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ANNUAL REPORT
DECEMBER 31, 1999
DAVIS GROWTH OPPORTUNITY FUND
DAVIS FINANCIAL FUND
DAVIS REAL ESTATE FUND
DAVIS CONVERTIBLE SECURITIES FUND
DAVIS GOVERNMENT BOND FUND
DAVIS GOVERNMENT MONEY MARKET FUND
(part of Davis Series Inc.)
DAVIS FUNDS
OVER 25 YEARS OF RELIABLE INVESTING
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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Dear Fellow Shareholder:
As we enter the new millennium, we must recognize that the market has come a
long way and is starting from a high base. We are unlikely to continue enjoying
the twin benefits of steeply falling interest rates and rising corporate profits
as a percentage of gross domestic product that propelled stock prices and
price/earnings ratios sharply higher in the last two decades or so of the 20th
century. Corporate profits have been inflated by various accounting practices.
In addition, while the Internet holds great possibilities for many businesses,
it is disrupting profitability for others.
Throughout modern times, we have seen the development of different networks that
linked people and businesses together and changed history. Examples include the
railroad, automobile/highway, electricity, air travel and telephone networks.
Today, the Internet is transforming the world through an electronic network that
transmits video, voice and data at ever-increasing speeds and ever-reducing
costs.
For many companies, the "net net" conclusion is that they must convert their
businesses to e-businesses or they will have no business. As a result, the
Internet revolution, like other revolutions before it, has spawned enormous
investment spending--creating a high degree of optimism and speculation, perhaps
even a financial bubble. Yet this speculation has also facilitated the raising
of low-cost capital and given the United States a first-mover advantage in
developing the Internet and driving it forward.
A recession or high interest rates would reduce the availability of capital and
spending on the Internet. We think policymakers have been willing to live with
some froth in the market because they believe the good of the Internet outweighs
the bad. The Internet should have a huge positive impact on productivity and
cost structures, and maintaining our leadership position is worth the risk of
not taking actions that could lead to recession. Continued investment in the
Internet is necessary for the good of the country and our competitive health.
At the same time, many business models will have to change and there definitely
will be losers as well as winners, as there have always been with any
technological advance. For example, as more business is done directly via the
Internet, middleman industries like distributors are particularly vulnerable.
Many established companies are going to have to provide greater value-added with
their services or their customers will turn to the Internet. The impact of these
businesses modernizing and taking restructuring charges will not necessarily be
bullish for corporate profits in the early stages.
Moreover, it is impossible to predict which of the new dot.com companies will
thrive or even survive over time. When you look at other industries that
transformed the country like autos and airplanes, you see that most of the
pioneering companies in those industries are no longer in business today.
We think we may be closing another chapter in the market's history and facing a
future that does not hold as many favorable macro factors. The Internet is both
a driver and a destroyer. Companies old and new are caught up in a Darwinian
struggle, trying to anticipate which business models will work and which will
not work. Hopefully, this will be a process of creative destruction and the
economy overall will emerge the better for it. But struggles are not necessarily
good for corporate profits, and we don't think it will be as easy--if, indeed,
it has ever been easy--to make money in stocks. As a result, stock selection
will be more crucial than ever.
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
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Because we are in a time of ferment and change, we think a premium will be paid
for company managements that "get it" and invest their shareholders' money
correctly to position the company for the future. In addition, with the U.S.
market unlikely to enjoy the big tailwind of expanding P/E ratios that it did
over the past 15 or 20 years, we think having a global perspective may be
increasingly important. Multinational companies have an advantage in that they
can allocate their capital around the world to areas where GDP growth is
expected to be the fastest.
Some foreign economies such as Germany and Japan appear to be behind us in their
evolution, and they may offer greater opportunities as more and more of their
businesses streamline and restructure. On the other hand, the United States is a
moving target, and it will not be easy for other countries to catch us because
we are driving our Internet development so rapidly.
If the Dow were to increase at the same pace over the next two decades as it did
over the past two, it would stand at roughly 100,000 in 2020. We are certain
that will not happen. However, if the Dow were to compound at a rate of 7% or 8%
a year, it could reach 40,000 or 50,000 over that time frame--meaning the market
still offers considerable opportunities for long-term wealth building.(1) As
always, we will focus on buying growing companies at reasonable prices that are
led by management teams who respond dynamically to change. We are on a long
voyage with our shareholders and our money is invested shoulder-to-shoulder with
theirs. We are not overly optimistic. We are not pessimistic. We are trying to
be realistic.
Sincerely,
/s/ Shelby M.C. Davis
- -----------------------
Shelby M.C. Davis
Senior Research Adviser
February 4, 2000
2
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS FINANCIAL FUND
PERFORMANCE OVERVIEW
o The Davis Financial Fund (Class A shares at net asset value) declined .85%
for the one-year period ended December 31, 1999.(2) Over the same time
frame, the 65 funds included in Lipper Analytical Services' Financial
Services Funds category declined 1.04%(3) while the Standard & Poor's 500
Index registered a gain of 21.04%.(4)
o The Fund's Class A shares delivered an average annual total return on net
asset value of 17.83% for the latest three-year period, 26.47% for the
latest five-year period and 22.48% since the Fund's inception on May 1,
1991.
o According to The Value Line Mutual Fund Survey in a report dated November
23, 1999, "Over the long term, the fund has produced exceptional returns
versus those of the Financial objective group, while incurring an average
level of volatility. Investors seeking to add financial-services exposure
to a diversified portfolio will find the offering highly appealing."
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND KENNETH CHARLES FEINBERG, PORTFOLIO
MANAGERS
Q. Could you recap the performance of the Fund and financial stocks in general
during 1999?
A. The year 1999 was a difficult year for financial stocks. Our Fund was down
1%, clearly disappointing when compared to the 21% increase in the S&P 500. As a
sector fund with over 80% of assets invested in financial stocks, Chris and I
realize, and hope our shareholders do too, that there will be years when the
Fund's performance diverges significantly from that of the overall market.
The primary reason for the underperformance of financial stocks in 1999 was a
restrictive Federal Reserve that raised short-term interest rates three times by
a total of 75 basis points. Historically, financial stocks perform poorly during
periods of rising interest rates, particularly when investors sense that the
Federal Reserve is serious about slowing down the economy to keep inflation
under control. The fact that most institutional investors are judged on
short-term performance encourages many investment firms to sell some of their
holdings of financial stocks and wait for clearer signs that the central bank
has adopted a more favorable bias toward interest rates. Given the growing trend
toward momentum investing in the current go-go market, it is not particularly
surprising that fewer investors have the fortitude to be early in increasing
their positions in financial stocks.
Another trend hurting the performance of the group was the gradual realization
among investors that the best of times may already be over for several financial
sectors that have benefited from favorable macroeconomic tailwinds that have
either peaked or begun to reverse. For instance, the earnings of many banks have
benefited from very benign credit loss experience, particularly in commercial
loans, given the nine-year economic expansion that we have all enjoyed.
Moreover, until recently, a number of banks actually had considerable recoveries
on previously charged-off loans from the traumatic early 1990's that boosted
reported earnings for years, but that have now been largely exploited. Rising
interest rates have also erased most of the embedded unrealized gains in banks'
large bond portfolios, which has eroded management's flexibility to meet
analysts' earnings expectations.
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
Perhaps most devastating to the performance of banks in 1999 was the realization
that the majority of the exciting mega-mergers that made headlines during the
past few years were not living up to expectations and not producing the expense
savings or revenue synergies promised by overly optimistic managements. These
merged banks have consistently missed their earnings targets, which has
undermined investor confidence and reduced price/earnings multiples for the
entire sector with few exceptions. Many of these stocks have fallen almost 50%
from their 1999 highs.
Similarly, investors in property-casualty stocks experienced continued
disappointments throughout the year as the decade-long soft-pricing environment
in commercial-lines insurance took its inevitable toll on reported earnings.
Insurance companies, which had for several years been able to offset part of
their commercial-lines losses with favorable loss reserve development on their
personal-lines business, suddenly saw this well run dry as brutal competition
forced personal-lines rates down just at the time that claims-cost inflation
trends reversed direction and began to accelerate. Pure-play personal-lines
companies that had been good stocks for the past few years were particularly
punished, with quality companies such as Allstate and Progressive falling 35%
and 57%, respectively, during the year. Managements are now in the process of
re-underwriting their underpriced risks but investor confidence in this sector
may take time to rebuild.
Q. What holdings were important contributors to performance?
A. One of the positive attributes of being a diversified financial services fund
is that the financial services sector includes many different sub-sectors in
which to find great companies. Our largest holding continues to be American
Express,(5) which performed extremely well rising 62% during 1999. American
Express has done a terrific job of reinvigorating its core card business with
important new product offerings that should drive profitable account growth both
in the United States and abroad. Chris and I wake up happy every day knowing
that American Express, with its strong global brand and 45 million customer
accounts, should be a prime beneficiary of the broad shift in spending that is
moving to the Internet. Neither cash nor checks but rather plastic is the
preferred payment vehicle on the Net.
Our second largest holding, Citigroup, turned in a stellar performance rising
68% during the year as the outstanding management team led by Sandy Weill and
John Reed, after an admittedly rocky start, proved to be one of the mega-mergers
that delivered favorable returns to shareholders. Citicorp is an extremely well
capitalized company with a respected brand name that can be leveraged to expand
its financial services businesses, such as asset management, consumer finance,
insurance and investment banking, and create an increasingly strong global
powerhouse. Sandy Weill continues to demonstrate that he is one the best
stewards of shareholder capital in corporate America. As part of Citigroup,
which is a partner of choice among the elite global companies in financial
services, he now has the whole world as his canvas. We are happy to be on board
with him.
The Fund also benefited from sizable positions in consumer finance companies
such as Providian and Capital One that have honed sophisticated data-mining
capabilities to profitably grow their credit card businesses in a fiercely
competitive environment. The success of these first-rate, highly focused
management teams shows how specialists in particular niches of financial
services, despite their smaller size, can gain tremendous market share at the
expense of larger, less agile players that fail to make the necessary
investments in technology required to remain competitive.
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
Q. What is your outlook for financial stocks going forward?
A. Historically, financial stocks lead the market down during the early stages
of Federal Reserve tightening, but then rally and lead the market up once
investors believe that the central bank has nearly completed its job of slowing
down the economy. So financial stocks could remain volatile until investors get
more clarity regarding the direction of inflation and interest rates. The good
news is that the current economic climate continues to be excellent with strong
growth and low inflation. Credit loss trends are generally stable reflecting the
strength of corporate balance sheets and strong discretionary income among
consumers.
Until sentiment changes, and this can happen very quickly, it could be a market
that especially rewards careful individual stock selection since the rising tide
of falling interest rates that lifted most financial companies' performance over
the past decade may not be repeated. We continue to find well managed companies
with strong balance sheets and valuable customer franchises whose business
fundamentals are actually accelerating in the current environment. Golden West
Financial and Household International are examples of outstanding companies that
fit this description and whose savvy management teams are using the businesses'
considerable free cash flow to aggressively repurchase shares at bargain prices,
thereby creating considerable value for shareholders.
Longer term, Chris and I remain extremely excited about the outlook for
carefully selected financial services companies for a variety of reasons, which
include:
o Favorable demographic trends in the United States, Europe and Asia that
should drive demand for savings and investment products worldwide;
o Accelerating deregulation of huge overseas markets that offer rich
opportunities to invest in companies with proven ability to execute in
international markets;
o Ongoing consolidation particularly now that the Glass-Steagall Act has been
replaced with less restrictive legislation that opens up greater
opportunity for cross-industry mergers;
o The emergence of powerful brand-name companies that should increasingly
take market share from both stodgy large competitors and weaker, smaller
players in these highly fragmented markets; and
o The strong excess cash flow currently generated by many companies that can
be used to enhance shareholder value through higher dividends, share
repurchases and successful acquisitions.
We believe that carefully researched, well managed financial services companies
with strong customer franchises will continue to represent outstanding
investment opportunities for shareholders.(6)
5
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DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
DAVIS GROWTH OPPORTUNITY FUND
PERFORMANCE OVERVIEW
o The Davis Growth Opportunity Fund's Class A shares delivered a total return
on net asset value of 31.45%(2) for the one-year period ended December 31,
1999, outpacing the 21.04% return of the Standard & Poor's 500 Index.(4)
o According to Morningstar, "The combination of a greater tech weighting,
more concentration, and a mid-cap focus figures to make this fund a bit
more volatile than others in the Davis family. That's part of its appeal,
however....[The members of the portfolio management team] are great
stock-pickers, so this fund's small asset base should give them the chance
to produce some fine results."(7)
AN INTERVIEW WITH CHRISTOPHER C. DAVIS, MEMBER OF THE PORTFOLIO MANAGEMENT TEAM
Q. Could you provide some perspective on the Fund's performance in 1999?
A. Our research team took over management of Davis Growth Opportunity Fund on
January 1, 1999. As we discussed last year, 1999 was a time of transition for
the Fund. Looking back over the year, we are pleased at how the transition has
progressed and now feel that this period of restructuring is largely completed.
Because of the more aggressive nature of the Fund's portfolio and its smaller
size, our research team has been able to invest in companies that may not yet be
appropriate as large holdings for our bigger, more conservative funds. As you
would expect, a fairly significant number of technology companies have been
added to this portfolio and were the most significant contributors to its good
performance in 1999. For this performance, we must particularly acknowledge the
contribution of Dwight Blazin, our analyst charged with covering this
fast-changing area. Dwight has proven that rarest of animals--an old-fashioned
analyst with his feet firmly on the ground investing successfully in this
high-flying world of the future. In particular, our opportunistic investments in
Novell, Symantec, Dallas Semiconductor and Agilent all deserve mention.(5)
While this Fund has come to have a technology bias, we continue to own small to
mid-sized growth companies in other industries that our team follows, including
the financial services sector and the health-care area.
Q. Were there Fund holdings that performed poorly last year?
A. Of course, if the Fund's positions in the companies and industries just
mentioned were our only investments, we would have far exceeded even the good
returns we reported for 1999. However, the gains in those shares were offset to
a degree by losses in some of the Fund's other holdings. Among the stocks that
experienced a disappointing year were Martin Marietta Materials, Masco and
Transatlantic Holdings. Significantly, the poor performance of these stocks was
not a reflection of poor performance in the underlying business, and our
research team does not regard them as mistakes.
6
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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
As we have often said, mistakes in investing are not determined by whether the
shares go down below the cost at which they were acquired. Given the volatility
of the stock market, this outcome is in fact likely in most cases. Rather
mistakes occur when our assessment of the underlying business value proves to be
too optimistic. In the category of mistakes--at least at this juncture--we must
reluctantly put our purchase of Progressive. Although Progressive is a
first-rate company run by excellent people, its underlying auto insurance
business has been negatively impacted by increased competition and the
increasing cost of settling claims. Similarly, the performance of another
portfolio company, Unisys, was hurt by growing competition and some revenue
disappointments in its core computer business. As a result, we subsequently sold
our position.
While this list is not exhaustive and while we know we are in a batting average
business, it is still important to remember that the only value of mistakes lies
in the lessons that we learn from them. As my grandfather Shelby Cullom Davis
once said, "If you do not admit you make mistakes, you do not learn from them."
Q. What is your long-term outlook?
A. We continue to have embedded in the portfolio significant gains in positions
that have been held for a long time, including Intel, ASM Lithography and
Novellus. However, the portfolio restructuring that we anticipated and discussed
last year is now largely behind us and so, therefore, are the extraordinary
distributions that came from the portfolio transition.
As in our last report to you, we must again caution that this Fund is likely to
be volatile and a bit racier than its more conservative brethren. My father
Shelby M.C. Davis once said that if you were to imagine an investment portfolio
as a meal, Davis New York Venture Fund might be considered the meat and
potatoes. Extending this metaphor, Davis Growth Opportunity Fund might be
perhaps more of a spicy appetizer. With this said, the entire research team is
excited about having this portfolio in house and we all are optimistic about its
future.(6)
MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS REAL ESTATE FUND
PERFORMANCE OVERVIEW
o The Davis Real Estate Fund (Class A shares at net asset value) declined
7.55% for the one-year period ended December 31, 1999.(2) By way of
comparison, the Morgan Stanley REIT (Real Estate Investment Trust) Index
dropped 4.55% during the same time period.(4)
o Since the Fund's inception on January 3, 1994, its Class A shares have
provided an average annual return on net asset value of 9.30%.
7
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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
Q. How would you characterize the performance of real estate stocks and the
Davis Real Estate Fund in 1999?
A. Real estate stocks remained in the doldrums as they have for some time. The
irony is that even after another year of positive earnings growth where the
earnings of real estate companies we own exceeded our expectations, their stock
prices continued to sag. As a fellow shareholder in the Davis Real Estate Fund,
I find these results disappointing. At the same time, I believe that real estate
stocks represent outstanding long-term opportunities today, and we believe the
Fund is strategically poised to take advantage of these opportunities once the
investment climate improves.
The Davis investment discipline is predicated on the belief that, over the long
term, growth in earnings is ultimately what drives price appreciation of all
stocks, including real estate stocks. Our approach is to pay a reasonable price
for companies that have attractive growth prospects over the long term.
Early in 1999, we positioned the Fund for a turnaround by increasing our focus
on real estate companies with superior growth prospects. At midyear, the outlook
for real estate stocks brightened as high-profile investors like Warren Buffett
moved into the market, and the Fund's performance improved dramatically at that
time. However, when a sustained recovery failed to materialize, Fund results
suffered. By December the Morgan Stanley REIT (Real Estate Investment Trust)
Index was trading at a three-year low.
Moreover, unlike many other sectors of the stock market today where investors
have been willing to pay remarkably lofty prices for growth, the exact opposite
has been true in real estate. Since the Fund is focused on growth-oriented real
estate stocks rather than yield-oriented stocks, we lagged behind our peer group
in 1999.
Q. What factors have been holding real estate stocks back?
A. We think there are two main reasons for the unsatisfactory performance of
real estate. First, many investors are concerned that we are coming toward the
end of an economic cycle and that when the next recession comes, real estate
will be besieged by the same difficulties it suffered in the late 1980s and
early 1990s.
In our minds, nothing could be further from the truth. We are not suggesting
that real estate earnings will continue to show strong growth forever, but the
cycle should be substantially less dramatic. The factors that created problems
last time around were caused primarily by tax code incentives that encouraged
overbuilding without regard to demand. Those tax incentives no longer exist. Now
there is a much more transparent view of what is happening in terms of new
building and development, and that eliminates surprises. As a result, there is
not nearly the excess supply of real estate we had in the prior cycle. In short,
the rules in real estate have changed, but many investors are acting as if the
old rules were still in effect.
The second reason for the continuing slump in real estate stocks is perhaps more
intuitive. Simply put, in these heady times of high-flying Internet shares and
other glamour stocks, it appears that some investors may find the returns
offered by real estate a little too sedate.
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 ANDREW A. DAVIS, PORTFOLIO MANAGER - CONTINUED
Generally, long-term returns in real estate stocks, like other stocks, should
approximate the rate of companies' earnings growth. The only way for the Fund to
achieve a return that is better than earnings growth over time is to buy the
stocks right--that is, not to overpay for a company's earnings.
For the real estate companies we follow we generally foresee consistent earnings
growth of between 8% to 12%. To do better than that, we have to buy these 12%
growers at eight or nine times earnings, which we have been able to do in the
current market environment. We expect other investors will eventually recognize
the companies' long-term growth potential, which means they should be willing to
pay a higher multiple of earnings for the shares. In that case, the companies'
valuations might rise so that they trade not at eight times earnings but at 10
or 11 times earnings, and the Fund would be positioned to ride the tide of those
long-term compounding earnings.
