Trust of America, Inc. 482,400 - 482,400 - -
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF ASSETS AND LIABILITIES
At June 30, 2000 (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)........... $159,901,688 $35,498,691 $547,442,163 $887,037,193 $250,907,508 $310,756,441
Cash...................... 21,559 33,712 51,719 286,433 21,789 21,149
Receivables:
Dividends and interest. 47,846 359,310 5,012,160 594,702 1,040,588 2,029,412
Capital stock sold..... 774,645 17,259 19,714,511 2,242,896 596,053 752,364
Investments sold....... 4,556,337 - - 7,438,176 - -
Prepaid expenses.......... 12,000 8,950 30,250 76,679 16,250 21,900
------------ ----------- ------------ ------------ ------------ -------------
Total assets... 165,314,075 35,917,922 572,250,803 897,676,079 252,582,188 313,581,266
------------ ----------- ------------ ------------ ------------ -------------
LIABILITIES:
Payables:
Investment securities
purchased............ 8,936,638 - 7,999,360 8,215,033 - -
Capital stock reacquired 138,655 379,369 2,796,099 1,383,356 188,474 372,631
Accrued expenses.......... 152,794 46,075 307,922 716,831 241,756 283,651
Commissions payable to
distributor (Note 3). 121,365 33,289 - 699,076 161,498 199,238
Distributions payable..... - 28,981 - - -
------------ ----------- ------------ ------------ ------------ -------------
Total liabilities 9,349,452 458,733 11,132,362 11,014,296 591,728 855,520
------------ ----------- ------------ ------------ ------------ -------------
NET ASSETS (NOTE 5)....... $155,964,623 $35,459,189 $561,118,441 $886,661,783 $251,990,460 $ 312,725,746
============ =========== ============ ============ ============ =============
NET ASSETS CONSIST OF:
Par value of shares of
capital stock.............. 67,044 66,074 5,611,184 288,312 93,805 153,412
Additional paid-in
capital................... 105,989,029 41,034,217 555,507,257 628,289,301 206,000,300 365,514,720
Undistributed net investment
income (deficit).......... (717,897) (47,227) - (2,469,414) 1,632,386 3,223,872
Accumulated net realized gain
(loss).................. 23,427,093 (5,473,122) - 10,309,811 4,878,226 (69,733,734)
Net unrealized appreciation
(depreciation) on 27,199,354 (120,753) - 250,243,773 39,385,743 13,567,476
------------ ----------- ------------ ------------ ------------ -------------
investments............... $155,964,623 $35,459,189 $561,118,441 $886,661,783 $251,990,460 $ 312,725,746
============ =========== ============ ============ ============ =============
</TABLE>
* Including repurchase agreements of $3,869,000, $3,334,000, $94,897,000,
$18,807,000 and $5,982,000 for Davis Growth Opportunity Fund, Davis Government
Bond Fund, Davis Government Money Market Fund, Davis Convertible Securities Fund
and Davis Real Estate Fund, respectively, and cost of $132,702,334, $35,619,444,
$547,442,163, $636,793,420, $211,521,765 and $297,188,965 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
34
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF ASSETS AND LIABILITIES - Continued
At June 30, 2000 (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............. $78,520,996 $14,740,940 $525,536,125 $ 443,765,827 $113,429,233 $156,897,297
Shares outstanding..... 3,284,873 2,743,695 525,536,125 14,212,069 4,209,151 7,693,487
Net asset value and redemp-
tion price per share (net
assets/shares outstanding) $ 23.90 $ 5.37 $ 1.00 $ 31.22 $ 26.95 $ 20.39
======= ======= ======= ======= ======== ========
Maximum offering price per
share (100/95.25 of net
asset value)......... $ 25.09 $ 5.64 $ 1.00 $ 32.78 $ 28.29 $ 21.41
======= ======= ======= ======= ======== ========
CLASS B SHARES
Net assets............. $65,131,533 $17,943,492 $29,469,947 $342,859,201 $ 83,889,511 $ 85,730,523
Shares outstanding..... 2,895,180 3,347,952 29,469,947 11,360,984 3,149,258 4,226,386
Net asset value,
offering and
redemption price per
share (net assets/shares
outstanding) (Note 3) $ 22.50 $ 5.36 $ 1.00 $ 30.18 $ 26.64 $ 20.28
======= ======= ======= ======= ======== ========
CLASS C SHARES
Net assets............. $ 8,339,447 $ 2,727,160 $ 6,112,369 $ 89,026,279 $ 18,451,701 $ 30,756,014
Shares outstanding..... 359,440 506,937 6,112,369 2,907,566 683,415 1,505,371
Net asset value,
offering and
redemption price per
share (net assets/shares
outstanding) (Note 3) $ 23.20 $ 5.38 $ 1.00 $ 30.62 $ 27.00 $ 20.43
======= ======= ======= ======= ======== ========
CLASS Y SHARES
Net assets............. $ 3,972,647 $ 47,597 - $ 11,010,476 $ 36,220,015 $ 39,341,912
Shares outstanding..... 164,888 8,801 - 350,606 1,338,648 1,915,918
Net asset value,
offering and
redemption price per
share (net assets/shares
outstanding) ........ $ 24.09 $ 5.41 - $ 31.40 $ 27.06 $ 20.53
======= ======= ======= ======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF OPERATIONS
For the six months ended June 30, 2000 (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................... $ 254,876 $ - $ - $3,903,594 $ 3,502,432 $8,237,813
Interest.................... 203,883 1,310,158 16,745,028 34,983 1,665,285 81,699
----------- ---------- ----------- ----------- ----------- -----------
Total income*....... 458,759 1,310,158 16,745,028 3,938,577 5,167,717 8,319,512
----------- ---------- ----------- ----------- ----------- -----------
Expenses:
Management fees (Note 2).... 547,165 100,992 1,283,183 2,689,435 948,334 1,079,801
Custodian fees.............. 30,297 17,955 41,922 69,168 32,971 35,478
Transfer agent fees
Class A.................. 45,347 14,093 61,627 285,489 41,329 78,656
Class B.................. 59,873 17,465 32,514 356,762 65,562 114,247
Class C.................. 10,022 2,930 9,438 83,848 13,849 26,601
Class Y.................. 551 15 - 7,155 1,901 5,174
Audit fees.................. 4,050 3,525 5,750 13,800 4,375 6,900
Legal fees.................. 3,544 1,425 13,197 21,984 9,498 11,452
Accounting fees (Note 2).... 3,252 1,248 18,750 7,248 3,750 4,752
Reports to s hareholders.... 26,697 3,054 84,319 142,753 45,510 55,834
Directors' fees and expenses 5,569 1,396 20,310 29,900 12,002 12,620
Registration and filing fees 35,000 29,565 53,985 58,637 40,111 41,893
Miscellaneous............... 4,648 407 15,581 174,532 4,633 41,992
Distribution plan payments (Note 3)
Class A.................. 70,774 16,346 - 384,032 81,888 140,229
Class B.................. 296,227 104,470 - 1,666,041 418,847 422,306
Class C.................. 34,731 16,263 - 417,207 93,095 143,442
----------- ---------- ----------- ----------- ----------- -----------
Total expenses...... 1,177,747 331,149 1,640,576 6,407,991 1,817,655 2,221,377
Expenses paid indirectly
(Note 6)........... (1,091) (132) (3,356) - (2,227) (1,413)
----------- ---------- ----------- ----------- ----------- -----------
Net expenses........ 1,176,656 331,017 1,637,220 6,407,991 1,815,428 2,219,964
----------- ---------- ----------- ----------- ----------- -----------
Net investment
income (loss). (717,897) 979,141 15,107,808 (2,469,414) 3,352,289 6,099,548
----------- ---------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from
investment transactions
Unaffiliated companies.... 23,038,174 (909,762) - 30,107,424 11,206,683 (5,098,862)
Affiliated companies...... - - - - (4,142,204)
Net change in unrealized
appreciation
/(depreciation) of
investments................. (12,117,208) 727,141 - 24,954,092 3,914,115 37,686,428
----------- ---------- ----------- ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments.. 10,920,966 (182,621) - 55,061,516 15,120,798 28,445,362
----------- ---------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations $10,203,069 $ 796,520 $15,107,808 $52,592,102 $18,473,087 $34,544,910
=========== ========== =========== =========== =========== ===========
*Net of foreign taxes
withheld as follows:........ $ 1,762 $ - $ - $ 10,825 $ 2,501 $ 8,292
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended June 30, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
DAVIS DAVIS DAVIS DAVIS DAVIS
GROWTH GOVERNMENT GOVERNMENT DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MONEY MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) . $ (717,897) $ 979,141 $ 15,107,808 $ (2,469,414) $ 3,352,289 $ 6,099,548
Net realized gain (loss) from
investment transactions ..... 23,038,174 (909,762) -- 30,107,424 11,206,683 (9,241,066)
Net change in unrealized
appreciation/(depreciation)
of investments............... (12,117,208) 727,141 -- 24,954,092 3,914,115 37,686,428
-------------- -------------- -------------- -------------- -------------- --------------
Net increase in net assets
resulting from operations ... 10,203,069 796,520 15,107,808 52,592,102 18,473,087 34,544,910
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A...................... -- (440,118) (14,071,643) -- (873,406) (1,503,976)
Class B...................... -- (507,076) (868,814) -- (455,628) (715,205)
Class C...................... -- (78,556) (167,351) -- (100,462) (244,236)
Class Y...................... -- (618) -- -- (290,407) (412,259)
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease) in
net
assets resulting from
capital
share transactions (Note 5)
Class A...................... 4,684,816 (3,199,066) 24,117,923 (10,253,165) (11,692,185) (6,893,179)
Class B...................... 9,252,079 (10,256,668) (15,048,383) (52,149,208) (8,154,768) (16,616,208)
Class C...................... 2,822,338 (2,039,652) (1,928,018) (5,063,908) (1,693,283) (2,293,892)
Class Y...................... 3,851,099 30,145 -- 2,021,999 690,405 (7,648,352)
-------------- -------------- -------------- -------------- -------------- --------------
Total increase (decrease)
in net assets.............. 30,813,401 (15,695,089) 7,141,522 (12,852,180) (4,096,647) (1,782,397)
NET ASSETS:
Beginning of period........... 125,151,222 51,154,278 553,976,919 899,513,963 256,087,107 314,508,143
-------------- -------------- -------------- -------------- -------------- --------------
End of period................. $155,964,623 $ 35,459,189 $561,118,441 $886,661,783 $251,990,460 $312,725,746
============== ============== ============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year ended December 31, 1999
================================================================================
<TABLE>
<CAPTION>
DAVIS DAVIS DAVIS DAVIS DAVIS
GROWTH GOVERNMENT GOVERNMENT DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND MONEY MARKET FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND FUND
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)...................... $ (995,733) $ 2,787,556 $ 24,347,969 $ (821,488) $ 7,153,518 $ 13,183,562
Net realized gain (loss)
from investment
transactions................ 27,840,527 (3,856,726) -- (18,241,280) 1,735,065 (54,820,043)
Net change in unrealized
appreciation/(depreciation)
of investments.............. 3,773,440 (1,425,531) -- 5,225,551 21,964,910 8,255,614
-------------- -------------- -------------- -------------- -------------- --------------
Net increase (decrease)
innet assets resulting from
operations.................. 30,618,234 (2,494,701) 24,347,969 (13,837,217) 30,853,493 (33,380,867)
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income .......
Class A..................... -- (1,079,677) (22,123,099) -- (3,737,774) (6,800,729)
Class B..................... -- (1,421,228) (1,826,938) -- (1,886,615) (3,557,875)
Class C..................... -- (280,468) (397,932) -- (476,532) (1,032,423)
Class Y..................... -- (6,183) -- -- (1,052,597) (1,784,407)
Realized gains from
investmenttransactions ....
Class A..................... (13,615,051) -- -- -- (3,779,462) --
Class B..................... (11,980,005) -- -- -- (2,703,748) --
Class C..................... (850,350) -- -- -- (592,162) --
Class Y..................... (10,469) -- -- -- (988,150) --
Return of capital ...........
Class A..................... -- (136,983) -- -- (43,674) (1,295,430)
Class B..................... -- (180,317) -- -- (22,044) (677,718)
Class C..................... -- (35,584) -- -- (5,568) (196,660)
Class Y..................... -- (784) -- -- (12,299) (339,901)
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease) in
netassets resulting from
capitalshare transactions
(Note 5) ...................
Class A..................... 12,642,166 (1,292,187) 28,541,312 (30,643,859) (22,674,204) (26,892,032)
Class B..................... (9,298,238) (4,635,530) 9,052,299 (35,203,119) (9,400,210) (34,754,115)
Class C..................... 1,196,224 (2,779,262) 1,909,677 (1,568,115) (8,796,270) 42,072
Class Y..................... (67,521) (323,278) -- (2,143,927) 780,544 11,466,558
-------------- -------------- -------------- -------------- -------------- --------------
Total increase (decrease)
in net assets............. 8,634,990 (14,666,182) 39,503,288 (83,396,237) (24,537,272) (99,203,527)
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................ $125,151,222 $ 51,154,278 $553,976,919 $899,513,963 $256,087,107 $314,508,143
============== ============== ============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (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.
39
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (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, 2000, Davis Government Bond Fund had approximately
$4,563,000 of capital loss carryovers and post October losses available to
offset future capital gains which expire between 2001 and 2008. At June 30,
2000, Davis Financial Fund had approximately $19,798,000 of capital loss
carryovers and post October losses available to offset future capital gains,
if any, of which expire between 2006 and 2008. At June 30, 2000, Davis
Convertible Securities Fund had approximately $6,311,000 of capital loss
carryovers and post October losses available to offset future capital gains,
if any, which expire in 2008. At June 30, 2000, Davis Real Estate Fund had
approximately $60,493,000 of capital loss carryovers and post October losses
available to offset future capital gains, if any, which will expire between
2006 and 2008.
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.
40
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (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% of 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, 2000 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. State Street Bank & Trust
Company ("State Street Bank") 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, 2000 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 $12,506, $2,603, $7,911, $74,228, $10,670 and
$21,689, respectively. 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, 2000
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, 2000,
SCD received $11,250 and $15,410 in commissions on the purchases and sales of
portfolio securities in the Davis Growth Opportunity Fund and Davis Financial
Fund, respectively.
41
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (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, 2000, Davis Distributors, LLC, the
Funds' Underwriter (the "Underwriter" or "Distributor") received $61,829,
$1,843, $768,210, $41,643 and $135,614 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 $9,700, $284, $120,199, $6,652 and $11,682 was
retained by the Underwriter and the remaining $52,129, $1,559, $648,011,
$34,991 and $123,932 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 up to 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, 2000 was $70,774, $16,346, $384,032, $81,888 and
$140,229, 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
During the six months ended June 30, 2000, 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 $223,917, $79,058, $1,252,592,
$314,726 and $317,392, respectively and service fees of $72,310, $25,412,
$413,449, $104,121 and $104,914, respectively.
42
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
================================================================================
NOTE 3 -DISTRIBUTION AND UNDERWRITING FEES -(CONTINUED)
Commission advances by the Distributor during the six months ended June 30,
2000 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 $124,451, $54,367,
$1,218,255, $133,082 and $153,424 of which $117,217, $46,632, $1,158,140,
$117,444 and $145,435 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 $40,192, $11,415, $10,034,867, $3,183,037 and $6,061,456, 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, 2000 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 $92,795, $170,044, $1,563,034, $231,791 and
$302,973, 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.
During the six months ended June 30, 2000, 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
$34,731, $16,263, $417,207, $93,095 and $143,442, respectively. During the
six months ended June 30, 2000, the Distributor received $758, $2,495,
$46,772, $3,089 and $11,690 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.