We think the ultimate upside from owning these real estate companies is a return
of between 10% to 15%, year in and year out--but few investors these days seem
to care about those kinds of returns. What they seem to want are returns of 10%
to 15% a day or a month. However, we do not believe results like that are
possible over long periods of time, and such an approach is not the way to build
long-term wealth.
If you look at the overall market, most income-oriented companies, such as
utilities, fared poorly in 1999, and real estate is not dissimilar in that
regard. Real estate stocks have fallen from favor due to a dramatic shift in
investor psychology--and to us that spells opportunity.
Q. What are some of your favorite holdings now?
A. One of our favorite companies is Centerpoint Properties, an industrial
REIT.(5) The company is growing its earnings 15% annually, year after year, but
it is still trading at around 11 times earnings.
Another favorite Fund holding is Home Properties of New York, an apartment REIT.
Home Properties is a great company with a terrific management team. Not only has
the company never missed an earnings estimate, it has actually beaten estimates
several times. Other investors do not seem to care. We do.
Two other large Fund positions with terrific growth rates and low dividend
yields are Public Storage, a storage REIT, and Vornado Realty, a diversified
REIT. However, because they are growth-oriented, not yield-oriented, these
stocks underperformed our expectations last year.
One area that suffered particularly in 1999 is the retail arena, and a company
we like here is General Growth Properties, a shopping mall REIT. Some observers
are predicting that the boom in shopping over the Internet will mean the death
of the shopping mall. Similar predictions were made when catalog sales and home
shopping via television first caught consumers' fancy, and those forecasts
proved to be incorrect. We expect the shopping mall concept to evolve, not die,
over the next decade. Already, we are starting to see alliances among retailers,
mall owners and Internet players in order to better serve consumers--and we
expect that trend to accelerate. However, because investor psychology is so
negative now, retail REITs are incredibly cheap and we see opportunities in
these shares.
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
One of the biggest positives today for the Fund as a whole is that the earnings
growth of our portfolio companies is solid. If we had owned 100% of every single
company in the Davis Real Estate Fund in 1999, we would have had returns of
around 14%. In other words, that would have been the cash we could have put in
our pocket at the end of the year. Unfortunately, that earnings performance was
not reflected in the companies' stock prices or, therefore, in the Fund's
results. While we are not satisfied with these short-term results, we remain
dedicated to the long-term Davis investment discipline and are taking advantage
of this downturn to solidify our core positions in well-managed REITs that we
believe are capable of generating steadily increasing rental income and solid
returns on capital.(6)
MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS CONVERTIBLE SECURITIES FUND
PERFORMANCE OVERVIEW
o The Davis Convertible Securities Fund's Class A shares delivered a total
return on net asset value of 12.97% for the one-year period ended December
31, 1999.(2) The 59 funds included in Lipper Analytical Services'
Convertible Securities Fund category provided an average return of 30.82%
for the same time period.(3)
o Since the Fund's inception on May 1, 1992, the Class A shares have
generated an average annual return on net asset value of 14.85%.
AN INTERVIEW WITH ANDREW A. DAVIS, PORTFOLIO MANAGER
Q. Could you provide some perspective on the performance of the Fund and the
convertibles market in 1999?
A. I view the Fund's results in 1999 as disappointing. Several factors
contributed to this unsatisfactory short-term performance. First, the market was
driven by a very few issues that soared to lofty valuations. A number of the
best performers in the convertibles universe were high-tech companies in the new
issues arena, many of which barely had revenues, let alone earnings. It is
difficult for the Fund to participate in that type of rally because of the Davis
price discipline. This discipline prevents us from buying high-flying glamorous
companies, not necessarily because we do not like the companies but because we
do not like their high valuations.
Two of the Fund's top six holdings--Hewlett-Packard and Motorola--are in the
technology area, and both enjoyed a tremendous year in 1999.(5) However, the
Fund did not participate in many of the Web-oriented companies that performed
even better, and that hampered the Fund's relative results in the short run.
That said, mistakes were also made last year--most notably with the Fund's
investments in Waste Management and Xerox--that hurt the Fund's short-term
performance. If a stock's price drops significantly as both of these companies'
shares did in 1999 and I do not have enough confidence in the long-term outlook
of the business to add to the Fund's investment but instead I want to sell, then
I have made a mistake. That is what happened with Waste Management and Xerox,
and the Fund's positions in both companies have been liquidated entirely.
10
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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
In addition, the Fund's performance was hurt by its real estate holdings, which
continued to languish in 1999 despite the companies' solid earnings and
extraordinarily attractive valuations. But I do not consider these investments a
mistake. Even though the real estate industry is currently out of favor, I
remain optimistic about the long-term outlook for the companies the Fund owns
and intend to be patient with these holdings.
On the positive side, the Fund had a number of big winners last year. In
addition to Motorola and Hewlett-Packard, these winners include American
Express, Halliburton, News America and Texas Instruments. These are all strong,
well-managed companies, as are Fund holdings such as American International
Group, Devon Energy and IMAX, and I believe these investments will drive Fund
performance over the next year.
Q. What is the Fund's overriding strategy?
A. Convertible securities combine features of both stocks and bonds. They can be
exchanged for common stock of the issuing company, and they pay a fixed rate of
income like bonds. If the company's stock increases in price, the convertible
security will generally appreciate in value. If the stock price falls, the
income received as a bond provides some protection against that declining stock
price. The Fund targets convertibles that have the potential to participate in
at least 80% of the underlying common stock's appreciation but that have only
50% of the downside risk if the stock price falls.
Q. What is your investment process?
A. The Fund employs a three-step investment process. First, I evaluate more than
500 convertibles according to such factors as their break-even time, call
protection, yield advantage and conversion premium in order to identify
convertibles that represent good value. Next, I analyze the investment potential
of the underlying companies using the time-tested Davis investment discipline to
uncover strong, well-managed companies with solid earnings growth prospects.
Then having identified bargain convertibles with attractive underlying stocks, I
apply the 80%/50% rule. If I think the convertible can deliver 80% or more of
the stock's upside potential while avoiding 50% of its downside risk, that
security is a candidate for purchase.(8)
Q. What is your approach for the Fund going forward?
A. My goal really is never to be the number one convertible fund because
normally that would involve a level of risk that I am not comfortable taking.
For example, in 1999 it probably would have required investing in new issue
Internet convertibles and other speculative securities that do not satisfy the
Davis investment criteria. Instead, my goal is for the Fund to achieve better
performance than the convertible funds group with an appropriate level of risk.
In the last year or two many investors have exhibited almost a price
indifference in making investments. They seem to be buying stocks as pieces of
paper in the expectation that they will be able to sell that paper to other
investors at a higher price without regard to the prospects for the underlying
business. That is a dangerous way to invest and is the opposite of the Davis
investment philosophy. We consider stocks to represent not merely pieces of
paper but ownership interests in real businesses. While different investment
styles move in and out of favor, our experience over many market cycles
convinces us that the Davis investment discipline of buying growth companies at
value prices and holding them for the long term is a proven method of building
wealth over time.
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
We are very much aware that the Internet is fundamentally changing the way
consumers and businesses do business. We are keeping an open mind about the new
ideas and new technologies that are coming on stream, but we intend to
rigorously apply the Davis price discipline in evaluating these companies. Great
companies do not necessarily make great investments. The price you pay to invest
is critical.
Looking forward, I am particularly optimistic about the Davis Convertible
Securities Fund because I am pleased with the businesses we own. The Fund is
well positioned with 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.(6)
MANAGEMENT'S DISCUSSION AND ANALYSIS
DAVIS GOVERNMENT BOND FUND
PERFORMANCE OVERVIEW
o The Davis Government Bond Fund (Class A shares at net asset value) declined
3.47% for the one-year period ended December 31, 1999.(2)
o The Fund's benchmark, the Lehman Brothers Intermediate Term U.S. Treasury
Securities Index, rose 0.44%(4) over the same period while the 124 funds
included in Lipper Analytical services' Intermediate U.S. Government Fund
category decreased an average of 1.68%.(3)
AN INTERVIEW WITH CRESTON A. KING, PORTFOLIO MANAGER
Q. What key factors influenced the Fund's performance in 1999?
A. The year 1999 was the worst year for the bond market since 1994 and the
second worst year since 1973. Between August 1, the date that I became portfolio
manager of the Fund, and the end of the year, the market was in a fairly
continuous downtrend with only a few up days recorded. The primary reason for
the market's sell off was the fear that inflationary forces could resurface as
the nation continued to enjoy robust economic growth. The Federal Reserve raised
interest rates three times in 1999 and is likely to raise rates further in 2000
in an effort to moderate the economy and keep inflation in check.
The Fund underperformed its peer group last year for two key reasons. First, the
overall maturity of the Fund's investments was somewhat longer than it should
have been because longer term securities tend to be more volatile and fall
further than shorter term securities in a rising interest rate environment.
Second, the Fund was invested fairly heavily in mortgage-backed securities
through the first seven months of 1999, and these securities tend to decline
even more than other bonds during periods of increasing interest rates because
mortgage refinancings drop off. With fewer homeowners paying off their mortgages
ahead of schedule, the mortgage-backed securities remain outstanding longer than
originally expected and that money is not available to reinvest at higher
current interest rates.
12
<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
Q. How is the Fund positioned today?
A. In August, we began a restructuring of the Fund's portfolio that was
completed by the middle of October. Currently the portfolio is invested
approximately one-third in highly liquid, actively traded U.S. government agency
securities; one-third in U.S. Treasury securities, where the Fund essentially
had no exposure before; and one-third in the mortgage sector, but in issues
backed by 15-year mortgages rather than 30-year mortgages.(5)
As we restructured the portfolio, our focus was on liquidity, liquidity,
liquidity in order to maintain a high degree of flexibility given the uncertain
interest rate climate. We also shortened the weighted average effective maturity
of the portfolio (taking into account bond call features and the average life of
mortgage-backed securities) to around 5 years. Once the economy shows signs of
slowing and interest rates begin to peak, we anticipate lengthening maturities
within the intermediate-term range (three to 10 years) in order to take
advantage of the higher yields and price appreciation potential of longer term
securities in a declining interest rate environment.
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.
We employ a research process focused on evaluating U.S. economic and interest
rate trends, which essentially drive bond market performance. We are also
committed to a long-term, buy-and-hold approach designed to reduce portfolio
turnover. However, we do anticipate making slight adjustments among the
percentages allocated to the three major sectors of the government
market--Treasuries, government agencies and mortgage-backed securities--as
relative values and opportunities change.
The Davis Government Bond Fund is intended to help 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.(6)
- -------------------------------
This Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of the Davis Series that contains more
information about risks, fees and expenses. Please read the prospectus carefully
before investing or sending money.
(1) This example illustrates the power of compounding over a 20-year period, and
is not intended to be indicative of future investment results which may be
higher or lower than the assumed rate.
13
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
(2) Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results. Investment
return and principal value will vary so that, when redeemed, an investor's
shares may be worth more or less than when purchased. The following table lists
the average annual total returns for Class A shares for the periods ending
December 31, 1999.
<TABLE>
<CAPTION>
*(Without a 4.75% sales charge taken into consideration)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR INCEPTION
- -----------------------------------------------------------------------------------------------------------------------
Davis Financial A (0.85%) 17.83% 26.47% 22.48% - 05/01/91
- -----------------------------------------------------------------------------------------------------------------------
Davis Real Estate A (7.55%) (0.79%) 9.51% 9.30% - 01/03/94
- -----------------------------------------------------------------------------------------------------------------------
Davis Convertible Securities A 12.97% 12.60% 18.54% 14.85% - 05/01/92
- -----------------------------------------------------------------------------------------------------------------------
Davis Growth Opportunity A 31.45% 19.76% 24.48% 23.36% - 12/01/94
- -----------------------------------------------------------------------------------------------------------------------
Davis Government Bond A (3.47%) 3.46% 5.06% 5.02% - 12/01/94
- -----------------------------------------------------------------------------------------------------------------------
*(With a 4.75% sales charge taken into consideration)
- -----------------------------------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 3 YEAR 5 YEAR INCEPTION
- -----------------------------------------------------------------------------------------------------------------------
Davis Financial A (5.56%) 15.94% 25.26% 21.80% - 05/01/91
- -----------------------------------------------------------------------------------------------------------------------
Davis Real Estate A (11.93%) (2.39%) 8.45% 8.42% - 01/03/94
- -----------------------------------------------------------------------------------------------------------------------
Davis Convertible Securities A 7.62% 10.79% 17.38% 14.13% - 05/01/92
- -----------------------------------------------------------------------------------------------------------------------
Davis Growth Opportunity A 25.18% 17.84% 23.27% 22.18% - 12/01/94
- -----------------------------------------------------------------------------------------------------------------------
Davis Government Bond A (8.00%) 1.78% 4.04% 4.01% - 12/01/94
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Lipper Analytical Services' rankings and comparisons are based on total
returns unadjusted for commissions.
(4) The definitions of indices quoted in this annual report appear below.
Investments cannot be made directly in any 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.
(5) Portfolio holdings and portfolio manager opinions cited in this material are
current as of the date of this report, but are subject to change. See each
Fund's Schedule of Investments for a detailed list of portfolio holdings.
14
<PAGE>
DAVIS SERIES, INC.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
(6) This report reflects the professional opinions of the Funds' portfolio
managers. All investments involve some degree of risk, and there can be no
assurance that the Fund's 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.
(7) Source: Morningstar Mutual Funds, June 7, 1999.
(8) While Davis Convertible Securities Fund seeks convertible securities meeting
the 80%/50% rule, there can be no assurance that the convertible securities
which the Fund purchases will actually perform in line with our expectations.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
15
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1999
===============================================================================
PORTFOLIO MAKEUP (% OF FUND NET ASSETS)
Short Term Investments,
Other Assets &
Liabilities
1.3%
Common Stocks
98.7%
SECTOR WEIGHTINGS (% OF STOCK HOLDINGS)
Advertising 6.3% Building Materials 5.6%
Capital Equipment 10.9% Computer Networking Systems 3.1%
Electronics 14.8% Financial Services 11.4%
Insurance 11.2% Other 7.4%
Pharmaceuticals 2.6% Publishing 3.2%
Technology 13.4% Telecommunications 7.1%
Theme Parks 3.0%
<TABLE>
<CAPTION>
% OF FUND
TOP 10 HOLDINGS SECTOR NET ASSETS
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Globalstar Telecommunications Ltd. Telecommunications 7.04%
Novell, Inc. Technology 6.81%
Novellus Systems, Inc. Capital Equipment 6.36%
WPP Group PLC Advertising Agencies 6.26%
Molex, Inc. Electronics 5.89%
ASM Lithography Holdings N.V. Capital Equipment 4.39%
Lexmark International Group, Inc. Technology 4.34%
Capital One Financial Corp. Financial Services 3.97%
Providian Financial Corp. Financial Services 3.64%
Transatlantic Holdings, Inc. Property/Casualty Insurance 3.56%
</TABLE>
16
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99)
(Highlighted positions are those greater than 0.99% of 12/31/99 total net
assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ace Ltd. Property/Casualty Insurance 01/04/99 --
Advent Software, Inc. Computer Software 12/20/99 0.36%
AGENCY.COM Inc. Internet Software 12/08/99 --
AGILENT TECHNOLOGIES, INC. ELECTRONICS 11/23/99 1.98%
Akamai Technologies, Inc. Internet Software 10/28/99 --
Allied Riser Communications Corp. Telecommunications 10/28/99 --
Allied Waste Industries, Inc. Waste Management Services 04/21/99 --
Allscripts, Inc. Information Systems 07/23/99 --
Ariba, Inc. Internet Software 06/22/99 --
Ask Jeeves, Inc. Technology 06/30/99 --
BackWeb Technologies Ltd. Internet Content 06/07/99 --
barnesandnoble.com inc. E-Commerce 05/25/99 --
Brocade Communications Systems, Inc. Technology 05/24/99 --
C-bridge Internet Solutions, Inc. Internet Software 12/17/99 --
CacheFlow Inc. Internet Software 11/18/99 --