43
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
June 30, 2000 (Unaudited)
================================================================================
NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
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, 2000 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..... $ 66,068,308 $ 32,704,151 $150,469,386 $ 25,872,159 $ 32,202,534
Proceeds of sales..... $ 44,473,366 $ 49,965,916 $215,756,626 $ 50,926,201 $ 68,053,203
</TABLE>
NOTE 5 - CAPITAL STOCK
At June 30, 2000 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:
44
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
June 30, 2000 (Unaudited)
<TABLE>
===================================================================================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
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.............................. 3,294,759 1,006,174 337,659,877 3,301,574 531,095 1,435,438
Shares issued in reinvestment
of distributions.................... - 62,742 13,794,682 - 28,335 74,188
------------ ------------ ------------ ------------ ------------ ------------
3,294,759 1,068,916 351,454,559 3,301,574 559,430 1,509,626
Shares redeemed.......................... (3,071,376) (1,669,694) (327,336,636) (3,730,131) (1,003,864) (1,909,083)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)............. 223,383 (600,778) 24,117,923 (428,557) (444,434) (399,457)
============ ============ ============ ============ ============ ============
Proceeds from shares sold................ $ 75,808,563 $ 5,357,058 $337,659,877 $ 96,169,919 $ 14,110,055 $ 26,952,264
Proceeds from shares issued in
reinvestment of
distributions ...................... - 334,077 13,794,682 - 765,379 1,361,281
------------ ------------ ------------ ------------ ------------ ------------
75,808,563 5,691,135 351,454,559 96,169,919 14,875,434 28,313,545
Cost of shares redeemed.................. (71,123,747) (8,890,201) (327,336,636) (106,423,084) (26,567,619) (35,206,724)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)............. $ 4,684,816 $ (3,199,066) $ 24,117,923 $(10,253,165) $(11,692,185) $ (6,893,179)
============ ============ ============ ============ ============ ============
<CAPTION>
YEAR ENDED
CLASS A DECEMBER 31, 1999
----------------------------------------------------------------------------------------
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.............................. 3,145,959 3,817,254 489,311,673 4,127,181 1,429,788 4,292,076
Shares issued in reinvestment
of distributions.................... 663,905 151,900 22,489,378 - 296,598 373,568
------------ ------------ ------------ ------------ ------------ ------------
3,809,864 3,969,154 511,801,051 4,127,181 1,726,386 4,665,644
Shares redeemed.......................... (3,126,446) (4,231,047) (483,259,739) (5,202,234) (2,664,056) (6,138,111)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)............. 683,418 (261,893) 28,541,312 (1,075,053) (937,670) (1,472,467)
============ ============ ============ ============ ============ ============
Proceeds from shares sold................ $ 63,534,504 $ 21,367,729 $489,311,673 $123,524,984 $ 35,529,821 $ 85,547,857
Proceeds from shares issued in
reinvestment of
distributions ...................... 13,032,786 850,367 22,489,378 - 7,198,251 7,118,561
------------ ------------ ------------ ------------ ------------ ------------
76,567,290 22,218,096 511,801,051 123,524,984 42,728,072 92,666,418
Cost of shares redeemed.................. (63,925,124) (23,510,283) (483,259,739) (154,168,843) (65,402,276) (119,558,450)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ............ $ 12,642,166 $ (1,292,187) $ 28,541,312 $(30,643,859) $(22,674,204) $(26,892,032)
============ ============ ============ ============ ============ ============
</TABLE>
45
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
June 30, 2000 (Unaudited)
<TABLE>
===================================================================================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
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 ............................. 1,029,507 722,514 22,269,433 1,300,675 181,783 255,369
Shares issued in reinvestment
of distributions ............... - 49,060 732,741 - 11,520 24,334
------------ ------------ ------------ ------------ ------------ ------------
1,029,507 771,574 23,002,174 1,300,675 193,303 279,703
Shares redeemed ......................... (627,797) (2,701,634) (38,050,557) (512,372) (3,282,651) (1,192,732)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ........ 401,710 (1,930,060) (15,048,383) (1,981,976) (319,069) (913,029)
============ ============ ============ ============ ============ ============
Proceeds from shares sold................ $ 22,453,513 $ 3,847,358 $ 22,269,433 $ 36,255,646 $ 4,769,902 $ 4,790,280
Proceeds from shares issued in
reinvestment of
distributions .................. - 260,845 732,741 - 307,570 445,078
------------ ------------ ------------ ------------ ------------ ------------
22,453,513 4,108,203 23,002,174 36,255,646 5,077,472 5,235,358
Cost of shares redeemed ................. (13,201,434) (14,364,871) (38,050,557) (88,404,854) (13,232,240) (21,851,566)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ........ $ 9,252,079 $(10,256,668) $(15,048,383) $(52,149,208) $ (8,154,768) $(16,616,208)
============ ============ ============ ============ ============ ============
<CAPTION>
YEAR ENDED
CLASS B DECEMBER 31, 1999
----------------------------------------------------------------------------------------
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 ............................. 457,988 4,342,349 77,842,904 2,787,722 617,097 1,038,220
Shares issued in reinvestment
of distributions ............... 578,680 159,671 1,559,286 - 157,317 159,571
------------ ------------ ------------ ------------ ------------ ------------
1,036,668 4,502,020 79,402,190 2,787,722 774,414 1,197,791
Shares redeemed ......................... (1,404,098) (5,344,647) (70,349,891) (4,042,943) (1,163,669) (3,026,165)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ........ (367,430) (842,627) 9,052,299 (1,255,221) (389,255) (1,828,374)
============ ============ ============ ============ ============ ============
Proceeds from shares sold................ $ 9,046,160 $ 24,390,433 $ 77,842,904 $ 81,577,802 $ 15,267,911 $ 20,759,379
Proceeds from shares issued in
reinvestment of
distributions .................. 10,803,653 890,085 1,559,286 - 3,765,045 3,017,103
------------ ------------ ------------ ------------ ------------ ------------
19,849,813 25,280,518 79,402,190 81,577,802 19,032,956 23,776,482
Cost of shares redeemed ................. (29,148,051) (29,916,048) (70,349,891) (116,780,921) (28,433,166) (58,530,597)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ........ $ (9,298,238) $ (4,635,530) $ 9,052,299 $(35,203,119) $ (9,400,210) $(34,754,115)
============ ============ ============ ============ ============ ============
</TABLE>
46
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
June 30, 2000 (Unaudited)
<TABLE>
===================================================================================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
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.............................. 163,730 73,058 8,508,244 728,968 69,632 243,459
Shares issued
in reinvestment
of distributions.................... - 6,195 146,010 - 2,597 9,435
------------ ------------ ------------ ------------ ------------ ------------
163,730 79,253 8,654,254 728,968 72,229 252,894
Shares redeemed.......................... (37,525) (461,271) (10,582,272) (935,008) (136,851) (380,686)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ............ 126,205 (382,018) (1,928,018) (206,040) (64,622) (127,792)
============ ============ ============ ============ ============ ============
Proceeds from shares sold................ $ 3,666,829 $ 390,555 $ 8,508,244 $ 20,643,380 $ 1,845,220 $ 4,537,892
Proceeds from shares issued in
reinvestment of
distributions....................... - 33,064 146,010 - 70,306 173,803
------------ ------------ ------------ ------------ ------------ ------------
3,666,829 423,619 8,654,254 20,643,380 1,915,526 4,711,695
Cost of shares redeemed.................. (844,491) (2,463,271) (10,582,272) (25,707,288) (3,608,809) (7,005,587)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ............ $ 2,822,338 $ (2,039,652) $ (1,928,018) $ (5,063,908) $ (1,693,283) $ (2,293,892)
============ ============ ============ ============ ============ ============
<CAPTION>
YEAR ENDED
CLASS C DECEMBER 31, 1999
----------------------------------------------------------------------------------------
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.............................. 134,267 1,009,453 24,201,099 1,209,312 171,632 839,413
Shares issued
in reinvestment
of distributions.................... 39,822 22,464 340,222 - 35,118 49,829
------------ ------------ ------------ ------------ ------------ ------------
174,089 1,031,917 24,541,321 1,209,312 206,750 889,242
Shares redeemed.......................... (108,727) (1,528,758) (22,631,644) (1,272,377) (565,480) (905,955)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) 65,362 (496,841) 1,909,677 (63,065) (358,730) (16,713)
============ ============ ============ ============ ============ ============