CAPITAL ONE FINANCIAL CORP. FINANCIAL SERVICES 01/04/99 3.97%
Charter Communications, Inc. Cable Television 11/08/99 --
China.com Corp. Internet Content 07/12/99 --
CINCINNATI FINANCIAL CORP. PROPERTY/CASUALTY INSURANCE 01/04/99 1.49%
Classic Communications, Inc. Cable Television 12/07/99 --
Cobalt Networks, Inc. Networking Products 11/04/99 --
Convergent Communications, Inc. Telecommunications 07/19/99 --
Copper Mountain Networks, Inc. Telecommunications 05/12/99 --
Crescent Operating, Inc. Diversified 01/08/99 0.18%
DALLAS SEMICONDUCTOR CORP. ELECTRONICS 03/11/99 1.49%
Destia Communications, Inc. Telecommunications 05/05/99 --
Digital Impact, Inc. Internet Software 11/22/99 --
Digital Insight Corp. Internet Content 09/30/99 --
DONALDSON, LUFKIN & JENRETTE, INC. FINANCIAL SERVICES 07/20/99 1.55%
DOW JONES & COMPANY, INC. PUBLISHING 01/08/99 1.36%
Drugstore.com, Inc. E-Commerce 07/27/99 --
E.piphany, Inc. Computer Software 09/21/99 --
Efficient Networks, Inc. Telecommunications 07/14/99 --
Egreetings Network, Inc. Internet Content 12/16/99 --
Engage Technologies, Inc. Internet Software 07/19/99 --
EToys Inc. E-Commerce 05/19/99 --
Everest Reinsurance Holdings, Inc. Property/Casualty Insurance 11/09/99 0.75%
Expedia, Inc. Class A E-Commerce 11/09/99 --
Extreme Networks, Inc. Computer Networking
Systems 04/08/99 --
</TABLE>
17
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99) - CONTINUED
(Highlighted positions are those greater than 0.99% of 12/31/99 total net
assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finisar Corp. Fiber Optics 11/11/99 --
Fogdog, Inc. E-Commerce 12/08/99 --
Fortune Brands, Inc. Consumer Products 03/11/99 --
FPIC Insurance Group, Inc. Property/Casualty Insurance 01/04/99 0.80%
FreeMarkets, Inc. E-Commerce 12/09/99 --
Gadzoox Networks, Inc. Computer Software 07/19/99 --
Gartner Group, Inc. Class A Consulting Services 02/04/99 --
Genentech, Inc. Pharmaceuticals 07/20/99 --
GetThere.com, Inc. Internet Content 11/23/99 --
GLOBALSTAR TELECOMMUNICATIONS LTD. TELECOMMUNICATIONS 04/12/99 7.04%
Golden West Financial Corp. Banks and Savings &
Loan Associations 01/04/99 0.64%
Hasbro, Inc. Toys 03/19/99 --
HORACE MANN EDUCATORS CORP. PROPERTY/CASUALTY INSURANCE 01/04/99 1.18%
Inet Technologies, Inc. Telecommunications 05/26/99 --
Informatica Corp. Computer Software 04/28/99 --
Internap Network Services Corp. Internet Software 09/29/99 --
Intertrust Technologies Corp. Applications Software 10/26/99 --
Interwoven, Inc. Internet Software 10/07/99 --
ITXC Corp. Internet Software 09/27/99 --
iVillage. Inc. Internet Content 03/18/99 --
JNI Corp. Computer Networking
Systems 10/26/99 --
Juniper Networks, Inc. Computer Networking
Systems 06/24/99 --
Kana Communications, Inc. Computer Software 09/21/99 --
LEXMARK INTERNATIONAL GROUP, INC. TECHNOLOGY 01/07/99 4.34%
Liberate Technologies, Inc. Internet Software 07/27/99 --
Marimba, Inc. Internet Software 04/29/99 --
Markel Corp. Property/Casualty Insurance 01/04/99 0.74%
MARRIOTT INTERNATIONAL, INC. HOTELS & MOTELS 02/04/99 2.02%
Martha Stewart Living Omnimedia, Inc. Diversified 10/18/99 --
MARTIN MARIETTA MATERIALS, INC. BUILDING MATERIALS 01/04/99 1.31%
MASCO CORP. BUILDING MATERIALS 01/04/99 3.24%
Maxygen, Inc. Medical Products 12/15/99 --
McAfee.com Corp. Computer Services 12/01/99 --
Media Metrix, Inc. Internet Content 05/07/99 --
MedicaLogic, Inc. Internet Content 12/10/99 --
Medscape, Inc. Internet Content 09/27/99 --
Metasolv Software, Inc. Computer Software 11/17/99 --
</TABLE>
18
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99) - CONTINUED
(Highlighted positions are those greater than 0.99% of 12/31/99 total net
assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MICRON TECHNOLOGY, INC. ELECTRONICS 04/21/99 1.86%
MOLEX, INC. ELECTRONICS 01/04/99 5.89%
MP3.com, Inc. E-Commerce 07/20/99 --
NCR CORP. COMPUTER NETWORKING
SYSTEMS 09/20/99 2.57%
NEON Systems, Inc. Computer Software 03/05/99 --
Network Plus Corp. Telecommunications 06/29/99 --
NetZero, Inc. Internet Software 09/23/99 --
Next Level Communications, Inc. Telecommunications 11/09/99 --
NorthPoint Communications Group, Inc. Internet Software 05/05/99 --
NOVELL, INC. TECHNOLOGY 06/17/99 6.81%
Official Payments Corporation Commercial Services 11/23/99 --
Parametric Technology Corp. Technology 03/11/99 --
pcOrder.com, Inc. Internet Software 02/25/99 --
Phone.com, Inc. Internet Software 06/10/99 --
PlanetRX.com, Inc E-Commerce 10/06/99 --
Portal Software, Inc. Internet Software 05/05/99 --
PREMIER PARKS, INC. THEME PARKS 11/09/99 2.96%
Preview Systems, Inc. Internet Software 12/08/99 --
PROGRESSIVE CORP. (OHIO) PROPERTY/CASUALTY INSURANCE 01/04/99 1.02%
PROVIDIAN FINANCIAL CORP. FINANCIAL SERVICES 01/04/99 3.64%
Quintus Corp. Computer Software 11/16/99 --
Razorfish, Inc. Communications Software 04/26/99 --
Redback Networks, Inc. Computer Software 05/17/99 --
Red Hat, Inc. Computer Software 08/11/99 --
ReliaStar Financial Corp. Life Insurance 01/04/99 --
Retek, Inc. Internet Software 11/17/99 --
RLI Corp. Property/Casualty Insurance 01/12/99 --
SAGA SYSTEMS, Inc. Computer Software 12/20/99 0.84%
The Santa Cruz Operation, Inc. Computer Software 12/20/99 0.55%
SciQuest.com, Inc E-Commerce 11/19/99 --
SEALED AIR CORP. INDUSTRIAL 01/04/99 2.48%
SEPRACOR, INC. PHARMACEUTICALS 05/11/99 2.60%
Silknet Software, Inc. Internet Software 05/05/99 --
Software.com, Inc. Internet Software 06/23/99 --
StarMedia Network, Inc. Internet Content 05/25/99 --
TheStreet.com, Inc Internet Content 05/10/99 --
Sycamore Networks, Inc. Computer Networking
Systems 10/21/99 0.49%
SYMANTEC CORP. TECHNOLOGY 05/21/99 2.11%
Talk City, Inc. Internet Content 07/20/99 --
</TABLE>
19
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99) - CONTINUED
(Highlighted positions are those greater than 0.99% of 12/31/99 total net
assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tanning Technology Corp. Computer Services 07/22/99 --
TenFold Corp. Applications Software 05/20/99 --
TIBCO Software, Inc. Computer Software 07/13/99 --
Tickets.com, Inc. E-Commerce 11/03/99 --
TRANSATLANTIC HOLDINGS, INC. PROPERTY/CASUALTY INSURANCE 01/04/99 3.56%
TRIBUNE CO. PUBLISHING 02/04/99 1.85%
Tritel, Inc. Telecommunications 12/13/99 --
Triton PCS Holdings, Inc. Telecommunications 10/27/99 --
Unisys Corp. Technology 04/01/99 --
UnumProvident Corp. Life Insurance 01/04/99 --
VA Linux Systems, Inc. Computer Software 12/09/99 --
VerticalNet, Inc. Internet Content 02/11/99 --
Viant Corp. Internet Software 06/17/99 --
Vitria Technology, Inc. Computer Software 09/16/99 --
Vulcan Materials Co. Building Materials 01/04/99 0.96%
The Washington Post Co. Publishing 01/04/99 --
Webvan Group, Inc. E-Commerce 11/04/99 --
Wireless Facilities, Inc. Commercial Services 11/04/99 --
WPP GROUP PLC ADVERTISING AGENCIES 01/04/99 6.26%
Ziff-Davis, Inc. Internet Content 03/30/99 --
POSITIONS CLOSED (1/1/99-12/31/99)
(Gains and losses greater than $500,000 are highlighted)
DATE OF FINAL
SECURITY SECTOR SALE GAIN/(LOSS)
- -------------------------------------------------------------------------------------------------------------
Ace Ltd. Property/Casualty Insurance 12/20/99 $ (435,001)
AGENCY.COM Inc. Internet Software 12/08/99 123,744
Akamai Technologies, Inc. Internet Software 10/29/99 199,042
Allied Riser Communications Corp. Telecommunication 10/29/99 (3)
Allied Waste Industries, Inc. Waste Management Services 08/18/99 (172,601)
Allscripts, Inc. Information Systems 07/23/99 18,434
Anadarko Petroleum Corp. Energy 01/04/99 8,109
Ariba, Inc. Internet Software 06/23/99 20,905
Ask Jeeves, Inc. Technology 07/01/99 29,649
Associates First Capital Corp. Financial Services 02/04/99 96,755
BackWeb Technologies Ltd. Internet Content 06/08/99 52,121
barnesandnoble.com inc. E-Commerce 05/25/99 3,500
BRIGHAM EXPLORATION CO. ENERGY 01/22/99 (764,794)
Brocade Communications Systems, Inc. Technology 05/25/99 19,874
BUSINESS OBJECTS S.A. - ADR COMPUTER SOFTWARE 01/08/99 3,431,858
C-bridge Internet Solutions, Inc. Internet Software 12/17/99 26,061
</TABLE>
20
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
POSITIONS CLOSED (1/1/99-12/31/99) - CONTINUED
(Gains and losses greater than $500,000 are highlighted)
<TABLE>
<CAPTION>
DATE OF FINAL
SECURITY SECTOR SALE GAIN/(LOSS)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CacheFlow Inc. Internet Software 11/19/99 $ 107,996
Charter Communications, Inc. Cable Television 11/09/99 17,809
China.com Corp. Internet Content 07/20/99 13,312
Classic Communications, Inc. Cable Television 12/08/99 26,245
Cobalt Networks, Inc. Networking Products 11/05/99 112,996
Convergent Communications, Inc. Telecommunications 07/20/99 9,312
Copper Mountain Networks, Inc. Telecommunications 05/13/99 48,685
Destia Communications, Inc. Telecommunications 05/06/99 62
DESWELL INDUSTRIES, INC. MANUFACTURING 01/15/99 (1,198,812)
Digital Impact, Inc. Internet Software 11/23/99 124,993
Digital Insight Corp. Internet Content 10/01/99 3,787
Drugstore.com, Inc. E-Commerce 07/28/99 33,498
E.piphany, Inc. Computer Software 09/22/99 47,747
Efficient Networks, Inc. Telecommunications 07/15/99 76,246
Egreetings Network, Inc. Internet Content 12/17/99 11,092
Eli Lilly and Co. Pharmaceuticals 04/26/99 373,426
Engage Technologies, Inc. Internet Software 07/20/99 69,996
EToys Inc. E-Commerce 05/21/99 268,488
Expedia, Inc. Class A E-Commerce 11/10/99 41,561
Extreme Networks, Inc. Computer Networking
Systems 04/09/99 140,806
Finisar Corp. Fiber Optics 11/12/99 34,999
FIRSTPLUS FINANCIAL GROUP, INC. FINANCIAL SERVICES 01/07/99 (2,837,622)
Flir Systems, Inc. Electronics 01/08/99 412,912
Fogdog, Inc. E-Commerce 12/10/99 19,498
FORCENERGY, INC. ENERGY 01/05/99 (1,015,050)
Fortune Brands, Inc. Consumer Products 07/01/99 320,110
FreeMarkets, Inc. E-Commerce 12/10/99 212,229
Gadzoox Networks, Inc. Computer Software 07/20/99 253,426
GARDEN RIDGE CORP. RETAIL 03/11/99 (2,299,994)
Gartner Group, Inc. Class A Consulting Services 09/22/99 (408,561)
Genentech, Inc. Pharmaceuticals 07/20/99 149,521
GetThere.com, Inc. Internet Content 11/23/99 22,185
Hasbro, Inc. Toys11/23/99 (191,434)
ICN PHARMACEUTICALS, INC. PHARMACEUTICALS 01/04/99 (897,457)
IHOP CORP. RESTAURANTS 01/08/99 1,196,810
IMC MORTGAGE CO. FINANCIAL SERVICES 01/04/99 (3,147,944)
Inet Technologies, Inc. Telecommunications 05/28/99 1,499
Informatica Corp. Computer Software 04/30/99 75,244
INTEGRATED PROCESS EQUIPMENT CORP. CAPITAL EQUIPMENT 01/05/99 (1,201,910)
Internap Network Services Corp. Internet Software 09/29/99 23,186
</TABLE>
21
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
POSITIONS CLOSED (1/1/99-12/31/99) - CONTINUED
(Gains and losses greater than $500,000 are highlighted)
<TABLE>
<CAPTION>
DATE OF FINAL
SECURITY SECTOR SALE GAIN/(LOSS)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intertrust Technologies Corp. Applications Software 10/27/99 $ 66,933
Interwoven, Inc. Internet Software 10/08/99 24,936
ITXC Corp. Internet Software 09/28/99 7,562
iVillage. Inc. Internet Content 03/19/99 131,744
JNI Corp. Computer Networking
Systems 10/27/99 22,749
Juniper Networks, Inc. Computer Networking
Systems 06/25/99 165,992
Kana Communications, Inc. Computer Software 09/22/99 116,995
KV PHARMACEUTICAL CO. PHARMACEUTICALS 03/08/99 1,289,974
THE LEARNING CO., INC. COMPUTER SOFTWARE 01/04/99 559,947
Liberate Technologies, Inc. Internet Software 07/28/99 30,932
Marimba, Inc. Internet Software 04/30/99 83,865
Martha Stewart Living Omnimedia, Inc. Diversified 10/19/99 14,219
Maxygen, Inc. Medical Products 12/16/99 44,497
McAfee.com Corp. Computer Services 12/02/99 57,597
Media Metrix, Inc. Internet Content 05/07/99 4,375
MedicaLogic, Inc. Internet Content 12/10/99 44,058
Medscape, Inc. Internet Content 09/28/99 22,497
Metasolv Software, Inc. Computer Software 11/18/99 18,249
MFC Bancorp Ltd. Financial Services 02/17/99 (465,397)
MP3.com, Inc. E-Commerce 07/21/99 351,231
NEON Systems, Inc. Computer Software 03/05/99 7,749
Network Plus Corp. Telecommunications 06/30/99 28,123
NetZero, Inc. Internet Software 09/28/99 39,996
Next Level Communications, Inc. Telecommunications 11/10/99 192,803
NFO Worldwide, Inc. Commercial 01/05/99 (484,608)
NorthPoint Communications Group, Inc. Internet Software 05/06/99 70,994
OCEAN ENERGY, INC. ENERGY 01/08/99 (3,528,813)
Official Payments Corporation Commercial Services 11/23/99 5,124
Paine Webber Group, Inc. Financial Services 01/06/99 (80,892)
Parametric Technology Corp. Technology 09/22/99 (147,204)
pcOrder.com, Inc. Internet Software 02/26/99 63,996
PFIZER, INC. PHARMACEUTICALS 06/11/99 6,435,811
Philip Morris Cos., Inc. Consumer Products 10/27/99 (410,025)
Phone.com, Inc. Internet Software 06/11/99 99,994
PlanetRX.com, Inc E-Commerce 10/07/99 63,621
Portal Software, Inc. Internet Software 05/06/99 71,559
Preview Systems, Inc. Internet Software 12/08/99 19,999
Quintus Corp. Computer Software 11/16/99 43,591
Razorfish, Inc. Communications Software 04/27/99 92,807
</TABLE>
22
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
POSITIONS CLOSED (1/1/99-12/31/99) - CONTINUED
(Gains and losses greater than $500,000 are highlighted)
<TABLE>
<CAPTION>
DATE OF FINAL
SECURITY SECTOR SALE GAIN/(LOSS)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Redback Networks, Inc. Computer Software 05/18/99 $ 44,348
RED HAT, INC. COMPUTER SOFTWARE 08/11/99 552,006
ReliaStar Financial Corp. Life Insurance 12/20/99 (240,467)
Retek, Inc. Internet Software 11/18/99 16,874
RLI Corp. Property/Casualty Insurance 08/18/99 45,157
SCHERING - PLOUGH CORP. PHARMACEUTICALS 05/21/99 1,879,133
SciQuest.com, Inc E-Commerce 11/19/99 32,498
SEITEL, INC. ENERGY 01/12/99 1,072,602
Silknet Software, Inc. Internet Software 05/05/99 18,747
Software.com, Inc. Internet Software 06/24/99 36,870
STAPLES, INC. RETAIL 01/15/99 3,290,023
StarMedia Network, Inc. Internet Content 05/27/99 41,716
TheStreet.com, Inc Internet Content 05/12/99 59,966
Talk City, Inc. Internet Content 07/20/99 4,249
Tanning Technology Corp. Computer Services 07/23/99 8,748
TenFold Corp. Applications Software 05/21/99 6,999
Thomas Group, Inc. Business Services 03/08/99 204,249
THREE - FIVE SYSTEMS, INC. ELECTRONICS 04/13/99 (707,233)
TIBCO Software, Inc. Computer Software 07/14/99 67,246
Tickets.com, Inc. E-Commerce 11/04/99 31,886
Tritel, Inc. Telecommunications 12/14/99 247,404
Triton PCS Holdings, Inc. Telecommunications 10/28/99 37,873
UNISYS CORP. TECHNOLOGY 10/15/99 (772,056)
UnumProvident Corp. Life Insurance 11/23/99 (481,577)
VA Linux Systems, Inc. Computer Software 12/09/99 449,983
VENTURE SEISMIC LTD. ENERGY 06/09/99 (737,327)
VerticalNet, Inc. Internet Content 02/11/99 82,245
Viant Corp. Internet Software 06/22/99 8,249
VIRAGEN, INC. PHARMACEUTICALS 02/09/99 (2,673,545)
Vitria Technology, Inc. Computer Software 09/17/99 17,155
WARNER LAMBERT CO. PHARMACEUTICALS 05/27/99 1,129,059
The Washington Post Co. Publishing 06/17/99 (40,821)
Webvan Group, Inc. E-Commerce 11/05/99 56,871
Wireless Facilities, Inc. Commercial Services 11/05/99 69,684
Ziff-Davis, Inc. Internet Content 03/31/99 83,444
</TABLE>
23
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GROWTH OPPORTUNITY FUND CLASS A
SHARES AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999. .
CLASS A SHARES
(This calculation includes an initial sales charge of 4 3/4%.)
One Year...................................... 25.18%
Five Year..................................... 23.27%
Life of Class (December 1, 1994 through
December 31, 1999)......................... 22.18%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class A shares of Davis Growth Opportunity Fund ("DGOF-A") on December 1,
1994 (inception of class) and paid a 4 3/4% sales charge. As the chart shows, by
December 31, 1999 the value of your investment would have grown to $27,689 a
176.89% increase on your initial investment. For comparison, the Standard and
Poor's 500 Stock Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DGOF-A
12/1/94 $10,000 $9,525
12/31/94 $10,305 $9,259
12/31/95 $14,164 $13,578
12/31/96 $17,407 $16,121
12/31/97 $23,206 $20,587
12/31/98 $29,825 $21,064
12/31/99 $36,092 $27,689
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. Investments cannot be made directly into the index. The
index used includes net dividends reinvested, but does not take into account any
sales charge.
The performance data for Davis Growth Opportunity Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
24
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GROWTH OPPORTUNITY FUND CLASS B SHARES
AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS B SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year ............................... 26.47%
Five Year .............................. 23.38%
Ten Years .............................. 14.35%
$10,000 INVESTED OVER TEN YEARS. Let's say you invested $10,000 in Davis Series,
Inc., Class B shares of Davis Growth Opportunity Fund ("DGOF-B") on December 31,
1989. As the chart shows, by December 31, 1999 the value of your investment
would have grown to $38,252 - a 282.52% increase on your initial investment. For
comparison, the Standard and Poor's 500 Stock Index is also presented on the
chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DGOF-B
12/31/89 $10,000.00 $10,000
12/31/90 $9,689.00 $9,528
12/31/91 $12,635.00 $13,428
12/31/92 $13,596.00 $13,042
12/31/93 $14,963.00 $14,497
12/31/94 $15,160.00 $13,277
12/31/95 $20,850.00 $19,310
12/31/96 $25,634.00 $22,760
12/31/97 $34,183.00 $28,864
12/31/98 $43,951.00 $29,329
12/31/99 $53,198.00 $38,252
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. Investments cannot be made directly into the index. The
index used includes net dividends reinvested, but does not take into account any
sales charge.
The performance data for Davis Growth Opportunity Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
25
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GROWTH OPPORTUNITY FUND CLASS C SHARES
AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS C SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year ...............................29.32%
Life of Class (August 15, 1997
through December 31, 1999) ........ 9.75%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class C shares of Davis Growth Opportunity Fund ("DGOF-C") on August 15,
1997 (inception of class). As the chart shows, by December 31, 1999 the value of
your investment would have grown to $12,477 - a 24.77% increase on your initial
investment. For comparison, the Standard and Poor's 500 Stock Index is also
presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DGOF-C
8/15/97 $10,000 $10,000
12/31/97 $10,863 $9,434
12/31/98 $13,961 $9,574
12/31/99 $16,895 $12,477
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. Investments cannot be made directly into the index. The
index used includes net dividends reinvested, but does not take into account any
sales charge.
The performance data for Davis Growth Opportunity Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
26
<PAGE>
DAVIS SERIES, INC.
DAVIS GROWTH OPPORTUNITY FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GROWTH OPPORTUNITY FUND CLASS Y SHARES
AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS Y SHARES
(There is no sales charge applicable to this calculation.)
One Year ............................... 32.16%
Life of Class (September 18, 1997
through December 31, 1999)......... 8.39%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class Y shares of Davis Growth Opportunity Fund ("DGOF-Y") on September
18, 1997 (inception of class). As the chart shows, by December 31, 1999 the
value of your investment would have grown to $12,021 - a 20.21% increase on your
initial investment. For comparison, the Standard and Poor's 500 Stock Index is
also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DGOF-Y
9/18/97 $10,000 $10,000
12/31/97 $10,330 $8,902
12/31/98 $13,276 $9,096
12/31/99 $16,066 $12,021
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. Investments cannot be made directly into the index. The
index used includes net dividends reinvested, but does not take into account any
sales charge.
The performance data for Davis Growth Opportunity Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
27
<PAGE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1999
===============================================================================
PORTFOLIO MAKEUP (% OF FUND NET ASSETS)
Convertible Bonds,
Other Assets &
Liabilities
0.4%
Common Stocks
99.6%
SECTOR WEIGHTINGS (% OF LONG TERM PORTFOLIO)
Banking 14.1% Restaurants 3.3%
Building Materials 6.5% Technology 2.8%
Financial Services 44.2% Consumer Products 1.2%
Insurance 19.4% Other 0.8%
Diversified 7.7%
<TABLE>
<CAPTION>
% OF FUND
TOP 10 HOLDINGS SECTOR NET ASSETS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
American Express Co. Financial Services 12.44%
Citigroup, Inc. Financial Services 7.18%
Transatlantic Holdings Inc. Insurance 6.61%
Providian Financial Corp. Financial Services 6.05%
Wells Fargo Co. Banks and Savings & Loan Associations 5.96%
Household International, Inc. Financial Services 5.13%
Tyco International Ltd. Diversified Manufacturing 3.93%
Berkshire Hathaway, Inc. (Class A) Diversified 3.72%
Capital One Financial Corp. Financial Services 3.67%
Bank of New York Co., Inc. Banks and Savings & Loan Associations 3.60%
</TABLE>
28
<PAGE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99)
(Highlighted positions are those greater than 0.99% of 12/31/99 total net
assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Corp. Banks and Savings
& Loan Associations 05/18/99 --
Donaldson, Lufkin & Jenrette Inc.-DLJdirect Financial Services 05/25/99 --
E-LOAN, Inc. Financial Services 06/28/99 --
Everest Reinsurance Holdings, Inc. Insurance 11/05/99 0.94%
FREDDIE MAC FINANCIAL SERVICES 05/05/99 1.94%
The Goldman Sachs Group, Inc. Financial Services 05/03/99 --
InsWeb Corp. Insurance 07/22/99 --
Kansas City Southern Industries, Inc. Transportation 12/08/99 0.83%
Legg Mason, Inc. Financial Services 04/05/99 0.97%
NextCard, Inc. Financial Services 05/14/99 --
UNUM Corp. Insurance 02/19/99 --
VULCAN MATERIALS CO. BUILDING MATERIALS 10/06/99 1.60%
</TABLE>
POSITIONS CLOSED (1/1/99-12/31/99)
(Gains and losses greater than $500,000 are highlighted)
<TABLE>
<CAPTION>
DATE OF FINAL
SECURITY SECTOR SALE GAIN/(LOSS)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ACE, LTD. INSURANCE 10/19/99 $ (6,263,501)
Alleghany Corp. Insurance 02/03/99 274,995
The Allstate Corp. Insurance 08/24/99 257,461
ANNUITY AND LIFE RE (HOLDINGS), LTD. INSURANCE 06/21/99 670,440
BANK OF AMERICA CORP. BANKS AND SAVINGS
& LOAN ASSOCIATIONS 10/14/99 (2,612,666)
BANK ONE CORP. BANKS AND SAVINGS
& LOAN ASSOCIATIONS 09/23/99 (4,433,303)
Donaldson, Lufkin & Jenrette Inc.-DLJdirect Financial Services 05/27/99 198,423
Dover Corp. Diversified Manufacturing 01/06/99 238,878
E-LOAN, Inc. Financial Services 06/29/99 54,372
ESG RE LTD. INSURANCE 11/16/99 (1,841,882)
THE GOLDMAN SACHS GROUP, INC. FINANCIAL SERVICES 05/04/99 2,249,748
Harcourt General, Inc. Publishing 06/02/99 255,942
HARLEYSVILLE GROUP, INC. INSURANCE 05/28/99 506,506
Hasbro, Inc. Consumer Products 02/10/99 (406,237)
HSB Group, Inc. Insurance 06/03/99 255,826
InsWeb Corp. Insurance 08/04/99 73,869
INTEL CORP. TECHNOLOGY 04/13/99 7,624,458
LEUCADIA NATIONAL CORP. INSURANCE 07/21/99 (892,831)
MATTEL, INC. CONSUMER PRODUCTS 02/18/99 (1,364,938)
</TABLE>
29
<PAGE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999 - CONTINUED
===============================================================================
POSITIONS CLOSED (1/1/99-12/31/99) - CONTINUED
(Gains and losses greater than $500,000 are highlighted)
<TABLE>
<CAPTION>
DATE OF FINAL
SECURITY SECTOR SALE GAIN/(LOSS)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MERCURY GENERAL CORP. INSURANCE 07/09/99 $ 1,301,801
NextCard, Inc. Financial Services 05/14/99 75,619
Nuernberger Beteil AGAKT LITA Insurance 10/15/99 170,234
ORION CAPITAL CORP. INSURANCE 07/21/99 2,890,078
RISK CAPITAL HOLDINGS, INC. INSURANCE 11/11/99 (559,548)
RLI CORP. INSURANCE 12/23/99 (4,657,654)
SMITHKLINE BEECHAM PLC - ADR PHARMACEUTICALS 05/19/99 3,600,339
State Auto Financial Corp. Insurance 01/06/99 172,542
Stirling Cooke Brown Holdings Ltd. Insurance 08/18/99 (293,439)
20th Century Industries Insurance 06/15/99 (101,871)
UNUM CORP. INSURANCE 06/23/99 1,449,736
VESTA INSURANCE GROUP, INC. INSURANCE 05/27/99 (617,080)
XL CAPITAL LTD. CLASS A INSURANCE 10/21/99 (3,045,437)
</TABLE>
30
<PAGE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS FINANCIAL FUND CLASS A SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS A SHARES
(This calculation includes an initial sales charge of 4 3/4%.)
One Year .............................. (5.56%)
Five Year ............................. 25.26%
Life of Class (May 1, 1991
through December 31, 1999) ....... 21.80%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class A shares of Davis Financial Fund ("DFF-A") on May 1, 1991 (inception
of Fund) and paid a 4 3/4% sales charge. As the chart shows, by December 31,
1999 the value of your investment would have grown to $55,341 - a 453.41%
increase on your initial investment. For comparison, the Standard and Poor's 500
Stock Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DFF-A
5/1/91 $10,000 $9,525
12/31/91 $11,234 $11,749
12/31/92 $12,089 $15,587
12/31/93 $13,302 $17,906
12/31/94 $13,482 $17,091
12/31/95 $18,531 $25,723
12/31/96 $22,774 $33,825
12/31/97 $30,361 $48,887
12/31/98 $39,021 $55,817
12/31/99 $47,221 $55,341
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Financial Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
31
<PAGE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS FINANCIAL FUND CLASS B SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS B SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year ............................... (5.64%)
Five Year .............................. 25.17%
Life of Class (December 27, 1994
through December 31, 1999)......... 24.96%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class B shares of Davis Financial Fund ("DFF-B") on December 27, 1994
(inception of class). As the chart shows, by December 31, 1999 the value of your
investment (less applicable contingent deferred sales charges) would have grown
to $30,567 - a 205.67% increase on your initial investment. For comparison, the
Standard and Poor's 500 Stock Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DFF-B
12/27/94 $10,000 $10,000
12/31/94 $10,003 $9,910
12/31/95 $13,749 $14,766
12/31/96 $16,897 $19,238
12/31/97 $22,526 $27,559
12/31/98 $28,951 $31,199
12/31/99 $35,035 $30,567
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Financial Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
32
<PAGE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS FINANCIAL FUND CLASS C SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS C SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year ............................... (2.67%)
Life of Class (August 12, 1997
through December 31, 1999)......... 8.65%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class C shares of Davis Financial Fund ("DFF-C") on August 12, 1997
(inception of class). As the chart shows, by December 31, 1999 the value of your
investment would have grown to $12,189 - a 21.89% increase on your initial
investment. For comparison, the Standard and Poor's 500 Stock Index is also
presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DFF-C
8/12/97 $10,000 $10,000
12/31/97 $10,562 $10,946
12/31/98 $13,574 $12,397
12/31/99 $16,426 $12,189
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Financial Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
33
<PAGE>
DAVIS SERIES, INC.
DAVIS FINANCIAL FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS FINANCIAL FUND CLASS Y SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS Y SHARES
(This is no sales charge applicable to this calculation.)
One Year ............................... (0.65%)
Life of Class (March 10, 1997
through December 31, 1999) ........ 14.54%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class Y shares of Davis Financial Fund ("DFF-Y") on March 10, 1997
(inception of class). As the chart shows, by December 31, 1999 the value of your
investment would have grown to $14,646 - a 46.46% increase on your initial
investment. For comparison, the Standard and Poor's 500 Stock Index is also
presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DFF-Y
3/10/97 $10,000 $10,000
12/31/97 $12,137 $12,866
12/31/98 $15,598 $14,741
12/31/99 $18,876 $14,646
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Financial Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
34
<PAGE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1999
===============================================================================
PORTFOLIO MAKEUP (% OF FUND NET ASSETS)
Short Term Investments, Other Assets & Liabilities 5.7%
Bonds 36.6%
Preferred Stocks 32.3%
Common Stocks 25.4%
SECTOR WEIGHTINGS (% OF LONG TERM PORTFOLIO)
Energy 10.6%
Real Estate 20.7%
Multimedia 3.5%
Financial Services 13.5%
Theme Parks 5.0%
Technology 19.7%
Other 4.0%
Insurance 6.4%
Industrial 9.3%
Communications 7.3%
<TABLE>
<CAPTION>
% OF FUND
TOP 10 HOLDINGS SECTOR NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
American Express Credit, Conv. Notes, 1.125%, 02/19/03 Financial Services 5.61%
Kerr-McGee Corp., 5.50%, 08/02/04 Series, Conv. Pfd. Energy 5.36%
American International Group, Inc., Conv. Notes, 2.25%, 07/30/04 Insurance 5.20%
Sealed Air Corp., $2.00, Ser. A Cum. Conv. Pfd. Industrial 4.79%
Hewlett-Packard Co. Technology 4.73%
Motorola, Inc., Conv. Sub. Deb., Zero Cpn., 09/27/13 Technology 4.36%
American Tower Corp., 144A Conv. Notes, 6.25%, 10/15/09 Communications 4.28%
IMAX Corp., Conv. Sub. Deb., 5.75%, 04/01/03 Industrial 4.00%
Vornado Realty Trust Diversified (REIT) 3.87%
Premier Parks, Inc., 7.50%, Cum. Conv. Pfd. Theme Parks 3.42%
</TABLE>
35
<PAGE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99)
(Highlighted Positions are those greater than 0.99% of 12/31/99
total net assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amazon.Com Inc., 4.75%, 2/1/09, Conv. Pfd. Internet Services 01/29/99 --
AMERICAN TOWER CORP., 144A
CONV. NOTES, 6.25%, 10/15/09 COMMUNICATIONS 09/28/99 4.28%
BANK ONE CORP, CONV. DEB.,
12.75%, 12/01/00 FINANCIAL SERVICES 04/29/99 1.64%
Canadian National Railway Co. Transportation 08/30/99 0.37%
Canadian National Railway Co., 5.25%,
06/30/29 Series, Conv. Pfd. Transportation 06/17/99 0.50%
Hilton Hotels Corp. Hotels 02/08/99 --
KERR-MCGEE CORP., 5.50%, 08/02/04 SERIES
CONV. PFD. ENERGY 07/27/99 5.36%
Loral Space & Communications, Ltd. Telecommunications 04/06/99 0.31%
Micron Technology, Inc. Technology 04/26/99 --
Micron Technology, Inc., Conv. Sub.
Notes, 7.00%, 07/01/04 Technology 04/26/99 --
PREMIER PARKS INC. THEME PARKS 09/27/99 1.34%
SAP AG-ADR TECHNOLOGY 03/17/99 2.09%
Waste Management, Inc. Waste Management Services 07/08/99 --
Waste Management, Inc., Conv. Sub. Notes,
4.00%, 02/01/02 Waste Management Services 08/23/99 --
Waste Management, Inc., Conv. Sub. Notes,
2.00%, 01/24/05 Waste Management Services 01/26/99 --
</TABLE>
POSITIONS CLOSED (1/1/99-12/31/99)
(Gains and losses greater than $1,000,000 are highlighted)
<TABLE>
<CAPTION>
SECURITY SECTOR DATE OF FINAL SALE GAIN/(LOSS)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIRTOUCH COMMUNICATIONS, INC., 6.00%
SER. B CONV. PFD. COMMUNICATIONS 01/20/99 $ 2,257,792
Amazon.Com Inc., 4.75%, Conv. Pfd. Internet Services 01/29/99 5,000
AMERICAN INTERNATIONAL GROUP, INC. INSURANCE 11/18/99 10,094,916
AVALON BAY COMMUNITIES, INC. DIVERSIFIED (REITS) 04/30/99 1,010,394
Baker Hughes Inc., Sr. Liquid Yield Option
Notes, Zero Cpn., 05/05/08 Energy 04/27/99 (419,331)
BANC ONE CORP. BANKS AND SAVINGS
& LOAN ASSOCIATIONS 09/10/99 1,144,384
BANK OF NEW YORK CO., INC. BANKS AND SAVINGS
& LOAN ASSOCIATIONS 02/05/99 1,745,605
CALENERGY CAPITAL TRUST II, 6.25%, CONV. PFD ENERGY 11/17/99 (1,466,629)
Camden Property Trust, $2.25, Ser. A
Cum. Conv. Pfd. Multi-Family Housing (REITS) 02/22/99 (48,438)
CapStar Hotel Corp., Conv. Sub.
Notes, 4.75%, 10/15/04 Hotels 02/08/99 (825,000)
</TABLE>
36
<PAGE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
PORTFOLIO ACTIVITY JANUARY 1, 1999 THROUGH DECEMBER 31, 1999 - CONTINUED
===============================================================================
<TABLE>
<CAPTION>
POSITIONS CLOSED (1/1/99-12/31/99) - CONTINUED
(Gains and losses greater than $1,000,000 are highlighted)
<S> <C> <C> <C>
Conseco, Inc. Insurance 01/26/99 $ 982,863
Conseco Finance Trust IV, 7.00%, Ser.F
Cum. Conv. Pfd. Financial Services 01/28/99 (708,955)
Devon Energy Corp. Energy 11/18/99 881,498
DEVON FINANCING TRUST, $3.25, CONV. PFD. ENERGY 07/29/99 (1,103,354)
Equity Residential Properties Trust,
7.25%, Ser. G Cum. Conv. Pfd Multi-Family Housing (REITS) 08/11/99 (182,506)
EVI, Inc., 5.00%, Ser. 144A Conv. Pfd. Energy 03/05/99 (2,018,863)
Family Golf Centers, Inc., Conv. Sub.
Notes, 5.75%, 10/15/04 Golf 02/16/99 (790,142)
Family Golf Centers, Inc., 144A Conv.
Sub. Notes, 5.75%, 10/15/04 Golf 02/16/99 (389,188)
Hilton Hotels Corp. Hotels 11/17/99 (660,794)
HILTON HOTELS CORP., CONV. SUB. NOTES
5.00%, 05/15/06 HOTELS 11/17/99 (1,154,453)
Kimco Realty Corp. Retail (REIT) 02/05/99 327,533
Liberty Property Trust Industrial 01/26/99 121,401
Mack-Cali Realty Corp. Office/Industrial (REITS) 01/26/99 200,217
MICRON TECHNOLOGY, INC. TECHNOLOGY 11/05/99 1,289,231
Micron Technology, Inc., Conv. Sub.
Notes, 7.00%, 07/01/04 Technology 11/05/99 385,981
Noble Affiliates, Inc. Energy 02/05/99 (516,994)
PARKER DRILLING CORP., CONV. SUB. NOTES,
5.50%, 08/01/04 DRILLING SERVICES 04/21/99 (2,014,913)
Patriot American Hospitality Inc. Hotels (REITS) 02/05/99 (121,779)
Republic National Bank NY, Conv.
Sr. Notes, 1.875%, 08/12/02 Financial Services 08/12/99 (921,763)
RJR Nabisco Holdings Corp. Consumer Products 03/04/99 (322,850)
Rouse Co., Conv. Sub. Deb., 5.75%, 07/23/02 Real Estate Development 05/24/99 (212,760)
ROUSE CO., $3.00, SER. B CONV. PFD. DIVERSIFIED (REITS) 11/17/99 (1,499,309)
Unocal Capital Trust, 6.25%, Conv. Pfd. Energy 03/17/99 (403,430)
U.S. BANCORP BANKS AND SAVINGS
& LOAN ASSOCIATIONS 02/23/99 1,806,451
U.S. RESTAURANT PROPERTIES, 7.72%,
SER. A CUM. CONV. PFD. RESTAURANT (REITS) 12/08/99 (2,974,658)
Vornado Operating, Inc. Real Estate Development 02/05/99 (25,716)
WASTE MANAGEMENT, INC. WASTE MANAGEMENT SERVICES 11/18/99 (1,992,505)
Waste Management, Inc., Conv., Sub. Notes,
4.00%, 02/01/02 Waste Management Services 11/17/99 (370,254)
WASTE MANAGEMENT, INC., CONV. SUB. NOTES,
2.00%, 01/24/05 WASTE MANAGEMENT SERVICES 08/23/99 (1,052,750)
WELLS FARGO CO. DIVERSIFIED FINANCIAL SERVICES 03/17/99 1,023,189
Xerox Corp., 144A Conv. Sub. Notes,
Zero Cpn., 04/12/18 Industrial 11/17/99 (584,139)
</TABLE>
37
<PAGE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS CONVERTIBLE SECURITIES FUND CLASS A
SHARES AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS A SHARES
(This calculation includes an initial sales charge of 4 3/4%.)
One Year .......................... 7.62%
Five Year ......................... 17.38%
Life of Class (May 1, 1992
through December 31, 1999)...... 14.13%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class A shares of Davis Convertible Securities Fund ("DCSF-A") on May 1,
1992 (inception of Fund) and paid a 4 3/4% sales charge. As the chart shows, by
December 31, 1999 the value of your investment would have grown to $27,565 - a
175.65% increase on your initial investment. For comparison, the Standard and
Poor's 500 Stock Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DCSF-A
5/1/92 $10,000 $9,525
12/31/92 $10,802 $10,764
12/31/93 $11,886 $12,621
12/31/94 $12,047 $11,773
12/31/95 $16,558 $14,914
12/31/96 $20,350 $19,308
12/31/97 $27,130 $24,846
12/31/98 $34,867 $24,400
12/31/99 $42,194 $27,565
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Convertible Securities Fund contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
38
<PAGE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS CONVERTIBLE SECURITIES FUND CLASS B
SHARES AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS B SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year .................................. 8.01%
Life of Class (February 3, 1995
through December 31, 1999) ........... 16.97%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class B shares of Davis Convertible Securities Fund ("DCSF-B") on February
3, 1995 (inception of class). As the chart shows, by December 31, 1999 the value
of your investment (less applicable contingent deferred sales charges) would
have grown to $21,584 - a 115.84% increase on your initial investment. For
comparison, the Standard and Poor's 500 Stock Index is also presented on the
chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DCSF-B
2/3/95 $10,000 $10,000
12/31/95 $13,188 $12,233
12/31/96 $16,208 $15,684
12/31/97 $21,608 $19,973
12/31/98 $27,771 $19,449
12/31/99 $33,607 $21,584
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Convertible Securities Fund contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
39
<PAGE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS CONVERTIBLE SECURITIES FUND CLASS C
SHARES AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS C SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year .................................. 10.98%
Life of Class (August 12, 1997
through December 31, 1999) ........... 6.84%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class C shares of Davis Convertible Securities Fund ("DCSF-C") on August
12, 1997 (inception of class). As the chart shows, by December 31, 1999 the
value of your investment would have grown to $11,710 - a 17.10% increase on your
initial investment. For comparison, the Standard and Poor's 500 Stock Index is
also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DCSF-C
8/12/97 $10,000 $10,000
12/31/97 $10,562 $10,738
12/31/98 $13,574 $10,457
12/31/99 $16,426 $11,710
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Convertible Securities Fund contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
40
<PAGE>
DAVIS SERIES, INC.