Proceeds from shares sold................ $ 2,717,503 $ 5,692,361 $ 24,201,099 $ 35,843,664 $ 4,362,506 $ 16,613,743
Proceeds from shares issued in
reinvestment of
distributions....................... 762,795 125,485 340,222 - 852,435 947,417
------------ ------------ ------------ ------------ ------------ ------------
3,480,298 5,817,846 24,541,321 35,843,664 5,214,941 17,561,160
Cost of shares redeemed.................. (2,284,074) (8,597,108) (22,631,644) (37,411,779) (14,011,211) (17,519,088)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) ............ $ 1,196,224 $ (2,779,262) $ 1,909,677 $ (1,568,115) $ (8,796,270) $ 42,072
============ ============ ============ ============ ============ ============
</TABLE>
47
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
June 30, 2000 (Unaudited)
<TABLE>
===================================================================================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
CLASS Y (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 ............................. 164,918 5,676 164,502 23,677 51,492
Shares issued in reinvestment
of distributions ................... - 1 - 10,252 21,494
------------ ------------ ------------ ----------- ------------
164,918 5,677 164,502 33,929 72,986
Shares redeemed ......................... (232) - (96,662) (8,730) (504,281)
------------ ------------ ------------ ----------- ------------
Net increase (decrease) ............ 164,686 5,677 67,840 25,199 (431,295)
============ ============ ============ ============ ============
Proceeds from shares sold ............... $ 3,856,505 $ 30,143 $ 4,757,080 $ 640,196 $ 954,599
Proceeds from shares issued in
reinvestment of distributions ...... - 2 - 278,023 396,784
------------ ------------ ------------ ----------- ------------
3,856,505 30,145 4,757,080 918,219 1,351,383
Cost of shares redeemed ................. (5,406) - (2,735,081) (227,814) (8,999,735)
------------ ------------ ------------ ----------- ------------
Net increase (decrease) ............ $ 3,851,099 $ 30,145 $ 2,021,999 $ 690,405 $ (7,648,352)
============ ============ ============ ============ ============
<CAPTION>
YEAR ENDED
CLASS Y DECEMBER 31, 1999
-------------------------------------------------------------------------
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 ............................. 1,516 4,288 142,397 24,246 658,578
Shares issued in reinvestment
of distributions ................... - 1 - 82,267 116,912
------------ ------------ ------------ ----------- ------------
1,516 4,289 142,397 106,513 775,490
Shares redeemed ......................... (4,660) (60,684) (215,183) (74,107) (204,631)
------------ ------------ ------------ ----------- ------------
Net increase (decrease) ............ (3,144) (56,395) (72,786) 32,406 570,859
============ ============ ============ ============ ============
Proceeds from shares sold ............... $ 34,406 $ 24,947 $ 4,266,232 $ 590,321 $ 13,107,822
Proceeds from shares issued in
reinvestment of distributions ...... - 5 - 2,008,602 2,244,759
------------ ------------ ------------ ----------- ------------
34,406 24,952 4,266,232 2,598,923 15,352,581
Cost of shares redeemed ................. (101,927) (348,230) (6,410,159) (1,818,379) (3,886,023)
------------ ------------ ------------ ----------- ------------
Net increase (decrease) ............ $ (67,521) $ (323,278) $ (2,143,927) $ 780,544 $ 11,466,558
============ ============ ============ ============ ============
</TABLE>
48
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
June 30, 2000 (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 $1,091, $132, $3,356,
$2,227 and $1,413 for Davis Growth Opportunity Fund, Davis Government Bond Fund,
Davis Government Money Market Fund, Davis Convertible Securities Fund and Davis
Real Estate Fund, respectively, during the six months ended June 30, 2000.
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 Growth Opportunity Fund was $2,863,528, or
1.84% of the Fund's net assets as of June 30, 2000. The aggregate value of
restricted securities in Davis Real Estate Fund was $11,919,375, or 3.81% of the
Fund's net assets as of June 30, 2000. 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 0.02% of the Fund's net assets as of
June 30, 2000. Information concerning restricted and illiquid securities is as
follows:
<TABLE>
<CAPTION>
Acquisition Valuation per Unit
Fund Security Date Shares/Par Cost per Unit as of June 30, 2000
---- -------- ---- ---------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Davis Growth LogicVision, Inc. Pfd.
Opportunity Class I 01/28/00 235,294 $4.25 $12.17
Davis Centerpoint Properties
Real Estate Corp. Private 04/02/98 300,000 $33.375 $39.73125
Davis
Convertible Florida West Airlines,
Securities Inc., 8.00%, 03/25/99 03/23/94 500,000 $100.00 $8.00
</TABLE>
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 A
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 22.17 $ 21.96 $ 22.49 $ 18.93 $ 17.25 $ 12.83
------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Loss .......................... (0.07) - (0.09) (0.10) (0.13) (0.11)
Net Realized and Unrealized Gains ............ 1.80 5.86 0.59 5.34 3.37 6.08
------- ------- ------- ------- ------- -------
Total From Investment Operations ........ 1.73 5.86 0.50 5.24 3.24 5.97
------- ------- ------- ------- ------- -------
Distributions
Distributions from Realized Gains ............ - (5.65) (1.03) (1.68) (1.55) (1.55)
Return of Capital ............................ - - - - (0.01) -
------- ------- ------- ------- ------- -------
Total Distributions ..................... - (5.65) (1.03) (1.68) (1.56) (1.55)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .................... $ 23.90 $ 22.17 $ 21.96 $ 22.49 $ 18.93 $ 17.25
======= ======= ======= ======= ======= =======
Total Return(1) ................................... 7.80% 31.45% 2.32% 27.70% 18.73% 46.65%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ..... $78,521 $67,871 $52,212 $48,386 $27,158 $22,890
Ratio of Expenses to Average Net Assets ...... 1.21%*(2) 1.29% 1.32% 1.27% 1.49%(2) 1.51%
Ratio of Net Investment Loss to
Average Net Assets ...................... (0.57)%* (0.50)% (0.38)% (0.58)% (0.76)% (0.71)%
Portfolio Turnover Rate(3) ................... 31.65% 100.30% 18.03% 19.33% 30.55% 30.07%
</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 1.20% and 1.48% for the six months
ended June 30, 2000 and the year ended December 31, 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
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 B
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 20.95 $ 21.18 $ 21.88 $ 18.58 $ 17.08 $ 12.82
------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Loss .......................... (0.15) - (0.26) (0.25) (0.27) (0.26)
Net Realized and Unrealized Gains ............ 1.70 5.42 0.59 5.23 3.33 6.07
------- ------- ------- ------- ------- -------
Total From Investment
Operations .............................. 1.55 5.42 0.33 4.98 3.06 5.81
------- ------- ------- ------- ------- -------
Distributions
Distributions from Realized Gains ............ - (5.65) (1.03) (1.68) (1.55) (1.55)
Return of Capital ............................ - - - - (0.01) -
------- ------- ------- ------- ------- -------
Total Distributions ..................... - (5.65) (1.03) (1.68) (1.56) (1.55)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .................... $ 22.50 $ 20.95 $ 21.18 $ 21.88 $ 18.58 $ 17.08
======= ======= ======= ======= ======= =======
Total Return(1) ................................... 7.40% 30.42% 1.61% 26.82% 17.86% 45.44%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ..... $65,132 $52,234 $60,587 $61,383 $39,343 $35,326
Ratio of Expenses to Average Net Assets ...... 2.10%* 2.16% 2.10% 2.09%(2) 2.25%(2) 2.30%
Ratio of Net Investment Loss to Average
Net Assets .............................. (1.47)%* (1.37)% (1.16)% (1.40)% (1.52)% (1.50)%
Portfolio Turnover Rate(3) ................... 31.65% 100.30% 18.03% 19.33% 30.55% 30.07%
</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 2.08% and 2.24% for 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
51
<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
(INCEPTION
SIX MONTHS OF CLASS)
ENDED YEAR ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ----------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 21.62 $ 21.71 $ 22.43 $ 25.56
------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Loss........................... (0.15) - (0.30) (0.04)
Net Realized and Unrealized Gains (Losses).... 1.73 5.56 0.61 (1.41)
------- ------- ------- -------
Total From Investment
Operations ......................... 1.58 5.56 0.31 (1.45)
------- ------- ------- -------
Dividends and Distributions
Distributions from Realized Gains............. - (5.65) (1.03) (1.68)
------- ------- ------- -------
Total Distributions - (5.65) (1.03) (1.68)
------- ------- ------- -------
Net Asset Value, End of Period..................... $ 23.20 $ 21.62 $ 21.71 $ 22.43
======= ======= ======= =======
Total Return(1) ................................... 7.31% 30.32% 1.48% (5.66)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)...... $ 8,339 $ 5,041 $ 3,644 $ 2,585
Ratio of Expenses to Average Net Assets....... 2.19%* 2.34%(2) 2.27% 2.19%*
Ratio of Net Investment Loss to
Average Net Assets ..................... (1.56)%* (1.54)% (1.33)% (1.51)%*
Portfolio Turnover Rate(3).................... 31.65% 100.30% 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 2.33% for 1999.
(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 GROWTH OPPORTUNITY FUND
================================================================================
The following financial information represents selected data for each
share of capital stock outstanding throughout each period:
CLASS Y
<TABLE>
<CAPTION>
AUGUST 15, 1997
(INCEPTION
SIX MONTHS OF CLASS)
ENDED YEAR ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ----------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 22.31 $ 21.96 $ 22.52 $ 27.19
------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Loss........................... (0.01) - (0.14) -
Net Realized and Unrealized Gains (Losses).... 1.79 6.00 0.61 (2.99)
------- ------- ------- -------
Total From Investment
Operations 1.78 6.00 0.47 (2.99)
------- ------- ------- -------
Dividends and Distributions
Distributions from Realized Gains............. - (5.65) (1.03) (1.68)
------- ------- ------- -------
Total Distributions - (5.65) (1.03) (1.68)
------- ------- ------- -------
Net Asset Value, End of Period..................... $ 24.09 $ 22.31 $ 21.96 $ 22.52
======= ======= ======= =======
Total Return(1) .................................. 7.98% 32.16% 2.18% (10.98)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)...... $ 3,973 $ 5 $ 73 $ 94
Ratio of Expenses to Average Net Assets....... 0.96%* 1.06%(2) 1.33%(2) 1.01%*
Ratio of Net Investment Loss to
Average Net Assets (0.33)%* (0.26)% (0.38)% (0.33)%*
Portfolio Turnover Rate(3).................... 100.30% 31.65% 19.33% 18.03%
</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 1.05% and 1.32% for 1999 and 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
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:
CLASS A
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 5.38 $ 5.90 $ 5.87 $ 5.76 $ 6.00 $ 5.79
------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income ....................... 0.14 0.28 0.29 0.33 0.33 0.39
Net Realized and Unrealized Gains (Losses) ... (0.01) (0.48) 0.07 0.11 (0.14) 0.27
------- ------- ------- ------- ------- -------
Total From Investment Operations ........ 0.13 (0.20) 0.36 0.44 0.19 0.66
------- ------- ------- ------- ------- -------
Dividends and Distributions
Net Investment Income ........................ (0.14) (0.28) (0.29) (0.33) (0.33) (0.36)
Return of Capital ............................ - (0.04) (0.04) - (0.10) (0.09)
------- ------- ------- ------- ------- -------
Total Dividend and Distributions ........ (0.14) (0.32) (0.33) (0.33) (0.43) (0.45)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .................... $ 5.37 $ 5.38 $ 5.90 $ 5.87 $ 5.76 $ 6.00
======= ======= ======= ======= ======= =======
Total Return(1) ................................... 2.54% (3.47)% 6.31% 7.92% 3.40% 11.82%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ..... $14,741 $18,002 $21,285 $17,589 $18,129 $21,485
Ratio of Expenses to Average Net Assets ...... 1.17%* 1.20% 1.43% 1.27%(2) 1.77% 1.74%
Ratio of Net Investment
Income to Average Net Assets ............ 5.32%* 5.07% 4.87% 5.82% 5.88% 6.54%
Portfolio Turnover Rate(3) ................... 87.59% 150.54% 18.40% 24.35% 45.50% 41.04%
</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 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
54
<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 YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 5.37 $ 5.88 $ 5.86 $ 5.75 $ 5.98 $ 5.79
------- ------- ------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income ....................... 0.11 0.24 0.27 0.29 0.29 0.34
Net Realized and Unrealized Gains (Losses) ... -(4) (0.48) 0.04 0.11 (0.13) 0.26
------- ------- ------- ------- ------- -------
Total From Investment Operations ........ 0.11 (0.24) 0.31 0.40 0.16 0.60
------- ------- ------- ------- ------- -------
Dividends and Distributions
Net Investment Income ........................ (0.12) (0.23) (0.27) (0.29) (0.29) (0.33)
Return of Capital ............................ - (0.04) (0.02) - (0.10) (0.08)
------- ------- ------- ------- ------- -------
Total Dividend and Distributions ........ (0.12) (0.27) (0.29) (0.29) (0.39) (0.41)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .................... $ 5.36 $ 5.37 $ 5.88 $ 5.86 $ 5.75 $ 5.98
======= ======= ======= ======= ======= =======
Total Return(1) ................................... 2.16% (4.12)% 5.38% 7.12% 2.78% 10.62%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ..... $17,943 $28,344 $36,005 $12,703 $12,959 $15,976
Ratio of Expenses to Average Net Assets ..... 1.95%* 1.95% 2.18%(2) 2.01%(2) 2.53%(2) 2.51%
Ratio of Net Investment Income
to Average Net Assets ................... 4.54%* 4.32% 4.13% 5.07% 5.13% 5.77%
Portfolio Turnover Rate(3) ................... 87.59% 150.54% 18.40% 24.35% 45.50% 41.04%
</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 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.
(4) Less than $0.005 per share.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
55
<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 C
<TABLE>
<CAPTION>
AUGUST 19, 1997
(INCEPTION
SIX MONTHS OF CLASS)
ENDED YEAR ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ----------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 5.39 $ 5.90 $ 5.88 $ 5.79
------ ------ ------ ------
Income (Loss) From Investment Operations
Net Investment Income ....................... 0.11 0.23 0.27 0.08
Net Realized and Unrealized Gains (Losses).... -(4) (0.47) 0.04 0.09
------ ------ ------ ------
Total From Investment Operations ........ 0.11 (0.24) 0.31 0.17
------ ------ ------ ------
Dividends and Distributions
Net Investment Income ........................ (0.12) (0.23) (0.27) (0.08)
Return of Capital ............................ - (0.04) (0.02) -
------ ------ ------ ------
Total Dividend and Distributions ........ (0.12) (0.27) (0.29) (0.08)
------ ------ ------ ------
Net Asset Value, End of Period .................... $ 5.38 $ 5.39 $ 5.90 $ 5.88
====== ====== ====== ======
Total Return(1) ................................... 2.15% (4.15)% 5.42% 2.97%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ..... $2,727 $4,791 $8,178 $ 215
Ratio of Expenses to Average Net Assets ...... 1.97%* 1.96% 2.18% 1.97%*(2)
Ratio of Net Investment Income to
Average Net Assets ...................... 4.52%* 4.31% 4.12% 5.11%*
Portfolio Turnover Rate(3) ................... 87.59% 150.54% 18.40% 24.35%
</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) Less than $0.005 per share.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
56
<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 Y
<TABLE>
<CAPTION>
SEPTEMBER 1, 1998
(INCEPTION
SIX MONTHS YEAR OF CLASS)
ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999(3) 1998
------ ------ ------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 5.42 $ 5.92 $ 5.92
------ ------ ------
Income (Loss) From Investment Operations
Net Investment Income........................ 0.16 0.24 0.07
Net Realized and Unrealized Gains (Losses).... (0.02) (0.40) 0.02
------ ------ ------
Total From Investment Operations......... 0.14 (0.16) 0.09
------ ------ ------
Dividends and Distributions
Net Investment Income......................... (0.15) (0.30) (0.07)
Return of Capital............................. - (0.04) (0.02)
------ ------ ------
Total Dividend and Distributions......... (0.15) (0.34) (0.09)
------ ------ ------
Net Asset Value, End of Period..................... $ 5.41 $ 5.42 $ 5.92
====== ====== ======
Total Return(1).................................... 2.69% (2.73)% 1.59%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)...... $ 48 $ 17 $ 352
Ratio of Expenses to Average Net Assets....... 0.92%* 0.92% 1.05%*
Ratio of Net Investment Income to
Average Net Assets....................... 5.57%* 5.35% 5.25%*
Portfolio Turnover Rate(2).................... 87.59% 150.54% 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) 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.