DAVIS CONVERTIBLE SECURITIES FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS CONVERTIBLE SECURITIES FUND CLASS Y
SHARES AND STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS Y SHARES
(There is no sales charge applicable to this calculation.)
One Year ......................... 13.30%
Life of Class (November 13, 1996
through December 31, 1999)..... 14.75%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class Y shares of Davis Convertible Securities Fund ("DCSF-Y") on November
13, 1996 (inception of class). As the chart shows, by December 31, 1999 the
value of your investment would have grown to $15,386 - a 53.86% increase on your
initial investment. For comparison, the Standard and Poor's 500 Stock Index is
also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DCSF-Y
11/13/96 $10,000 $10,000
12/31/96 $10,183 $10,701
12/31/97 $13,576 $13,782
12/31/98 $17,448 $13,581
12/31/99 $21,114 $15,386
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Convertible Securities Fund contained in this
report represents past performance and assumes that all distributions were
reinvested, and should not be considered as an indication of future performance
from an investment in the Fund today. The investment return and principal value
will fluctuate so that shares may be worth more or less than their original cost
when redeemed.
41
<PAGE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1999
===============================================================================
PORTFOLIO MAKEUP (% OF FUND NET ASSETS)
Short Term Investments, Other Assets & Liabilities 0.7%
Preferred Stocks 11.1%
Common Stocks 88.2%
SECTOR WEIGHTINGS (% OF LONG TERM PORTFOLIO)
Other 2.6%
Hotels 2.8%
Resorts/Theme Parks 5.9%
Real Estate 83.7%
Apartments 5.0%
<TABLE>
<CAPTION>
% OF FUND
TOP 10 HOLDINGS SECTOR NET ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Home Properties of New York, Inc. Apartments (REITS) 5.94%
Alexandria Real Estate Equities, Inc. Office Space (REITS) 5.59%
Vornado Realty Trust Diversified (REITS) 5.06%
Public Storage, Inc. Storage (REITS) 5.03%
Boardwalk Equities, Inc. Apartments 4.97%
Apartment Investment & Management Co. Apartments (REITS) 4.94%
Premier Parks Inc., 7.50%, Conv. Pfd. Resorts/Theme Parks 4.72%
Boston Properties, Inc. Office Space (REITS) 4.53%
Spieker Properties, Inc. Diversified (REITS) 4.33%
Parkway Properties Inc. Office Space (REITS) 3.93%
</TABLE>
42
<PAGE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
PORTFOLIO ACTIVITY - JANUARY 1, 1999 THROUGH DECEMBER 31, 1999
===============================================================================
NEW POSITIONS ADDED (1/1/99-12/31/99)
(Highlighted Positions are those greater than 1.99% of 12/31/99 total net
assets)
<TABLE>
<CAPTION>
DATE OF 1ST % OF 12/31/99
SECURITY SECTOR PURCHASE FUND NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARCHSTONE COMMUNITIES TRUST APARTMENT (REITS) 01/26/99 3.55%
Cornerstone Properties, Inc. Office Space (REITS) 09/20/99 1.43%
DUKE-WEEKS REALTY CORP. DIVERSIFIED (REITS) 07/01/99 3.30%
Echelon International Corp. Real Estate Development 09/09/99 --
Hilton Hotels Corp. Hotels & Lodging 02/05/99 --
Kilroy Realty Corp. Office Space (REITS) 12/09/99 1.14%
Kimco Realty Corp. Shopping Centers (REITS) 11/17/99 1.44%
Liberty Property Trust Diversified (REITS) 10/28/99 1.16%
MARRIOTT INTERNATIONAL, INC. HOTELS & LODGING 02/05/99 2.79%
PREMIER PARKS, INC. 7.50%, CONV. PFD. RESORTS/THEME PARKS 05/28/99 4.72%
Prentiss Properties Trust Industrial (REITS) 06/17/99 --
</TABLE>
POSITIONS CLOSED (1/1/99-12/31/99)
(Gains and losses greater than $1,500,000 are highlighted)
<TABLE>
<CAPTION>
SECURITY SECTOR DATE OF FINAL SALE GAIN/(LOSS)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AMB Property Corp. Diversified (REITS) 02/22/99 $ (816,596)
AMERICAN TOWER CORP. WIRELESS EQUIPMENT/
REAL ESTATE 05/11/99 (1,532,131)
BRANDYWINE REALTY TRUST OFFICE SPACE (REITS) 01/27/99 (1,761,151)
Camden Property Trust Apartments (REITS) 02/03/99 (1,019,912)
Camden Property Trust, $2.25, Ser. A
Cum. Conv. Pfd. Apartments (REITS) 03/25/99 (28,091)
Echelon International Corp. Real Estate Development 12/17/99 (22,005)
Essex Property Trust Apartments (REITS) 02/16/99 (498,120)
GLENBOROUGH REALTY TRUST, INC. DIVERSIFIED (REITS) 11/09/99 (3,437,899)
HILTON HOTELS CORP. HOTELS & LODGING 08/17/99 (2,243,859)
Mack-Cali Realty Corp. Office Space (REITS) 03/02/99 (974,466)
MEDITRUST COMPANIES HEALTH CARE (REITS) 07/29/99 (1,820,564)
MERISTAR HOSPITALITY CORP. HOTELS & LODGING (REITS) 12/15/99 (6,636,249)
MeriStar Hotels & Resorts, Inc. Hotels & Lodging 01/27/99 (97,099)
PATRIOT AMERICAN HOSPITALITY, INC. HOTELS & LODGING (REITS) 02/05/99 (3,456,666)
Post Properties, Inc. Apartments (REITS) 03/22/99 (435,432)
Prentiss Properties Trust Industrial (REITS) 09/20/99 (281,733)
Reckson Associates Realty Corp. Diversified (REITS) 04/21/99 (159,854)
Reckson Services Industries, Inc. Diversified 02/08/99 514,520
ROUSE CO. DIVERSIFIED (REITS) 09/20/99 (3,451,070)
Rouse Co., Conv. Sub. Deb. 5.75%, 07/23/02 Diversified 05/26/99 (127,500)
Rouse Co., $3.00, Ser. B Conv. Pfd. Diversified (REITS) 04/07/99 (654,488)
THE ST. JOE CO. DIVERSIFIED 02/11/99 (2,468,379)
SECURITY CAPITAL GROUP, INC. CLASS B DIVERSIFIED 04/19/99 (6,569,764)
</TABLE>
43
<PAGE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
PORTFOLIO ACTIVITY - JANUARY 1, 1999 THROUGH DECEMBER 31, 1999 - CONTINUED
===============================================================================
POSITIONS CLOSED (1/1/99-12/31/99) - CONTINUED
<TABLE>
<CAPTION>
SECURITY SECTOR DATE OF FINAL SALE GAIN/(LOSS)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Simon Property Group, Inc. Malls (REITS) 01/29/99 $ (53,640)
SL Green Realty Corp. Office Space (REITS) 03/29/99 (1,133,195)
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. HOTELS & LODGING 11/03/99 (11,268,816)
STORAGE USA INC. STORAGE (REITS) 10/08/99 (3,239,388)
U.S. RESTAURANT PROPERTIES, INC. RESTAURANTS (REITS) 07/02/99 (1,639,009)
Vornado Operating, Inc. Diversified 01/27/99 (10,951)
</TABLE>
44
<PAGE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS REAL ESTATE FUND CLASS A SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Period ended December 31, 1999.
CLASS A SHARES
(This calculation includes an initial sales charge of 4 3/4%.)
One Year ............................... (11.93%)
Five Year .............................. 8.45%
Life of Class (January 3, 1994
through December 31, 1999) ........ 8.42%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class A shares of Davis Real Estate Fund ("DREF-A") on January 3, 1994
(inception of Fund) and paid a 4 3/4% sales charge. As the chart shows, by
December 31, 1999 the value of your investment would have grown to $16,233 - a
62.33% increase on your initial investment. For comparison, the Standard and
Poor's 500 Stock Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DREF-A
1/3/94 $10,000 $9,525
12/31/94 $10,158 $10,306
12/31/95 $13,961 $12,131
12/31/96 $17,158 $16,625
12/31/97 $22,875 $20,794
12/31/98 $29,399 $17,559
12/31/99 $35,577 $16,233
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Real Estate Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
45
<PAGE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS REAL ESTATE FUND CLASS B SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS B SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year .................................(11.89%)
Five Year ................................ 8.23%
Life of Class (December 27, 1994
through December 31, 1999) ........... 8.55%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class B shares of Davis Real Estate Fund ("DREF-B") on December 27, 1994
(inception of class). As the chart shows, by December 31, 1999 the value of your
investment (less applicable contingent deferred sales charges) would have grown
to $15,088 - a 50.88% increase on your initial investment. For comparison, the
Standard and Poor's 500 Stock Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DREF-B
12/27/94 $10,000 $10,000
12/31/94 $10,003 $10,089
12/31/95 $13,749 $11,741
12/31/96 $16,897 $15,968
12/31/97 $22,526 $19,781
12/31/98 $28,951 $16,375
12/31/99 $35,035 $15,088
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Real Estate Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
46
<PAGE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS REAL ESTATE FUND CLASS C SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS C SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year .................................(9.22%)
Life of Class (August 13, 1997
through December 31, 1999) ...........(6.43%)
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class C shares of Davis Real Estate Fund ("DREF-C") on August 13, 1997
(inception of class). As the chart shows, by December 31, 1999 the value of your
investment would have been $8,535 - a 14.65% decrease on your initial
investment. For comparison, the Standard and Poor's 500 Stock Index is also
presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DREF-C
8/13/97 $10,000 $10,000
12/31/97 $10,613 $11,112
12/31/98 $13,640 $9,312
12/31/99 $16,506 $8,535
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Real Estate Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
47
<PAGE>
DAVIS SERIES, INC.
DAVIS REAL ESTATE FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS REAL ESTATE FUND CLASS Y SHARES AND
STANDARD & POOR'S 500 STOCK INDEX
===============================================================================
Average Annual Total Return For the Period ended December 31, 1999.
CLASS Y SHARES
(There is no sales charge applicable to this calculation.)
One Year ............................ (7.21%)
Life of Class (November 8, 1996
through December 31, 1999) ...... 3.46%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class Y shares of Davis Real Estate Fund ("DREF-Y") on November 8, 1996
(inception of class). As the chart shows, by December 31, 1999 the value of your
investment would have grown to $11,129 - a 11.29% increase on your initial
investment. For comparison, the Standard and Poor's 500 Stock Index is also
presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
S & P 500 DREF-Y
11/8/96 $10,000 $10,000
12/31/96 $10,188 $11,289
12/31/97 $13,582 $14,145
12/31/98 $17,455 $11,994
12/31/99 $21,123 $11,129
Standard & Poor's 500 Stock Index is an unmanaged index which has no specific
investment objective. The index used includes net dividends reinvested, but does
not take into account any sales charge. Investments cannot be made directly into
the index.
The performance data for Davis Real Estate Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
48
<PAGE>
DAVIS SERIES, INC.
DAVIS GOVERNMENT BOND FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GOVERNMENT BOND FUND CLASS A SHARES
AND THE LEHMAN BROTHERS INTERMEDIATE TERM U.S. TREASURY SECURITIES INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS A SHARES
(This calculation includes an initial sales charge of 4 3/4%.)
One Year .................................... (8.00%)
Five Year ................................... 4.04%
Life of Class (December 1, 1994
through December 31, 1999) .............. 4.01%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class A shares of Davis Government Bond Fund ("DGBF-A") on December 1,
1994 (inception of class) and paid a 4 3/4% sales charge. As the chart shows, by
December 31, 1999 the value of your investment would have grown to $12,213 - a
22.13% increase on your initial investment. For comparison, the Lehman Brothers
Intermediate Term U.S. Treasury Securities Index is also presented on the chart
below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
Lehman Index DGBF-A
12/1/94 $10,000 $9,525
12/31/94 $10,032 $9,539
12/31/95 $11,485 $10,666
12/31/96 $11,941 $11,029
12/31/97 $12,856 $11,902
12/31/98 $13,967 $12,653
12/31/99 $14,029 $12,213
The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is an
unmanaged index which has no specific investment objective. Investments cannot
be made directly into the index.
The performance data for Davis Government Bond Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that shares may be worth more or less than their original cost when
redeemed.
49
<PAGE>
DAVIS SERIES, INC.
DAVIS GOVERNMENT BOND FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GOVERNMENT BOND FUND CLASS B SHARES
AND THE LEHMAN BROTHERS INTERMEDIATE TERM U.S. TREASURY SECURITIES INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS B SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year ............................... (7.78%)
Five Years ............................. 3.92%
Ten Years .............................. 4.60%
$10,000 INVESTED OVER TEN YEARS. Let's say you invested $10,000 in Davis Series,
Inc., Class B shares of Davis Government Bond Fund ("DGBF-B") on December 31,
1989. As the chart shows, by December 31, 1999 the value of your investment
would have grown to $15,690 - a 56.90% increase on your initial investment. For
comparison, the Lehman Brothers Intermediate Term U.S. Treasury Securities Index
is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
Lehman Index DGBF-B
12/31/89 $10,000 $10,000
12/31/90 $10,956 $10,611
12/31/91 $12,506 $11,923
12/31/92 $13,377 $12,418
12/31/93 $14,482 $12,876
12/31/94 $14,185 $12,751
12/31/95 $16,240 $14,105
12/31/96 $16,884 $14,497
12/31/97 $18,178 $15,529
12/31/98 $19,749 $16,365
12/31/99 $19,837 $15,690
The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is an
unmanaged index which has no specific investment objective. Investments cannot
be made directly into the index.
The performance data for Davis Government Bond Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that the shares may be worth more or less than their original cost
when redeemed.
50
<PAGE>
DAVIS SERIES, INC.
DAVIS GOVERNMENT BOND FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GOVERNMENT BOND FUND CLASS C SHARES AND
THE LEHMAN BROTHERS INTERMEDIATE TERM U.S. TREASURY SECURITIES INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS C SHARES
(This calculation includes any applicable contingent deferred sales charge.)
One Year ..................................(5.06%)
Life of Class (August 19, 1997
through December 31, 1999) ........... 1.69%
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class C shares of Davis Government Bond Fund ("DGBF-C") on August 19, 1997
(inception of class). As the chart shows, by December 31, 1999 the value of your
investment would have grown to $10,405 - an 4.05% increase on your initial
investment. For comparison, the Lehman Brothers Intermediate Term U.S. Treasury
Securities Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
Lehman Index DGBF-C
8/19/97 $10,000 $10,000
12/31/97 $10,319 $10,297
12/31/98 $11,211 $10,855
12/31/99 $11,260 $10,405
The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is an
unmanaged index which has no specific investment objective. Investments cannot
be made directly into the index.
The performance data for Davis Government Bond Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that the shares may be worth more or less than their original cost
when redeemed.
51
<PAGE>
DAVIS SERIES, INC.
DAVIS GOVERNMENT BOND FUND
COMPARISON OF DAVIS SERIES, INC. - DAVIS GOVERNMENT BOND FUND CLASS Y SHARES AND
THE LEHMAN BROTHERS INTERMEDIATE TERM U.S. TREASURY SECURITIES INDEX
===============================================================================
Average Annual Total Return for the Periods ended December 31, 1999.
CLASS Y SHARES
(There is no sales charge applicable to this calculation.)
One Year ..................................(2.73%)
Life of Class (September 1, 1998
through December 31, 1999) ...........(0.89%)
$10,000 INVESTED AT INCEPTION. Let's say you invested $10,000 in Davis Series,
Inc., Class Y shares of Davis Government Bond Fund ("DGBF-Y") on September 1,
1998 (inception of class). As the chart shows, by December 31, 1999 the value of
your investment would have been $9,881 - an 1.19% decrease on your initial
investment. For comparison, the Lehman Brothers Intermediate Term U.S. Treasury
Securities Index is also presented on the chart below.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
Lehman Index DGBF-Y
8/31/98 $10,000 $10,000
12/31/98 $10,266 $10,159
12/31/99 $10,311 $9,881
The Lehman Brothers Intermediate Term U.S. Treasury Securities Index is an
unmanaged index which has no specific investment objective. Investments cannot
be made directly into the index.
The performance data for Davis Government Bond Fund contained in this report
represents past performance and assumes that all distributions were reinvested,
and should not be considered as an indication of future performance from an
investment in the Fund today. The investment return and principal value will
fluctuate so that the shares may be worth more or less than their original cost
when redeemed.