(3) Per share calculations other than distributions were based on average
shares outstanding for the period.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
57
<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, 2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<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 ......................... .027 .044 .048 .049 .047 .051
Dividends
Net Investment Income ......................... (.027) (.044) (.048) (.049) (.047) (.051)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period .................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return(1) ................................... 2.76% 4.51% 4.94% 5.02% 4.80% 5.25%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ..... $561,118 $553,977 $514,474 $464,459 $411,416 $360,290
Ratio of Expenses to Average Net Assets ..... 0.60%* 0.61% 0.61% 0.57% 0.66% 0.73%
Ratio of Net Investment Income to
Average Net Assets ....................... 5.51%* 4.52% 4.84% 4.92% 4.72% 5.13%
</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
58
<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 YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 29.07 $ 29.32 $ 25.68 $ 18.06 $ 14.50 $ 10.68
-------- -------- -------- -------- -------- -------
Income (Loss) From Investment Operations
Net Investment Income......................... (0.02) 0.11 0.09 0.13 0.14 0.07
Net Realized and Unrealized Gains (Losses).... 2.17 (0.36) 3.55 7.92 4.44 5.32
-------- -------- -------- -------- -------- -------
Total From Investment Operations......... 2.15 (0.25) 3.64 8.05 4.58 5.39
-------- -------- -------- -------- -------- -------
Dividends and Distributions
Net Investment Income......................... - - - (0.13) (0.15) (0.07)
Distributions from Realized Gains............. - - - (0.30) (0.87) (1.50)
-------- -------- -------- -------- -------- -------
Total Dividend and Distributions ........ - - - (0.43) (1.02) (1.57)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of Period..................... $ 31.22 $ 29.07 $ 29.32 $ 25.68 $ 18.06 $ 14.50
======== ======== ======== ======== ======== =======
Total Return (1)................................... 7.40% (0.85)% 14.17% 44.53% 31.50% 50.51%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)...... $443,766 $425,584 $460,799 $292,059 $107,579 $79,874
Ratio of Expenses to Average Net Assets....... 1.08%* 1.04% 1.07%(2) 1.07% 1.15% 1.18%
Ratio of Net Investment Income
to Average Net Assets................ (0.14)%* 0.36% 0.34% 0.77% 0.92% 0.53%
Portfolio Turnover Rate(3).................... 17.47% 17.55% 11.37% 6.23% 25.78% 41.89%
</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 1.06% 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
59
<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>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 -------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 28.22 $ 28.71 $ 25.36 $ 17.91 $ 14.41 $ 10.68
-------- -------- -------- -------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income (Loss) ................. (0.15) (0.16) (0.12) (0.01) 0.01 0.01
Net Realized and Unrealized Gains (Losses) ... 2.11 (0.33) 3.47 7.76 4.37 5.22
-------- -------- -------- -------- ------- -------
Total From Investment Operations ........ 1.96 (0.49) 3.35 7.75 4.38 5.23
-------- -------- -------- -------- ------- -------
Dividends and Distributions
Net Investment Income ........................ - - - - (0.01) -
Distributions from Realized Gains ............ - - - (0.30) (0.87) (1.50)
-------- -------- -------- -------- ------- -------
Total Dividend and Distributions ........ - - - (0.30) (0.88) (1.50)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of Period .................... $ 30.18 $ 28.22 $ 28.71 $ 25.36 $ 17.91 $ 14.41
======== ======== ======== ======== ======= =======
Total Return (1) .................................. 6.95% (1.71)% 13.21% 43.25% 30.29% 49.00%
Ratios/Supplemental Data
Net Assets, End of Period(000 omitted) ...... $342,859 $376,541 $419,145 $193,257 $ 8,213 $ 1,762
Ratio of Expenses to Average Net Assets ...... 1.97%* 1.90% 1.93%(2) 1.97% 2.04% 2.09%
Ratio of Net Investment Income
(Loss) to Average Net Assets ............ (1.03)%* (0.50)% (0.52)% (0.12)% 0.19% (0.38)%
Portfolio Turnover Rate(3) ................... 17.47% 17.55% 11.37% 6.23% 25.78% 41.89%
</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 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
60
<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 C
<TABLE>
<CAPTION>
AUGUST 12, 1997
(INCEPTION
SIX MONTHS OF CLASS)
ENDED YEAR ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ----------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 28.63 $ 29.12 $ 25.71 $ 23.76
------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income (Loss).................. (0.15) (0.15) (0.10) -
Net Realized and Unrealized Gains (Losses)... 2.14 (0.34) 3.51 2.25
------- ------- ------- -------
Total From Investment Operations......... 1.99 (0.49) 3.41 2.25
------- ------- ------- -------
Dividends and Distributions
Distributions from Realized Gains............. - - - (0.30)
------- ------- ------- -------
Total Dividend and Distributions ........ - - - (0.30)
------- ------- ------- -------
Net Asset Value, End of Period..................... $ 30.62 $ 28.63 $ 29.12 $ 25.71
======= ======= ======= =======
Total Return (1)................................... 6.95% (1.68)% 13.26% 9.45%
Ratios/Supplemental Data
Net Assets, End of Period(000 omitted)....... $89,026 $89,128 $92,513 $19,515
Ratio of Expenses to Average Net Assets....... 1.96%* 1.89% 1.91% 1.93%*
Ratio of Net Investment Income
(Loss) to Average Net Assets............. (1.02)%* (0.49)% (0.51)% (0.09)%*
Portfolio Turnover Rate(2).................... 17.47% 17.55% 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) 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 FINANCIAL FUND
================================================================================
The following financial information for each respective fund represents selected
data for each share of capital stock outstanding throughout each period.
CLASS Y
<TABLE>
<CAPTION>
MARCH 10, 1999
(INCEPTION
SIX MONTHS OF CLASS)
ENDED YEAR ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ----------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 29.21 $ 29.40 $ 25.66 $ 20.32
------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income (Loss).................. -(4) 0.20 0.14 0.09
Net Realized and Unrealized Gains (Losses).... 2.19 (0.39) 3.60 5.74
------- ------- ------- -------
Total From Investment Operations......... 2.19 (0.19) 3.74 5.83
------- ------- ------- -------
Dividends and Distributions
Net Investment Income......................... - - - (0.19)
Distributions from Realized Gains............. - - - (0.30)
------- ------- ------- -------
Total Dividend and Distributions ........ - - - (0.49)
------- ------- ------- -------
Net Asset Value, End of Period..................... $ 31.40 $ 29.21 $ 29.40 $ 25.66
======= ======= ======= =======
Total Return (1)................................... 7.50% (0.65)% 14.58% 28.66%
Ratios/Supplemental Data
Net Assets, End of Period(000 omitted)....... $11,010 $ 8,260 $10,453 $ 3,805
Ratio of Expenses to Average Net Assets....... 0.92%* 0.86% 0.83%(2) 0.79%*
Ratio of Net Investment Income
(Loss) to Average Net Assets............. 0.02%* 0.54% 0.58% 1.06%*
Portfolio Turnover Rate(3).................... 17.47%* 17.55% 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 0.82% 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.