52
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS GROWTH OPPORTUNITY FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=============================================================================================================
COMMON STOCK - (98.70%)
<S> <C> <C>
ADVERTISING AGENCIES - (6.26%)
500,000 WPP Group PLC .............................................................. $ 7,834,206
-------------
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (0.64%)
24,000 Golden West Financial Corp..................................................... 804,000
-------------
BUILDING MATERIALS - (5.51%)
40,000 Martin Marietta Materials, Inc................................................. 1,640,000
160,000 Masco Corp..................................................................... 4,060,000
30,000 Vulcan Materials Co............................................................ 1,198,125
-------------
6,898,125
CAPITAL EQUIPMENT - (10.76%)
48,500 ASM Lithography Holding N.V.*.................................................. 5,495,656
65,000 Novellus Systems, Inc.*........................................................ 7,964,531
-------------
13,460,187
COMPUTER NETWORKING SYSTEMS- (3.06%)
85,000 NCR Corp.*..................................................................... 3,219,375
2,000 Sycamore Networks, Inc.*....................................................... 609,625
-------------
3,829,000
COMPUTER SOFTWARE - (1.74%)
7,000 Advent Software, Inc.*......................................................... 448,219
52,500 SAGA SYSTEMS, Inc.*............................................................ 1,046,719
22,500 The Santa Cruz Operation, Inc.*................................................ 682,734
-------------
2,177,672
DIVERSIFIED - (0.18%)
82,500 Crescent Operating, Inc.*...................................................... 221,719
-------------
ELECTRONICS - (14.60%)
32,000 Agilent Technologies, Inc.*.................................................... 2,474,000
29,000 Dallas Semiconductor Corp...................................................... 1,868,687
51,500 Intel Corp. ................................................................... 4,237,484
30,000 Micron Technology, Inc.*....................................................... 2,332,500
130,000 Molex, Inc..................................................................... 7,365,313
-------------
18,277,984
FINANCIAL SERVICES - (11.28%)
103,000 Capital One Financial Corp..................................................... 4,963,312
40,000 Donaldson, Lufkin & Jenrette, Inc.............................................. 1,935,000
42,700 Fannie Mae .................................................................... 2,666,081
50,000 Providian Financial Corp....................................................... 4,553,125
-------------
14,117,518
HOTELS & MOTELS - (2.02%)
80,000 Marriott International, Inc.................................................... 2,525,000
-------------
INDUSTRIAL - (2.48%)
60,000 Sealed Air Corp.*.............................................................. 3,108,750
-------------
</TABLE>
53
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS GROWTH OPPORTUNITY FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=============================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
LIFE INSURANCE - (1.56%)
41,500 AFLAC Inc...................................................................... $ 1,958,281
-------------
PHARMACEUTICALS - (2.60%)
32,800 Sepracor, Inc.*................................................................ 3,259,500
-------------
PROPERTY/CASUALTY INSURANCE - (9.54%)
60,000 Cincinnati Financial Corp...................................................... 1,865,625
42,000 Everest Reinsurance Holdings, Inc.............................................. 937,125
60,000 FPIC Insurance Group, Inc.* ................................................... 999,375
75,000 Horace Mann Educators Corp..................................................... 1,471,875
6,000 Markel Corp.*.................................................................. 930,000
17,500 Progressive Corp. (Ohio)....................................................... 1,279,688
57,000 Transatlantic Holdings, Inc.................................................... 4,449,563
-------------
11,933,251
PUBLISHING - (3.21%)
25,000 Dow Jones & Co., Inc........................................................... 1,700,000
42,000 Tribune Co..................................................................... 2,312,625
-------------
4,012,625
TECHNOLOGY - (13.26%)
60,000 Lexmark International Group, Inc.*............................................. 5,430,000
213,500 Novell, Inc.*.................................................................. 8,519,984
45,000 Symantec Corp.*................................................................ 2,642,344
-------------
16,592,328
TELECOMMUNICATIONS - (7.04%)
200,000 Globalstar Telecommunications Ltd*............................................. 8,806,250
-------------
THEME PARKS - (2.96%)
128,200 Premier Parks Inc.*............................................................ 3,701,775
-------------
Total Common Stock - (identified cost $84,201,609).................. 123,518,171
-------------
</TABLE>
54
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS GROWTH OPPORTUNITY FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (1.84%)
$ 2,308,000 State Street Corporation Repurchase Agreement, 2.75%, 01/03/000, dated
12/31/99, repurchase value of $2,308,529 (collateralized by $2,455,000
par value Fannie Mae Discount Note, Zero Cpn., 07/07/00,
market value $2,378,281) - (identified cost $2,308,000)...................... $ 2,308,000
--------------
Total Investments - (100.54%) - (identified cost $86,509,609) - (a)............ 125,826,171
Liabilities Less Other Assets - (0.54%)........................................ (674,949)
--------------
Net Assets - (100%)................................................. $ 125,151,222
==============
*Non-Income Producing Security
(a) Aggregate cost for Federal Income Tax purposes is $86,509,609. At December
31, 1999 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation...................................................... $ 45,689,798
Unrealized depreciation..................................................... (6,373,236)
--------------
Net unrealized appreciation ........................................ $ 39,316,562
==============
</TABLE>
(b) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is an affiliate, as defined in the Investment
Company Act of 1940, at or during the year ended December 31, 1999. The
securities listed below are not affiliates as of December 31, 1999. Transactions
during the period in which the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1998 Additions Reductions December 31, 1999 Income
- -------- ----------------- --------- ---------- ----------------- ------
<S> <C> <C> <C> <C> <C>
Crescent Operating, Inc. - 185,000 102,500 82,500 -
RLI Corp. - 20,000 20,000 - $ 5,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
MORTGAGES - (36.53%)
<S> <C> <C>
FANNIE MAE - MORTGAGE POOLS - (23.23%)
$ 881,886 5.50%, 02/01/09 Pool No. 252317.............................................. $ 824,017
4,211,105 7.00%, 09/01/12 Pool No. 313700.............................................. 4,165,036
4,933,438 6.50%, 08/01/13 Pool No. 251901.............................................. 4,790,072
2,166,409 6.50%, 02/01/14 Pool No. 323614.............................................. 2,103,453
-------------
Total Fannie Mae - (identified cost $12,048,493)....................... 11,882,578
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
- MORTGAGE POOLS - (13.30%)
6,987,874 7.00%, 10/15/24 Pool No. 780385 - (identified cost $6,907,623)............... 6,804,442
-------------
Total Mortgages - (identified cost $18,956,116)..................... 18,687,020
-------------
U.S. TREASURY - (34.58%)
5,000,000 United States Treasury Notes, 5.625%, 09/30/01............................... 4,950,000
4,000,000 United States Treasury Notes, 6.00%, 08/15/04................................ 3,937,880
4,000,000 United States Treasury Notes, 5.875%, 11/15/05............................... 3,882,240
5,000,000 United States Treasury Notes, 6.25%, 02/15/07................................ 4,917,450
-------------
Total U.S. Treasury - (identified cost $18,061,318)................. 17,687,570
-------------
GOVERNMENT AGENCY - (26.99%)
3,000,000 Fannie Mae, 6.50%, 08/15/04.................................................. 2,957,850
2,000,000 Federal Home Loan Bank, 7.20%, 05/05/04...................................... 1,993,040
3,000,000 Freddie Mac, 5.75%, 06/15/01................................................. 2,971,260
3,000,000 Freddie Mac, 5.50%, 05/15/02................................................. 2,925,990
3,000,000 Freddie Mac, 7.625%, 09/09/09................................................ 2,959,410
-------------
Total Government Agency - (identified cost $14,012,600)............. 13,807,550
-------------
SHORT TERM INVESTMENTS - (5.19%)
2,655,000 State Street Corporation Repurchase Agreement, 2.75%, 01/03/00, dated
12/31/99, repurchase value of $2,655,608 (collateralized by $2,825,000
par value Fannie Mae Discount Note, Zero Cpn., 07/07/00,
market value $2,736,719) - (identified cost $2,655,000)...................... 2,655,000
-------------
Total Investments - (103.29%) - (identified cost $53,685,034) (a)............ 52,837,140
Liabilities Less Other Assets - (3.29%)................................... (1,682,862)
---------------
Net Assets - (100%) ............................................... $ 51,154,278
===============
(a) Aggregate cost for Federal Income Tax purposes is $53,685,034. At December
31, 1999 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation...................................................... $ -
Unrealized depreciation...................................................... (847,894)
-------------
Net unrealized depreciation......................................... $ (847,894)
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
FANNIE MAE - (20.15%)
$ 5,000,000 5.65%, 01/11/00 Discount Note................................................ $ 4,992,153
145,000 5.65%, 01/12/00 Medium Term Note............................................. 144,781
12,000,000 5.54%, 01/18/00 Medium Term Note (b)......................................... 11,997,680
2,755,000 4.82%, 01/28/00 Medium Term Note............................................. 2,752,384
14,970,000 5.43%, 02/07/00 Discount Note................................................ 14,886,455
20,000,000 5.53%, 03/23/00 Medium Term Note............................................. 19,997,536
11,155,000 9.05%, 04/01/00.............................................................. 11,253,252
4,000,000 6.59%, 04/17/00 Medium Term Note............................................. 4,009,824
6,000,000 4.98%, 04/20/00 Medium Term Note............................................. 5,986,831
10,000,000 5.12%, 05/12/00 Medium Term Note............................................. 9,978,331
2,000,000 5.67%, 05/26/00 Medium Term Note............................................. 1,998,415
1,000,000 5.67%, 07/21/00 Medium Term Note............................................. 999,137
3,832,000 5.50%, 07/26/00 Medium Term Note............................................. 3,824,877
4,000,000 5.62%, 08/09/00 Medium Term Note (b)......................................... 3,998,782
6,500,000 5.934%, 09/06/00 (b)......................................................... 6,496,301
340,000 5.86%, 11/07/00 Medium Term Note............................................. 339,360
8,000,000 6.269%, 12/08/00 (b)......................................................... 7,992,674
-------------
Total Fannie Mae - (identified cost $ 111,648,773).................. 111,648,773
-------------
FEDERAL FARM CREDIT BANK - (8.37%)
3,400,000 5.775%, 01/10/00 Discount Note............................................... 3,395,091
2,000,000 5.25%, 01/18/00.............................................................. 1,999,592
4,000,000 6.286%, 03/01/00 Medium Term Note (b)........................................ 3,999,467
4,000,000 6.279%, 03/10/00 Medium Term Note (b)........................................ 3,999,376
10,000,000 5.755%, 07/03/00 (b)......................................................... 9,985,022
5,000,000 5.95%, 09/01/00 (b).......................................................... 4,999,333
8,000,000 6.316%, 09/01/00 (b)......................................................... 7,998,400
10,000,000 5.635%, 09/15/00 (b)......................................................... 9,997,933
-------------
Total Federal Farm Credit Bank - (identified cost $ 46,374,214)..... 46,374,214
-------------
FEDERAL HOME LOAN BANK - (36.59%)
14,000,000 5.893%, 01/21/00 (b)......................................................... 13,998,439
35,000,000 5.00%, 01/28/00 Discount Note................................................ 34,868,750
5,750,000 5.57%, 02/02/00 Discount Note................................................ 5,721,531
2,100,000 5.45%, 02/25/00 ............................................................. 2,098,308
1,000,000 5.15%, 03/08/00 ............................................................. 998,966
9,500,000 5.16%, 03/08/00 ............................................................. 9,490,300
350,000 5.02%, 03/22/00.............................................................. 349,204
3,500,000 5.65%, 04/07/00 ............................................................. 3,498,071
10,000,000 5.075%, 04/28/00............................................................. 9,980,642
9,000,000 6.003%, 04/28/00 (b)......................................................... 8,995,092
10,000,000 5.05%, 05/19/00.............................................................. 9,971,277
5,000,000 5.26%, 05/26/00.............................................................. 4,989,287
</TABLE>
57
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS GOVERNMENT MONEY MARKET FUND-CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
FEDERAL HOME LOAN BANK - CONTINUED
$ 10,000,000 5.56%, 05/30/00 Discount Note................................................ $ 9,997,911
9,500,000 5.873%, 06/09/00 (b)......................................................... 9,486,561
305,000 5.67%, 06/12/00 ............................................................. 304,567
1,000,000 4.985%, 06/23/00 ............................................................ 994,608
18,000,000 5.56%, 07/14/00 ............................................................. 17,972,013
10,000,000 5.62%, 08/03/00 (b).......................................................... 9,768,333
5,000,000 6.04%, 09/01/00 ............................................................. 4,999,870
3,500,000 5.875%, 09/07/00 .......................................................... 3,498,234
10,000,000 6.323%, 09/21/00 (b)......................................................... 9,997,869
8,000,000 5.924%, 10/04/00 (b)......................................................... 7,996,610
12,000,000 5.15%, 10/13/00 (b).......................................................... 12,000,000
10,000,000 6.263%, 10/25/00 (b)......................................................... 9,990,368
510,000 5.00%, 11/24/00 ............................................................. 505,315
250,000 5.88%, 11/28/00.............................................................. 249,589
-------------
Total Federal Home Loan Bank - (identified cost $ 202,721,715)...... 202,721,715
-------------
FREDDIE MAC - (31.76%)
5,000,000 5.52%, 01/03/00 Discount Note................................................ 4,998,467
5,000,000 5.50%, 01/04/00 Discount Note................................................ 4,997,708
9,150,000 5.45%, 01/05/00 Discount Note................................................ 9,144,459
8,000,000 5.244%, 01/06/00 Discount Note............................................... 7,994,173
1,316,000 5.45%, 01/10/00 Discount Note................................................ 1,314,207
3,684,000 5.52%, 01/10/00 Discount Note................................................ 3,678,916
5,000,000 5.60%, 01/11/00 Discount Note................................................ 4,992,222
5,000,000 5.47%, 01/12/00 Discount Note................................................ 4,991,643
5,000,000 5.51%, 01/13/00 Discount Note................................................ 4,990,817
10,245,000 5.42%, 01/14/00 Discount Note................................................ 10,224,948
35,000,000 5.43%, 01/20/00 Discount Note................................................ 34,899,696
11,300,000 5.35%, 01/27/00 Discount Note................................................ 11,254,828
19,852,000 5.40%, 02/02/00 Discount Note................................................ 19,756,711
22,995,000 5.395%, 02/25/00 Discount Note............................................... 22,805,467
10,000,000 5.60%, 02/29/00 Discount Note................................................ 9,908,222
20,000,000 5.815%, 01/10/01 Medium Term Note (b)........................................ 19,981,000
-------------
Total Freddie Mac - (identified cost $ 175,933,484)................. 175,933,484
-------------
SALLIE MAE - (5.86%)
12,000,000 6.063%, 06/30/00 Medium Term Note (b)........................................ 11,997,754
20,000,000 6.163%, 11/15/00 Medium Term Note (b)........................................ 19,991,458
470,000 5.70%, 11/30/00 Medium Term Note............................................. 468,325
-------------
Total Sallie Mae - (identified cost $ 32,457,537).................. 32,457,537
-------------
</TABLE>
58
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS GOVERNMENT MONEY MARKET FUND-CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
==============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (0.40%)
$ 2,205,000 State Street Corporation Repurchase Agreement, 2.75%, 01/03/00, dated
12/31/99, repurchase value of $2,205,505 (collateralized by $2,345,000
par value Fannie Mae Discount Note, Zero Cpn., 07/07/00,
market value $2,271,719) - (identified cost $2,205,000)...................... $ 2,205,000
--------------
Total Investments - (103.13%) - (identified cost $ 571,340,723) - (a)........ 571,340,723
Liabilities Less Other Assets - (3.13%)...................................... (17,363,804)
--------------
Net Assets - (100%)................................................. $ 553,976,919
==============
</TABLE>
(a) Aggregate cost for Federal Income Tax Purposes is $ 571,340,723.
(b) The interest rates on floating rate securities, shown as of December 31,
1999, 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
59
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS FINANCIAL FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=============================================================================================================
COMMON STOCK - (99.55%)
<S> <C> <C>
BANKS AND SAVINGS & LOAN ASSOCIATIONS - (14.05%)
279,050 Bank of East Asia Ltd........................................................ $ 777,183
810,000 Bank of New York Co., Inc.................................................... 32,400,000
60,000 Fifth Third Bancorp.......................................................... 4,400,625
435,000 Golden West Financial Corp................................................... 14,572,500
329,448 Lloyds TSB Group PLC......................................................... 4,092,290
90,000 State Street Corp............................................................ 6,575,625
416,000 U.S. Bancorp ................................................................ 9,906,000
1,326,330 Wells Fargo & Co............................................................. 53,633,469
-------------
126,357,692
-------------
BUILDING MATERIALS - (6.44%)
598,300 Martin Marietta Materials, Inc............................................... 24,530,300
750,800 Masco Corp................................................................... 19,051,550
360,000 Vulcan Materials Co.......................................................... 14,377,500
-------------
57,959,350
-------------
CONSUMER PRODUCTS - (1.24%)
480,000 Philip Morris Cos., Inc...................................................... 11,130,000
-------------
DIVERSIFIED - (3.73%)
597 Berkshire Hathaway, Inc. (Class A)*.......................................... 33,491,700
24 Berkshire Hathaway, Inc. (Class B)*.......................................... 43,920
-------------
33,535,620
-------------
DIVERSIFIED MANUFACTURING - (3.93%)
910,000 Tyco International Ltd....................................................... 35,376,250
-------------
FINANCIAL SERVICES - (63.25%)
INSURANCE - (19.13%)
226,531 American International Group, Inc............................................ 24,493,664
41,800 Chubb Corp................................................................... 2,353,863
487,500 Cincinnati Financial Corp.................................................... 15,158,203
378,600 Everest Reinsurance Holdings, Inc............................................ 8,447,513
337,300 FPIC Insurance Group, Inc.*.................................................. 5,618,153
854,500 Horace Mann Educators Corp................................................... 16,769,563
7,500 Markel Corp.*................................................................ 1,162,500
210,000 Progressive Corp. (Ohio)..................................................... 15,356,250
470,100 ReliaStar Financial Corp..................................................... 18,422,044
761,700 Transatlantic Holdings Inc................................................... 59,460,206
141,000 Travelers Property Casualty Corp. Class A.................................... 4,829,250
-------------
172,071,209
-------------
</TABLE>
60
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS FINANCIAL FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES /PRINCIPAL SECURITY (NOTE 1)
============================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
FINANCIAL SERVICES - CONTINUED
OTHER FINANCIAL SERVICES - (44.12%)
673,000 American Express Co.......................................................... $ 111,886,250
685,000 Capital One Financial Corp................................................... 33,008,437
225,000 Charles Schwab Corp.......................................................... 8,634,375
1,162,500 Citigroup, Inc............................................................... 64,591,406
369,400 Donaldson, Lufkin & Jenrette Inc............................................. 17,869,725
370,000 Freddie Mac.................................................................. 17,413,125
1,239,500 Household International, Inc................................................. 46,171,375
240,600 Legg Mason, Inc.............................................................. 8,721,750
500,000 MBNA Corp.................................................................... 13,625,000
143,950 Morgan Stanley Dean Witter & Co............................................. 20,548,863
597,500 Providian Financial Corp..................................................... 54,409,844
--------------
396,880,150
--------------
REAL ESTATE DEVELOPMENT - (0.02%)
146,578 HomeFed Corp.*............................................................... 130,546
--------------
RESTAURANT & FOOD - (3.27%)
730,500 McDonald's Corp.............................................................. 29,448,281
--------------
TECHNOLOGY - (2.79%)
50,000 Hewlett-Packard Co........................................................... 5,696,875
180,000 International Business Machines Corp......................................... 19,440,000
--------------
25,136,875
--------------
TRANSPORTATION - (0.83%)
100,000 Kansas City Southern Industries, Inc......................................... 7,462,500
--------------
Total Common Stock - (identified cost $670,900,042)................. 895,488,473
--------------
</TABLE>
61
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS FINANCIAL FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL SECURITY (NOTE 1)
=============================================================================================================
<S> <C> <C>
CONVERTIBLE BOND - (0.19%)
$ 750,000 Cincinnati Financial Corp., Sr. Deb., Conv., 5.50%, 05/01/02
- (identified cost $980,625)........................................ $ 1,681,875
--------------
Total Investments - (99.74%) - (identified cost $671,880,667) - (a).......... 897,170,348
Other Assets Less Liabilities - (0.26%)...................................... 2,343,615
--------------
Net Assets - (100%) ............................................... $ 899,513,963
==============
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $671,880,667. At December
31, 1999 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation...................................................... $ 263,940,832
Unrealized depreciation...................................................... (38,651,151)
--------------
Net unrealized appreciation......................................... $ 225,289,681
==============
</TABLE>
(b) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is an affiliate, as defined in the Investment
Company Act of 1940, at or during the year ended December 31, 1999. The security
listed below is not an affiliate as of December 31, 1999. Transactions during
the period in which the issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1998 Additions Reductions December 31, 1999 Income
- -------- ----------------- --------- ---------- ----------------- ------
<S> <C> <C> <C> <C> <C>
RLI Corp. 513,075 - 513,075 - $ 472,586
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS CONVERTIBLE SECURITIES FUND
<TABLE>
<CAPTION>
VALUE
SHARES /PRINCIPAL SECURITY (NOTE 1)
============================================================================================================
CONVERTIBLE PREFERRED STOCK - (32.29%)
<S> <C> <C>
COMMUNICATIONS - (2.58%)
102,400 Loral Space & Communications, Inc., 6.00%, Pfd. Conv. Ser. C................. $ 6,617,600
-------------
DIVERSIFIED (REIT) - (3.73%)
400,000 General Growth Properties, 7.25%, Cum. Conv. Pfd............................. 8,000,000
38,200 Glenborough Realty Trust, 7.75%, Ser. A Conv. Pfd............................ 532,412
21,700 Vornado Realty Trust, 6.50%, Ser. A Conv. Pfd................................ 1,011,763
-------------
9,544,175
-------------
ENERGY - (6.89%)
415,600 Kerr-McGee Corp., 5.50%, 08/02/04 Series, Conv. Pfd.......................... 13,714,800
59,600 Tosco Financing Trust, 5.75%, Conv. Pfd...................................... 2,838,450
22,800 Tosco Financing Trust, 5.75%, Ser. 144A Conv. Pfd. (b)....................... 1,085,850
-------------
17,639,100
-------------
HOTELS - (0.34%)
27,900 Host Marriott Financial Trust, 6.75%, Ser. 144A Conv. Pfd. (b)............... 875,363
-------------
INDUSTRIAL - (4.79%)
242,900 Sealed Air Corp., $2.00, Ser. A Cum. Conv. Pfd. New.......................... 12,266,450
-------------
MULTI-FAMILY HOUSING (REIT) - (1.58%)
171,500 Equity Residential Properties Trust, 7.00%, Ser. E Conv. Pfd................. 4,051,687
-------------
OFFICE/INDUSTRIAL (REIT) - (7.32%)
160,000 Crescent Real Estate Equities, 6.75%, Ser. A Conv. Pfd....................... 2,420,000
153,000 Equity Office Properties Trust, 5.25%, Ser. B Cum. Conv. Pfd................. 6,043,500
230,000 Reckson Assoc. Realty, 7.625%, Ser. A Cum. Conv. Pfd......................... 4,571,250
240,000 SL Green Realty Corp., 8.00%, Cum. Conv. Pfd................................. 5,700,000
-------------
18,734,750
-------------
THEME PARKS - (3.42%)
162,200 Premier Parks, Inc., 7.50%, Cum. Conv. Pfd................................... 8,758,800
-------------
TRANSPORTATION - (1.64%)
30,500 Canadian National Railway Co., 5.25%, 06/30/29 Series, Conv. Pfd............. 1,281,000
70,000 Union Pacific Cap. Trust, 6.25%, Ser. 144A Cum. Conv. Pfd. (b)............... 2,913,750
-------------
4,194,750
-------------
Total Convertible Preferred Stock - (identified cost $91,834,697)... 82,682,675
-------------
CONVERTIBLE BONDS - (36.63%)
COMMUNICATIONS - (4.27%)
$ 7,800,000 American Tower Corp., 144A Conv. Notes, 6.25%, 10/15/09 (b).................. 10,949,250
-------------
ENERGY - (2.75%)
11,415,000 Valhi Inc., Conv. Sub. Deb., Zero Cpn., 10/20/07 (d)......................... 7,034,494
-------------
</TABLE>
63
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL /SHARES SECURITY (NOTE 1)
==============================================================================================================
CONVERTIBLE BONDS - CONTINUED
<S> <C> <C>
FINANCIAL SERVICES - (9.43%)
$ 500,000 Alex Brown, Inc., Conv. Sub. Deb., 5.75%, 06/12/01........................... $ 2,223,750
10,000,000 American Express Credit, Conv. Notes, 1.125%, 02/19/03....................... 14,375,000
2,441,000 Bank One Corp., Conv. Deb., 12.75%, 12/01/00 (c)............................. 4,198,520
3,300,000 Bell Atlantic Financial Services, Series 144A, 5.75%, 04/01/03 (b)........... 3,349,500
-------------
24,146,770
-------------
INDUSTRIAL - (4.00%)
7,570,000 IMAX Corp., Conv. Sub. Deb., 5.75%, 04/01/03................................. 10,247,888
-------------
INSURANCE - (6.07%)
8,500,000 American International Group, Inc., Conv. Notes, 2.25%, 07/30/04............. 13,313,125
1,000,000 Cincinnati Financial Corp. Conv. Sub. Deb., 5.50%, 05/01/02.................. 2,242,500
-------------
15,555,625
-------------
MULTI-FAMILY HOUSING (REIT) - (0.23%)
500,000 Camden Property Trust, Conv. Sub. Deb., 7.33%, 04/01/01...................... 583,125
-------------
MULTIMEDIA - (3.29%)
10,700,000 News America Holdings, Conv. Sub. Deb., Zero Cpn., 03/11/13 (d).............. 8,432,991
-------------
TECHNOLOGY - (6.57%)
8,199,000 Hewlett-Packard Co., 144A Conv. Sub. Notes, Zero Cpn., 10/14/17 (b) (d)...... 5,647,061
6,620,000 Motorola, Inc., Conv. Sub. Deb., Zero Cpn., 09/27/13 (d)..................... 11,171,250
-------------
16,818,311
-------------
TRANSPORTATION - (0.02%)
500,000 Florida West Airlines, Inc., 8.00%, 03/25/99+ (c)............................ 40,000
-------------
Total Convertible Bonds - (identified cost $75,294,669)............. 93,808,454
-------------
COMMON STOCK - (25.41%)
BUILDING MATERIALS - (0.94%)
94,606 Masco Corp................................................................... 2,400,628
-------------
DIVERSIFIED FINANCIAL SERVICES - (2.47%)
113,716 Citigroup, Inc............................................................... 6,318,345
-------------
DIVERSIFIED (REITS) - (4.13%)
48,600 Glenborough Realty Trust, Inc................................................ 650,025
305,200 Vornado Realty Trust......................................................... 9,919,000
-------------
10,569,025
-------------
ENERGY - (0.39%)
30,000 MidAmerican Energy Holdings Co.*............................................. 1,010,625
-------------
FINANCIAL SERVICES - (0.87%)
13,400 American Express Co.......................................................... 2,227,750
-------------
</TABLE>
64
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES/PRINCIPAL SECURITY (NOTE 1)
============================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
OFFICE /INDUSTRIAL (REITS) - (0.99%)
58,156 Centerpoint Properties Corp.................................................. $ 2,086,346
17,770 Equity Office Properties Trust............................................... 437,586
-------------
2,523,932
-------------
REAL ESTATE DEVELOPMENT - (0.01%)
38,581 HomeFed Corp.*............................................................... 34,361
-------------
SELF STORAGE (REIT) - (1.44%)
162,121 Public Storage, Inc.......................................................... 3,678,120
-------------
SHOPPING CENTERS (REIT) - (0.13%)
33,333 Mid-Atlantic Realty Trust.................................................... 335,413
-------------
TECHNOLOGY - (12.03%)
106,300 Hewlett -Packard Co. ........................................................ 12,111,556
58,000 Intel Corp................................................................... 4,772,312
20,000 Motorola, Inc................................................................ 2,945,000
103,000 SAP AG-ADR................................................................... 5,362,438
57,916 Texas Instruments, Inc....................................................... 5,610,613
-------------
30,801,919
-------------
TELECOMMUNICATIONS - (0.31%)
32,800 Loral Space & Communications, Ltd.*.......................................... 797,450
-------------
THEME PARKS - (1.34%)
118,900 Premier Parks Inc.*.......................................................... 3,433,238
-------------
TRANSPORTATION - (0.36%)
35,600 Canadian National Railway Co................................................. 936,725
-------------
Total Common Stock - (identified cost $38,957,666).................. 65,067,531
-------------
</TABLE>
65
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS CONVERTIBLE SECURITIES FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL SECURITY (NOTE 1)
============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (5.55%)
$ 14,226,000 Lehman Brothers Repurchase Agreement, 2.80%, 01/03/00, dated 12/31/99,
repurchase value $14,229,319 (collateralized by $14,101,000 par value
U.S. Treasury Nts., 5.625%-8.75%, 08/15/00-05/15/08,
market value $14,511,949) - (identified cost $14,226,000)................... $ 14,226,000
-------------
Total Investments - (99.88%) - (identified cost $220,313,032) - (a).......... 255,784,660
Other Assets Less Liabilities - (0.12%)...................................... 302,447
-------------
Net Assets - (100%) ................................................ $ 256,087,107
=============
*Non-Income Producing Security.
+This security is in default and is not currently paying interest.
(a) Aggregate cost for Federal Income Tax purposes is $220,330,643. At December
31, 1999 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation...................................................... $ 52,790,192
Unrealized depreciation...................................................... (17,336,175)
-------------
Net unrealized appreciation......................................... $ 35,454,017
=============
</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 $24,820,774 and 9.69%
of the Fund's net assets as of December 31, 1999.
(c) Illiquid security. See Note 7 of the Notes to Financial Statements.
(d) As of December 31, 1999 zero coupon bonds represented $32,285,796 or 12.61%
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
66
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS REAL ESTATE FUND
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=============================================================================================================
COMMON STOCK - (88.22%)
<S> <C> <C>
APARTMENTS - (4.97%)
1,819,600 Boardwalk Equities, Inc.*.................................................... $ 15,630,786
-------------
APARTMENTS (REITS) - (24.60%)
390,331 Apartment Investment & Management Co......................................... 15,540,053
545,200 Archstone Communities Trust.................................................. 11,176,600
347,267 Avalon Bay Communities, Inc.................................................. 11,915,599
238,100 Equity Residential Properties Trust.......................................... 10,163,894
411,400 Gables Residential Trust..................................................... 9,873,600
681,200 Home Properties of New York, Inc. ........................................... 18,690,425
-------------
77,360,171
-------------
DIVERSIFIED - (2.65%)
333,715 Crescent Operating, Inc.*.................................................... 896,859
441,300 Trizec Hahn Corp............................................................. 7,446,938
-------------
8,343,797
-------------
DIVERSIFIED (REITS) - (13.85%)
531,600 Duke-Weeks Realty Corp....................................................... 10,366,200
150,400 Liberty Property Trust....................................................... 3,647,200
374,000 Spieker Properties, Inc...................................................... 13,627,625
489,900 Vornado Realty Trust......................................................... 15,921,750
-------------
43,562,775
-------------
GOLF (REITS) - (2.60%)
482,400 Golf Trust of America, Inc. (c).............................................. 8,170,650
-------------
HOTELS & LODGING - (2.79%)
277,700 Marriott International, Inc.................................................. 8,764,906
-------------
INDUSTRIAL (REITS) - (6.36%)
265,100 Centerpoint Properties Corp.................................................. 9,510,462
300,000 Centerpoint Properties Corp. Private (b)..................................... 10,493,437
-------------
20,003,899
-------------
MALLS (REITS) - (0.98%)
109,800 General Growth Properties, Inc............................................... 3,074,400
-------------
OFFICE SPACE (REITS) - (18.15%)
552,300 Alexandria Real Estate Equities, Inc......................................... 17,570,044
457,400 Boston Properties, Inc....................................................... 14,236,575
308,400 Cornerstone Properties, Inc.................................................. 4,510,350
114,100 Crescent Real Estate Equities Co............................................. 2,096,587
109,902 Equity Office Properties Trust............................................... 2,706,337
163,500 Kilroy Realty Corp........................................................... 3,597,000
429,400 Parkway Properties Inc....................................................... 12,372,088
-------------
57,088,981
-------------
REAL ESTATE DEVELOPMENT - (3.33%)
818,400 Catellus Development Corp.*............................................... 10,485,750
-------------
</TABLE>
67
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS REAL ESTATE FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (NOTE 1)
=============================================================================================================
COMMON STOCK - CONTINUED
<S> <C> <C>
RESORTS/THEME PARKS - (1.10%)
21,000 Premier Parks Inc.*......................................................... $ 606,375
158,461 Vail Resorts, Inc.* ........................................................ 2,842,394
-------------
3,448,769
-------------
SHOPPING CENTERS (REITS) - (1.81%)
72,500 JDN Realty Corp.............................................................. 1,169,063
134,000 Kimco Realty Corp............................................................ 4,539,250
-------------
5,708,313
-------------
STORAGE (REITS) - (5.03%)
697,300 Public Storage, Inc.......................................................... 15,819,994
-------------
Total Common Stock - (identified cost $ 296,732,152)................ 277,463,191
-------------
CONVERTIBLE PREFERRED STOCK - (11.05%)
DIVERSIFIED (REITS) - (0.30%)
20,000 Vornado Realty Trust, 6.50%, Ser. A Conv. Pfd................................ 932,500
--------------
MALLS (REITS) - (3.31%)
520,000 General Growth Properties, 7.25%, 07/15/08 Series, Conv. Pfd................. 10,400,000
--------------
MULTI-FAMILY HOUSING (REITS) - (0.33%)
43,700 Equity Residential Properties Trust, 7.00%, Ser. E Conv. Pfd................. 1,032,412
--------------
OFFICE (REITS) - (2.39%)
316,500 SL Green Realty Corp., 8.00%, 04/15/08 Series Cum. Conv. Pfd................. 7,516,875
--------------
RESORTS/THEME PARKS - (4.72%)
275,100 Premier Parks Inc., 7.50%, Conv. Pfd......................................... 14,855,400
--------------
Total Convertible Preferred Stock - (identified cost $39,587,178)... 34,737,187
--------------
</TABLE>
68
<PAGE>
DAVIS SERIES, INC.
SCHEDULES OF INVESTMENTS AT DECEMBER 31, 1999
DAVIS REAL ESTATE FUND - CONTINUED
<TABLE>
<CAPTION>
VALUE
PRINCIPAL SECURITY (NOTE 1)
============================================================================================================
<S> <C> <C>
SHORT TERM INVESTMENTS - (0.79%)
$ 2,483,000 State Street Corporation Repurchase Agreement, 2.75%, 01/03/00, dated
12/31/99, repurchase value of $2,483,569 (collateralized by $2,640,000
par value Fannie Mae Discount Note, Zero Cpn., 07/07/00,
market value $2,557,500) - (identified cost $2,483,000)...................... 2,483,000
--------------
Total Investment - (100.06%) - (identified cost $ 338,802,330) - (a)......... 314,683,378
Liabilities Less Other Assets - (0.06%)...................................... (175,235)
--------------
Net Assets - (100%)............................................................................ $ 314,508,143
==============
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $ 338,802,330. At December
31, 1999 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation..................................................... $ 9,891,714
Unrealized depreciation..................................................... (34,010,666)
--------------
Net unrealized depreciation ........................................ $ (24,118,952)
==============
</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 year ended December 31, 1999. The
aggregate fair value of the securities of affiliated companies held by the Fund
as of December 31, 1999 amounts to $ 8,170,650. Transactions during the period
in which the issuers were affiliates are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares Dividend
Security December 31, 1998 Additions Reductions December 31, 1999 Income
- -------- ----------------- --------- ---------- ----------------- ------
<S> <C> <C> <C> <C> <C>
Crescent Operating, Inc.(d) 21,740 467,375 155,400 333,715 -
Golf Trust of America, Inc. 225,100 289,100 31,800 482,400 879,516
</TABLE>
(d) Not an affiliate as of December 31, 1999.