(4) Less than $0.005 per share.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
62
<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 YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 -----------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 25.21 $ 23.76 $ 25.26 $ 21.22 $ 18.22 $ 15.57
-------- -------- -------- ------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income .................... 0.40 0.77 0.77 0.67 0.71 0.67
Net Realized and Unrealized Gains (Losses) 1.54 2.22 (1.23) 5.33 4.56 3.42
-------- -------- -------- ------- ------- -------
Total From Investment Operations ...... 1.94 2.99 (0.46) 6.00 5.27 4.09
-------- -------- -------- ------- ------- -------
Dividends and Distributions
Net Investment Income .................... (0.20) (0.76) (0.76) (0.67) (0.69) (0.66)
Distributions from Realized Gains ........ -- (0.77) (0.27) (1.22) (1.54) (0.78)
Return of Capital ........................ -- (0.01) (0.01) (0.07) (0.04) --
-------- -------- -------- ------- ------- -------
Total Dividend and Distributions ...... (0.20) (1.54) (1.04) (1.96) (2.27) (1.44)
-------- -------- -------- ------- ------- -------
Net Asset Value, End of Period ............. $ 26.95 $ 25.21 $ 23.76 $ 25.26 $ 21.22 $ 18.22
======== ======== ======== ======= ======= =======
Total Return(1) ............................ 7.70% 12.97% (1.79)% 28.68% 29.46% 26.68%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) . $113,429 $117,308 $132,856 $90,107 $42,841 $59,757
Ratio of Expenses to Average Net Assets .. 21.08%* 21.12% 1.16%(2) 1.08%(2) 21.05% 21.14%
Ratio of Net Investment Income
to Average Net Assets ................. 3.00%* 2.99% 3.27% 3.00% 3.34% 3.87%
Portfolio Turnover Rate(3)................ 10.80% 32.99% 14.43% 23.68% 43.16% 53.58%
</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
63
<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 DECEMBER 31, THROUGH
JUNE 30, 2000 -------------------------------------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .......... $ 24.98 $23.55 $25.03 $21.05 $18.14 $15.95
------ ------ ------ ------ ------ ------
Income (Loss) From Investment
Operations
Net Investment Income ........ 0.27 0.53 0.56 0.44 0.59 0.54
Net Realized and Unrealized
Gains (Losses) ............. 1.53 2.22 (1.22) 5.26 4.45 2.97
------ ------ ------ ------ ------ ------
Total From Investment
Operations ............. 1.80 2.75 (0.66) 5.70 5.04 3.51
------ ------ ------ ------ ------ ------
Dividends and Distributions
Net Investment Income ....... (0.14) (0.54) (0.54) (0.44) (0.56) (0.54)
Distributions from
Realized Gains ............. -- (0.77) (0.27) (1.22) (1.54) (0.78)
Return of Capital ........... -- (0.01) (0.01) (0.06) (0.03) --
------ ------ ------ ------ ------ ------
Total Dividend and
Distributions ............ (0.14) (1.32) (0.82) (1.72) (2.13) (1.32)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period . $26.64 $24.98 $23.55 $25.03 $21.05 $18.14
====== ====== ====== ====== ====== ======
Total Return(1)................. 7.21% 12.01% (2.62)% 27.35% 28.21% 25.31%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) .............. $83,890 $86,623 $90,827 $35,536 $2,075 $378
Ratio of Expenses to
Average Net Assets ......... 22.02%* 22.01% 2.04%(2) 2.11%(2) 2.01%(2) 2.01%*
Ratio of Net Investment Income
to Average Net Assets ..... 2.06%* 2.10% 2.39% 2.09% 2.40% 3.00%*
Portfolio Turnover Rate(3).... 10.80% 32.99% 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
64
<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
YEAR (INCEPTION
SIX MONTHS ENDED OF CLASS)
ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 --------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997
----------- ------ ------ ------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ................. $ 25.31 $ 23.86 $ 25.36 $24.91
------- ------- ------- ------
Income (Loss) From Investment
Operations
Net Investment Income ............... 0.28 0.55 0.59 0.11
Net Realized and Unrealized
Gains (Losses) .................... 1.56 2.23 (1.26) 1.72
------- ------- ------- ------
Total From Investment operations 1.84 2.78 (0.67) 1.83
------- ------- ------- ------
Dividends and Distributions
Net Investment Income .............. (0.15) (0.55) (0.55) (0.11)
Distributions from Realized Gains ... -- (0.77) (0.27) (1.22)
Return of Capital .................. -- (0.01) (0.01) (0.05)
------- ------- ------- ------
Total Dividend and Distributions (0.15) (1.33) (0.83) (1.38)
------- ------- ------- ------
Net Asset Value, End of Period ........ $ 27.00 $ 25.31 $ 23.86 $25.36
======= ======= ======= ======
Total Return(1)........................ 7.25% 11.98% (2.61)% 7.38%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ..................... $18,452 $18,936 $26,406 $6,296
Ratio of Expenses to
Average Net Assets ................ 2.02%* 2.01% 2.03%(2) 2.08%*(2)
Ratio of Net Investment Income
to Average Net Assets ............ 2.06%* 2.10% 2.40% 2.01%*
Portfolio Turnover Rate(3)........... 10.80% 32.99% 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 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
65
<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 YEAR ENDED OF CLASS)
ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ------------------------------------ DECEMBER 31
(UNAUDITED) 1999 1998 1997 1996
----------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ............. $ 25.29 $ 23.84 $ 25.34 $ 21.29 $ 21.39
------- ------- ------- ------- -------
Income (Loss) From Investment
Operations
Net Investment Income ........... 0.42 0.82 0.89 0.69 0.07
Net Realized and Unrealized
Gains (Losses) ................ 1.57 2.25 (1.27) 5.35 1.44
------- ------- ------- ------- -------
Total From Investment
Operations ................ 1.99 3.07 (0.38) 6.04 1.51
------- ------- ------- ------- -------
Dividends and Distributions
Net Investment Income .......... (0.22) (0.84) (0.85) (0.69) (0.06)
Distributions from Realized Gains -- (0.77) (0.27) (1.22) (1.54)
Return of Capital .............. -- (0.01) -- (0.08) (0.01)
------- ------- ------- ------- -------
Total Dividend and
Distributions ............. (0.22) (1.62) (1.12) (1.99) (1.61)
------- ------- ------- ------- -------
Net Asset Value, End of Period .... $ 27.06 $ 25.29 $ 23.84 $ 25.34 $ 21.29
======= ======= ======= ======= =======
Total Return(1).................... 7.87% 13.30% (1.46)% 28.80% 7.01%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ................. $36,220 $33,221 $30,536 $36,543 $33,006
Ratio of Expenses to
Average Net Assets ............ 20.88%* 20.87% 0.86%(2) 20.95%(2) 0.98%*
Ratio of Net Investment Income
to Average Net Assets ........ 3.20%* 3.24% 3.57% 3.09% 3.11%*
Portfolio Turnover Rate(3)....... 10.80% 32.99% 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
66
<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>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996(1) 1995
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $ 18.27 $ 20.73 $ 25.41 $ 21.24 $ 16.44 $ 14.72
-------- -------- -------- -------- ------- -------
Income (Loss) From Investment Operations
Net Investment Income .................. 0.42 0.78 0.74 0.74 0.71 0.82
Net Realized and Unrealized Gains
(Losses) ............................. 1.90 (2.32) (4.65) 4.51 5.22 1.71
-------- -------- -------- -------- ------- -------
Total From Investment Operations .. 2.32 (1.54) (3.91) 5.25 5.93 2.53
-------- -------- -------- -------- ------- -------
Dividends and Distributions
Net Investment Income .................. (0.20) (0.78) (0.74) (0.74) (0.70) (0.81)
Distributions from Realized Gains ...... -- -- -- (0.27) (0.25) --
Return of Capital ...................... -- (0.14) (0.03) (0.07) (0.18) --
-------- -------- -------- -------- ------- -------
Total Dividends and Distributions .. (0.20) (0.92) (0.77) (1.08) (1.13) (0.81)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of Period ........... $ 20.39 $ 18.27 $ 20.73 $ 25.41 $ 21.24 $ 16.44
======== ======== ======== ======== ======= =======
Total Return(2) .......................... 12.82% (7.55)% (15.56)% 25.08% 37.05% 17.70%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $156,897 $147,835 $198,328 $147,488 $32,507 $29,320
Ratio of Expenses to Average Net
Assets ............................... 1.18%* 1.21% 1.21% 1.18% 1.32%(3) 1.43%
Ratio of Net Investment Income to
Average Net Assets ................... 4.48%* 3.82% 3.40% 3.40% 3.95% 5.44%
Portfolio Turnover Rate(4) ............. 10.98% 52.22% 19.14% 12.50% 18.60% 38.82%
</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, 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 1.31% for the year ended 1996. 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
67
<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>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 ------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996(1) 1995
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $ 18.21 $ 20.67 $ 25.32 $ 21.19 $ 16.41 $14.72
------- ------- -------- -------- ------- ------
Income (Loss) From Investment Operations
Net Investment Income .................. 0.35 0.61 0.56 0.54 0.56 0.68
Net Realized and Unrealized Gains
(Losses) ........................... 1.88 (2.32) (4.63) 4.47 5.21 1.70
------- ------- -------- -------- ------- ------
Total From Investment Operations .. 2.23 (1.71) (4.07) 5.01 5.77 2.38
------- ------- -------- -------- ------- ------
Dividends and Distributions
Net Investment Income .................. (0.16) (0.61) (0.56) (0.54) (0.63) (0.69)
Distributions from Realized Gains ...... -- -- -- (0.27) (0.25) --
Return of Capital ...................... -- (0.14) (0.02) (0.07) (0.11) --
------- ------- -------- -------- ------- ------
Total Dividend and Distributions ... (0.16) (0.75) (0.58) (0.88) (0.99) (0.69)
------- ------- -------- -------- ------- ------
Net Asset Value, End of Period ........... $ 20.28 $ 18.21 $ 20.67 $ 25.32 $ 21.19 $16.41
======= ======= ======== ======== ======= ======
Total Return(2)........................... 12.36% (8.37)% (16.21)% 23.88% 35.99% 16.59%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $85,731 $93,585 $143,993 $114,283 $10,919 $414
Ratio of Expenses to Average Net Assets 2.15%*(3) 2.06% 2.02% 2.04% 2.22% 2.39%
Ratio of Net Investment Income to
Average Net Assets .................. 3.52%* 2.97% 2.59% 2.60% 3.46% 4.48%
Portfolio Turnover Rate(4).............. 10.98% 52.22% 19.14% 12.50% 18.60% 38.82%
</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, 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 2.14% for the six months ended June
30, 2000. 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
68
<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 ENDED OF CLASS)
ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 --------------------- DECEMBER 31,
(UNAUDITED) 1999 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 18.34 $ 20.81 $ 25.49 $23.41
------- ------- ------- ------
Income (Loss) From Investment Operations
Net Investment Income ................................ 0.34 0.61 0.53 0.18
Net Realized and Unrealized Gains (Losses) ......... 1.91 (2.33) (4.62) 2.42
------- ------- ------- ------
Total From Investment Operations ................ 2.25 (1.72) (4.09) 2.60
------- ------- ------- ------
Dividends and Distributions
Net Investment Income ................................ (0.16) (0.61) (0.53) (0.18)
Distributions from Realized Gains .................... -- -- -- (0.27)
Return of Capital .................................... -- (0.14) (0.06) (0.07)
------- ------- ------- ------
Total Dividend and Distributions ................. (0.16) (0.75) (0.59) (0.52)
------- ------- ------- ------
Net Asset Value, End of Period ......................... $ 20.43 $ 18.34 $ 20.81 $25.49
======= ======= ======= ======
Total Return1 .......................................... 12.38% (8.34)% (16.20)% 11.12%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ............. $30,756 $29,952 $34,336 $8,322
Ratio of Expenses to Average Net Assets .............. 2.06%* 2.01% 2.02% 2.03%*
Ratio of Net Investment Income to Average Net Assets . 3.60%* 3.02% 2.59% 2.56%*
Portfolio Turnover Rate(2)............................ 10.98% 52.22% 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
69
<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 Y
<TABLE>
<CAPTION>
NOVEMBER 8, 1996
(INCEPTION
SIX MONTHS YEAR ENDED OF CLASS)
ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ------------------------------------ DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996
----------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $18.38 $20.86 $25.56 $21.37 $19.29
------ ------ ------ ------ ------
Income (Loss) From Investment Operations
Net Investment Income ..................... 0.46 0.80 0.83 0.79 0.13
Net Realized and Unrealized Gains (Losses) 1.91 (2.28) (4.67) 4.54 2.35
------ ------ ------ ------ ------
Total From Investment Operations ....... 2.37 (1.48) (3.84) 5.33 2.48
------ ------ ------ ------ ------
Dividends and Distributions
Net Investment Income ..................... (0.22) (0.86) (0.83) (0.79) (0.13)
Distributions from Realized Gains ......... -- -- -- (0.27) (0.25)
Return of Capital ......................... -- (0.14) (0.03) (0.08) (0.02)
------ ------ ------ ------ ------
Total Dividends and Distributions ....... (0.22) (1.00) (0.86) (1.14) (0.40)
------ ------ ------ ------ ------
Net Asset Value, End of Period .............. $20.53 $18.38 $20.86 $25.56 $21.37
====== ====== ====== ====== ======
Total Return(1).............................. 13.02% (7.21)% (15.20)% 25.29% 12.89%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) .. $39,342 $43,136 $37,054 $27,147 $18,165
Ratio of Expenses to Average Net Assets ... 0.91%*(2) 0.85% 0.83%(2) 1.00% 1.18%*
Ratio of Net Investment Income to Average
Net Assets ............................. 4.76%* 4.18% 3.79% 3.47% 4.22%*
Portfolio Turnover Rate(3)................. 10.98% 52.22% 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 0.90% and 0.82% for the six months
ended June 30, 2000 and for 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
70
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Tucson, Arizona 85706
================================================================================
DIRECTORS OFFICERS
Jeremy H. Biggs Jeremy H. Biggs
Wesley E. Bass, Jr. Chairman
Marc P. Blum Christopher C. Davis
Andrew A. Davis President - Davis Growth Opportunity
Christopher C. Davis Fund, Davis Financial Fund & Vice
Jerry D. Geist President - Davis Government Bond
D. James Guzy Fund, Davis Government Money
G. Bernard Hamilton Market Fund, Davis Convertible
Laurence W. Levine Securities Fund & Davis Real Estate Fund
Christian R. Sonne Andrew A. Davis
Marsha Williams President - Davis Convertible Securities,
Davis Real Estate Fund & Vice
President - Davis Growth Opportunity
Fund, Davis Government Bond Fund, Davis
Government Money Market Fund, Davis
Financial Fund
Creston A. King
President - Davis Government Money
Market Fund & Davis Government Bond
Fund
Kenneth C. Eich
Vice President
Sharra L. Reed
Vice President,
Treasurer &
Assistant Secretary
Thomas D. Tays
Vice President & Secretary
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
(800) 279-0279
DISTRIBUTOR
Davis Distributors, LLC
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
TRANSFER AGENT & CUSTODIAN
State Street Bank and Trust Company
c/o The Davis Funds
P.O. Box 8406
Boston, Massachusetts 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, Colorado 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.
71
<PAGE>
Davis Selected Advisers, L.P.
2949 East Elvira Road
Tucson, Arizona 85706
1-800-279-0279
[DAVIS FUNDS LOGO]