SEE NOTES TO FINANCIAL STATEMENTS
69
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF ASSETS AND LIABILITIES
At December 31, 1999
<TABLE>
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
----------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
value * (see accompanying
Schedules of Investments)
Unaffiliated companies.. $125,826,171 $52,837,140 $571,340,723 $ 897,170,348 $255,784,660 $ 306,512,728
Affiliated companies.... - - - - - 8,170,650
Cash.................... 27,179 33,081 35,467 4,310,150 18,850 211,093
Receivables:
Dividends and interest. 18,026 619,939 3,618,149 650,664 1,186,742 2,228,053
Capital stock sold..... 285,790 174,617 965,779 2,727,680 467,317 1,443,530
Investments sold....... 18,749 - - - - -
Prepaid expenses........ 3,000 - - 18,364 - 22,298
------------ ----------- ------------ ------------ ------------ ------------
Total assets.... 126,178,915 53,664,777 575,960,118 904,877,206 257,457,569 318,588,352
------------ ----------- ------------ ------------ ------------ ------------
LIABILITIES:
Payables:
Investment securities
purchased............. - 2,023,200 19,981,000 - - -
Capital stock reacquired 818,329 356,521 1,623,394 3,800,446 945,431 3,543,893
Accrued expenses........ 121,151 78,118 322,834 800,510 253,276 319,009
Commissions payable to
distributor (Note 3).. 88,213 52,660 - 762,287 171,755 217,307
Distributions payable... - - 55,971 - - -
------------ ----------- ------------ ------------ ------------ ------------
Total liabilities 1,027,693 2,510,499 21,983,199 5,363,243 1,370,462 4,080,209
------------ ----------- ------------ ------------ ------------ ------------
NET ASSETS (Note 5)........ $125,151,222 $51,154,278 $553,976,919 $899,513,963 $256,087,107 $314,508,143
============ =========== ============ ============ ============ ============
NET ASSETS CONSISTS OF:
Par value of shares of
capital stock............ 57,884 95,146 5,539,769 313,800 101,834 172,127
Additional paid-in capital. 85,387,857 56,470,386 548,437,150 693,708,095 226,842,102 398,947,636
Accumulated net realized
gain (loss).............. 388,919 (4,563,360) - (19,797,613) (6,328,457) (60,492,668)
Net unrealized appreciation
(depreciation) on
investment............... 39,316,562 (847,894) - 225,289,681 35,471,628 (24,118,952)
------------ ----------- ------------ ------------ ------------ ------------
$125,151,222 $51,154,278 $553,976,919 $899,513,963 $256,087,107 $314,508,143
============ =========== ============ ============ ============ ============
</TABLE>
* Including repurchase agreements of $2,308,000, $2,655,000, $2,205,000,
$14,226,000 and $2,483,000 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 $86,509,609, $53,685,034,
$571,340,723, $671,880,667, $220,313,032 and $338,802,330 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
70
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF ASSETS AND LIABILITIES - Continued
At December 31, 1999
<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 .................. $ 67,871,062 $ 18,002,355 $501,418,202 $425,584,411 $117,307,996 $147,835,426
Shares outstanding .......... 3,061,490 3,344,473 501,418,202 14,640,626 4,653,585 8,092,944
Net asset value and redemp-
tion price per share (net
assets/shares outstanding) $ 22.17 $ 5.38 $ 1.00 $ 29.07 $ 25.21 $ 18.27
============ ============ ============ ============ ============ ============
Maximum offering price per
share (100/95.25 of net
asset value) ............. $ 23.28 $ 5.65 $ 1.00 $ 30.52 $ 26.47 $ 19.18
============ ============ ============ ============ ============ ============
CLASS B SHARES
Net assets .................. $ 52,234,258 $ 28,344,090 $ 44,518,330 $376,540,958 $ 86,622,534 $ 93,584,637
Shares outstanding .......... 2,493,470 5,278,012 44,518,330 13,342,960 3,468,327 5,139,415
Net asset value, offering and
redemption price per share
(net assets/shares ....... $ 20.95 $ 5.37 $ 1.00 $ 28.22 $ 24.98 $ 18.21
outstanding) (Note 3) ============ ============ ============ ============ ============ ============
CLASS C SHARES
Net assets .................. $ 5,041,395 $ 4,790,904 $ 8,040,387 $ 89,128,248 $ 18,936,038 $ 29,951,708
Shares outstanding .......... 233,235 888,955 8,040,387 3,113,606 748,037 1,633,163
Net asset value, offering and
redemption price per share
(net assets/shares ....... $ 21.62 $ 5.39 $ 1.00 $ 28.63 $ 25.31 $ 18.34
outstanding) (Note 3) ============ ============ ============ ============ ============ ============
CLASS Y SHARES
Net assets .................. $ 4,507 $ 16,929 -- $ 8,260,346 $ 33,220,539 $ 43,136,372
Shares outstanding .......... 202 3,124 -- 282,766 1,313,449 2,347,213
Net asset value, offering and
redemption price per share
(net assets/shares
outstanding).............. $ 22.31 $ 5.42 -- $ 29.21 $ 25.29 $ 18.38
============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
71
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF OPERATIONS
Year ended December 31, 1999
<TABLE>
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income
(LOSS):
Income:
Dividends
Unaffiliated companies ........... $ 778,446 $ - $ - $ 13,637,407 $ 7,894,033 $ 17,876,636
Affiliated companies ............. - - - - 879,516
Interest ........................... 71,275 3,814,564 27,629,969 75,243 3,194,418 88,699
------------ ----------- ----------- -------------- ------------- ------------
Total income* .......... 849,721 3,814,564 27,629,969 13,712,650 11,088,451 18,844,851
------------ ----------- ----------- -------------- ------------- ------------
Expenses:
Management fees (Note 2) ........... 806,845 304,347 2,529,714 6,133,985 2,003,319 2,683,242
Custodian fees ..................... 57,677 48,630 87,566 163,254 69,576 85,829
Transfer agent fees
Class A ....................... 78,001 37,767 127,437 569,680 101,145 294,448
Class B ....................... 110,843 56,537 73,563 741,557 135,407 281,120
Class C ....................... 13,773 11,747 19,630 160,164 33,142 61,498
Class Y ....................... 50 157 - 13,529 4,088 10,420
Audit fees ......................... 8,207 7,564 12,211 24,032 8,617 13,869
Legal fees ......................... 4,606 3,252 24,306 50,422 13,885 19,945
Accounting fees (Note 2) ........... 6,504 2,496 37,500 14,496 7,500 9,504
Reports to shareholders ............ 30,787 29,828 138,584 313,029 78,220 123,251
Directors' fees and expenses ...... 8,840 5,625 46,456 73,796 24,435 29,800
Registration and filing fees ....... 69,928 68,899 139,225 179,513 86,624 101,550
Miscellaneous ...................... 20,296 7,209 48,810 99,315 32,933 23,150
Distribution plan payments (Note 3)
Class A ....................... 114,740 51,351 - 866,206 227,169 392,768
Class B ....................... 481,629 327,123 - 4,177,902 888,663 1,198,831
Class C ....................... 34,846 65,473 - 957,064 225,161 337,845
------------ ----------- ----------- -------------- ------------- ------------
Total expenses ......... 1,847,572 1,028,005 3,285,002 14,537,944 3,939,884 5,667,070
Expenses paid indirectly
(Note 6)............... (2,118) (997) (3,002) (3,806) (4,951) (5,781)
------------ ----------- ----------- -------------- ------------- ------------
Net expenses ........... 1,845,454 1,027,008 3,282,000 14,534,138 3,934,933 5,661,289
------------ ----------- ----------- -------------- ------------- ------------
Net investment
income (loss) .. (995,733) 2,787,556 24,347,969 (821,488) 7,153,518 13,183,562
------------ ----------- ----------- -------------- ------------- ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from
investment trancstions
Unaffiliated companies........... 28,051,629 (3,856,726) - (13,583,626) 1,735,065 (54,425,825)
Affiliated companies ............ (211,102) - - (4,657,654) - (394,218)
Net change in unrealized appreciation
/(depreciation) of investments .... 3,773,440 (1,425,531) - 5,225,551 21,964,910 8,255,614
------------ ----------- ----------- -------------- ------------- ------------
Net realized and unrealized
Unaffiliated companies .......... 31,613,967 (5,282,257) - (13,015,729) 23,699,975 (46,564,429)
------------ ----------- ----------- -------------- ------------- ------------
Net increase (decrease) in net
assets resulting from
Operations ................. $ 30,618,234 $(2,494,701) $24,347,969 $ (13,837,217) $ 30,853,493 $(33,380,867)
============ =========== =========== ============== ============= ============
*Net of foreign taxes
withheld as follows: ............... $ 2,643 $ - $ - $ 16,152 $ 5,542 $ 6,857
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
72
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year ended December 31, 1999
<TABLE>
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (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) in
net 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 investment
transactions
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 net assets
resulting from capital share
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
73
<PAGE>
DAVIS SERIES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year ended December 31, 1998
<TABLE>
<CAPTION>
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,002,598) $ 1,935,171 $ 24,003,183 $ (632,007) $ 7,885,939 $ 12,331,188
Net realized gain (loss) from
investment transactions .. 6,203,448 52,416 -- (1,754,284) 3,179,282 (5,680,753)
Net change in unrealized
appreciation/(depreciation)
of investments ........... (4,643,587) 97,364 -- 94,092,422 (18,721,504) (78,469,955)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
operations ............... 557,263 2,084,951 24,003,183 91,706,131 (7,656,283) (71,819,520)
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A .................. -- (1,011,026) (22,555,142) -- (4,305,724) (6,590,346)
Class B .................. -- (824,586) (1,203,998) -- (1,892,880) (3,781,620)
Class C .................. -- (117,098) (244,043) -- (530,204) (700,728)
Class Y .................. -- (3,500) -- -- (1,157,131) (1,258,494)
Realized gains from investment
transactions
Class A .................. (2,392,175) -- -- -- (1,495,013) --
Class B .................. (2,818,423) -- -- -- (1,025,386) --
Class C .................. (167,105) -- -- -- (293,996) --
Class Y .................. (3,289) -- -- -- (339,290) --
Return of capital
Class A .................. -- (128,856) -- -- (32,807) (290,164)
Class B .................. -- (105,094) -- -- (14,423) (166,501)
Class C .................. -- (14,924) -- -- (4,040) (30,852)
Class Y .................. -- (446) -- -- (8,818) (55,416)
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease) in net
assets resulting from capital
share transactions (Note 5)
Class A .................. 5,761,804 3,704,166 20,572,302 119,526,856 51,865,638 91,841,839
Class B .................. 1,813,973 23,364,964 24,543,979 190,577,787 60,704,983 61,511,162
Class C .................. 1,312,781 8,011,305 4,412,062 66,688,051 21,650,844 31,122,949
Class Y .................. 3,484 354,057 -- 5,775,012 (3,323,361) 16,688,859
------------ ------------ ------------ ------------ ------------ ------------
Total increase in
net assets 4,068,313 35,313,913 49,528,343 474,273,837 112,142,109 116,471,168
NET ASSETS:
Beginning of period ......... 112,447,919 30,506,547 464,945,288 508,636,363 168,482,270 297,240,502
------------ ------------ ------------ ------------ ------------ ------------
End of period ............... $116,516,232 $ 65,820,460 $514,473,631 $982,910,200 $280,624,379 $413,711,670
============ ============ ============ ============ ============ ============
</TABLE>
74
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS
At December 31, 1999
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.
75
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
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 December 31, 1999, 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 December 31,
1999, 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 December 31, 1999, 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 December 31, 1999, 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.
76
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
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. Accordingly, during the year ended
December 31, 1999, for Davis Growth Opportunity Fund, amounts have been
reclassified to reflect a decrease in overdistributed net investment income of
$995,733 and a corresponding decrease in accumulated net realized gain; for
Davis Government Bond Fund, amounts have been reclassified to reflect a decrease
in accumulated net realized loss of $84,293 and a corresponding decrease in
additional paid-in capital; for Davis Financial Fund, amounts have been
reclassified to reflect a decrease in overdistributed net investment income of
$821,488, a decrease in additional paid-in capital of $1,019,439 and an increase
in accumulated gains of $197,951; for Davis Convertible Securities Fund amounts
have been reclassified to reflect an increase in accumulated net realized losses
of $25,597 and a corresponding increase in additional paid in capital; and for
Davis Real Estate Fund, amounts have been reclassified to reflect a decrease in
undistributed net investment income of $8,128 and a corresponding decrease in
accumulated net realized loss.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATE
Advisory fees are paid monthly to Davis Selected Advisers, L.P., the Funds'
investment adviser (the "Adviser"). The fee for the Davis Government Money
Market Fund is 0.50% of the first $250 million of average net assets, 0.45% of
the next $250 million of average net assets and 0.40% of average net assets in
excess of $500 million. The fee for the Davis Government Bond Fund is 0.50%
average net assets. The fee for each of the Davis Growth Opportunity Fund, Davis
Financial Fund, Davis Convertible Securities Fund and Davis Real Estate Fund is
0.75% of the average net assets for the first $250 million, 0.65% of the average
net assets on the next $250 million, and 0.55% of the average net assets in
excess of $500 million.
The Adviser is paid for registering fund shares for sale in various states.
The fee for the year ended December 31, 1999 for the Davis Growth Opportunity
Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis
Financial Fund, Davis Convertible Securities Fund and Davis Real Estate Fund,
amounted to $9,996 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 year ended
December 31, 1999 for the Davis Growth Opportunity Fund, Davis Government Bond
Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund amounted to $ 23,054,
$7,095, $19,104, $165,263, $25,721 and $57,797, 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 year
ended December 31, 1999 for the Davis Growth Opportunity Fund, Davis Government
Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis
Convertible
77
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATE -
(CONTINUED)
Securities Fund and Davis Real Estate Fund amounted to $6,504, $2,496, $37,500,
$14,496, $7,500 and $9,504, 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 year ended December 31, 1999, SCD
received $19,527 and $16,260 in commissions on the purchases and sales of
portfolio securities in the Davis Growth Opportunity Fund and Davis Financial
Fund, respectively.
NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES
CLASS A SHARES OF DAVIS GROWTH OPPORTUNITY FUND, DAVIS GOVERNMENT BOND
FUND, DAVIS FINANCIAL FUND, DAVIS CONVERTIBLE SECURITIES FUND AND DAVIS REAL
ESTATE FUND
Class A shares of the Funds are sold at net asset value plus a sales charge
and are redeemed at net asset value (without a contingent deferred sales
charge).
During the year ended December 31, 1999, Davis Distributors, LLC, the
Funds' Underwriter (the "Underwriter" or "Distributor") received $57,858,
$50,142, $1,456,334, $233,781 and $357,316 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 $8,181, $7,013, $226,502, $33,590 and $55,075 was
retained by the Underwriter and the remaining $49,677, $43,129, $1,229,832,
$200,191 and $302,241 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 year ended December 31, 1999 was
$114,740, $51,351, $866,206, $227,169 and $392,768, 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.
78
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
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 year ended December 31, 1999, Class B shares of the Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund made distribution plan
payments which included distribution fees of $365,002, $246,727, $3,139,462,
$670,517 and $900,602, respectively and service fees of $116,627, $80,396,
$1,038,440, $218,146 and $298,229, respectively.
Commission advances by the Distributor during the year ended December 31,
1999 on the sale of Class B shares of the Davis Growth Opportunity Fund, Davis
Government Bond Fund, Davis Financial Fund, Davis Convertible Securities Fund
and Davis Real Estate Fund amounted to $151,631, $205,391, $2,527,789, $502,300
and $762,424 of which $90,532, $134,706, $2,481,282, $455,013 and $727,425 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
$234,155, $203,105, $11,102,188, $3,457,997 and $6,233,584, 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 year ended
December 31, 1999 the Distributor received contingent deferred sales charges
from Class B shares of the Davis Growth Opportunity Fund, Davis Government Bond
Fund, Davis Financial Fund, Davis Convertible Securities Fund and Davis Real
Estate Fund of $223,970, $236,953, $1,911,297, $395,597 and $831,806,
respectively.
79
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
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 year ended December 31, 1999, Class C shares of the Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis
Convertible Fund and Davis Real Estate Fund made distribution payments of
$34,846, $65,473, $957,064, $225,161 and $337,845, respectively. During the year
ended December 31, 1999, the Distributor received $3,124, $16,953, $123,532,
$39,053 and $45,334 in contingent deferred sales charges from Class C shares of
Davis Growth Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund,
Davis Convertible Securities and Davis Real Estate Fund, respectively.
DAVIS GOVERNMENT MONEY MARKET FUND
All classes of shares of the Davis Government Money Market Fund are sold to
investors at net asset value. The shareholders of the Davis Government Money
Market Fund have adopted a Distribution expense plan in accordance with Rule
12b-1, which does not provide for any amounts to be paid directly to the
Distributor as either compensation or reimbursement for distributing shares of
the Fund, but does authorize the use of the advisory fee to the extent such fee
may be considered to be indirectly financing any activity or expense which is
primarily intended to result in the sale of Fund shares.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities) during the year ended December 31, 1999 for the Davis Growth
Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Real Estate Fund were as follows:
<TABLE>
<CAPTION>
DAVIS DAVIS DAVIS
GROWTH GOVERNMENT DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Cost of purchases............. $ 107,272,441 $ 87,383,076 $ 170,798,035 $ 86,421,224 $ 194,240,203
Proceeds of sales............. $ 129,354,101 $ 93,260,819 $ 245,156,313 $ 144,590,768 $ 237,112,566
</TABLE>
NOTE 5 - CAPITAL STOCK
At December 31, 1999 there were 10 billion shares of capital stock ($0.01
par value per share) authorized of which 550 million shares each are designated
to the Davis Growth Opportunity Fund, Davis Government Bond Fund, Davis
Financial Fund, Davis Convertible Securities Fund and Davis Real Estate Fund.
5.1 million shares are designated to Davis Government Money Market Fund.
Transactions in capital stock were as follows:
80
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
CLASS A DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................... 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)
============ ============ ============ ============ ============ ============
YEAR ENDED
CLASS A DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
Shares sold .................... 1,518,470 3,160,162 539,737,311 12,668,316 3,736,408 8,062,035
Shares issued in reinvestment
of distributions ......... 107,320 141,050 22,137,587 138 211,983 275,560
------------ ------------ ------------ ------------ ------------ ------------
1,625,790 3,301,212 561,874,898 12,668,454 3,948,391 8,337,595
Shares redeemed ................ (1,398,742) (2,689,218) (541,302,595) (8,327,667) (1,924,393) (4,577,513)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ............. 227,048 611,994 20,572,303 4,340,787 3,760,082 2,023,998
============ ============ ============ ============ ============ ============
Proceeds from shares sold ...... $ 35,361,613 $ 18,668,243 $539,737,311 $343,611,116 $ 93,013,319 $188,681,546
Proceeds from shares issued in
reinvestment
of distributions ......... 2,307,465 828,828 22,137,587 3,438 5,077,907 6,083,772
------------ ------------ ------------ ------------ ------------ ------------
37,669,078 19,497,071 561,874,898 343,614,554 98,091,226 194,765,318
Cost of shares redeemed ........ (31,907,274) (15,792,905) (541,302,596) (224,087,698) (46,225,588) (102,923,479)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ............. $ 5,761,804 $ 3,704,166 $ 20,572,302 $119,526,856 $ 51,865,638 $ 91,841,839
============ ============ ============ ============ ============ ============
</TABLE>
81
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
CLASS B DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................... 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)
============ ============ ============ ============ ============ ============
YEAR ENDED
CLASS B DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
Shares sold .................... 868,064 7,172,861 95,164,634 9,271,722 2,999,720 4,400,784
Shares issued in reinvestment
of distributions ......... 130,667 93,650 1,056,722 177 95,158 125,670
------------ ------------ ------------ ------------ ------------ ------------
998,731 7,266,511 96,221,356 9,271,899 3,094,878 4,526,454
Shares redeemed ................ (943,806) (3,313,729) (71,677,377) (2,293,408) (657,019) (2,072,314)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ............. 54,925 3,952,782 24,543,979 6,978,491 2,437,859 2,454,140
============ ============ ============ ============ ============ ============
Proceeds from shares sold ...... $ 19,480,204 $ 42,278,281 $ 95,164,634 $249,847,256 $ 73,963,154 $104,063,066
Proceeds from shares issued in
reinvestment of
distributions ............ 2,708,838 549,153 1,056,722 4,293 2,243,009 2,757,015
------------ ------------ ------------ ------------ ------------ ------------
22,189,042 42,827,434 96,221,356 249,851,549 76,206,163 106,820,081
Cost of shares redeemed ........ (20,375,069) (19,462,470) (71,677,377) (59,273,762) (15,501,180) (45,308,919)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ............. $ 1,813,973 $ 23,364,964 $ 24,543,979 $190,577,787 $ 60,704,983 $ 61,511,162
============ ============ ============ ============ ============ ============
</TABLE>
82
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
CLASS C DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................... 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
============ ============ ============ ============ ============ ============
YEAR ENDED
CLASS C DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
DAVIS
DAVIS DAVIS GOVERNMENT DAVIS
GROWTH GOVERNMENT MONEY DAVIS CONVERTIBLE DAVIS
OPPORTUNITY BOND MARKET FINANCIAL SECURITIES REAL ESTATE
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ------------- ------------
Shares sold .................... 151,917 2,106,807 22,054,854 2,982,995 1,106,813 1,702,090
Shares issued
in reinvestment
of distributions ......... 7,636 9,341 203,415 -- 25,053 23,551
------------ ------------ ------------ ------------ ------------ ------------
159,553 2,116,148 22,258,269 2,982,995 1,131,866 1,725,641
Shares redeemed ................ (106,932) (766,851) (17,846,207) (565,286) (273,399) (402,275)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ............. 52,621 1,349,297 4,412,062 2,417,709 858,467 1,323,366
============ ============ ============ ============ ============ ============
Proceeds from
shares sold .............. $ 3,480,079 $ 12,473,788 $ 22,054,854 $ 81,536,806 $ 27,554,478 $ 39,481,196
Proceeds from shares issued in
reinvestment of
distributions ............ 162,272 55,001 203,415 -- 597,272 511,436
------------ ------------ ------------ ------------ ------------ ------------
3,642,351 12,528,789 22,258,269 81,536,806 28,151,750 39,992,632
Cost of shares
redeemed ................. (2,329,570) (4,517,484) (17,846,207) (14,848,755) (6,500,906) (8,869,683)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ............. $ 1,312,781 $ 8,011,305 $ 4,412,062 $ 66,688,051 $ 21,650,844 $ 31,122,949
============ ============ ============ ============ ============ ============
</TABLE>
83
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
CLASS Y
YEAR ENDED
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>
<TABLE>
<CAPTION>
CLASS Y SEPTEMBER 1,
1998 (INCEPTION
YEAR ENDED OF CLASS) THROUGH YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
----------------- ----------------- --------------------------------------------
DAVIS DAVIS DAVIS DAVIS
GROWTH GOVERNMENT DAVIS CONVERTIBLE REAL
OPPORTUNITY BOND FINANCIAL SECURITIES ESTATE
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Shares sold ....................... 4,004 64,225 384,619 83,627 754,373
Shares issued in reinvestment
of distributions ............ 153 259 -- 59,589 52,922
------------ ------------ ------------ ------------ ------------
4,157 64,484 384,619 143,216 807,295
Shares redeemed ................... (4,997) (4,965) (177,312) (304,192) (93,138)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) ..... (840) 59,519 207,307 (160,976) 714,157
============ ============ ============ ============ ============
Proceeds from shares sold ......... $ 101,885 $ 381,919 $ 10,496,605 $ 2,093,815 $ 17,553,545
Proceeds from shares issued in
reinvestment of distributions 3,290 1,533 -- 1,437,986 1,168,974
------------ ------------ ------------ ------------ ------------
105,175 383,452 10,496,605 3,531,801 18,722,519
Cost of shares redeemed ........... (101,691) (29,395) (4,721,593) (6,855,162) (2,033,660)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) ..... $ 3,484 $ 354,057 $ 5,775,012 $ (3,323,361) $ 16,688,859
============ ============ ============ ============ ============
</TABLE>
84
<PAGE>
DAVIS SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
December 31, 1999
NOTE 6 - CUSTODY FEES
Under an agreement with the custodian bank, custody fees are reduced by
credits for cash balances. Such reductions amounted to $2,118, $997, $3,002,
$3,806, $4,951 and $5,781 for Davis Growth Opportunity Fund, Davis Government
Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis
Convertible Securities Fund and Davis Real Estate Fund, respectively, during the
year ended December 31, 1999.
NOTE 7 - RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are not registered under the Securities Act of 1933
and may have contractual restrictions on resale. They are valued under methods
approved by the Board of Directors as reflecting fair value. The aggregate value
of restricted securities in Davis Real Estate Fund was $10,493,437, or 3.34% of
the Fund's net assets as of December 31, 1999. Securities may be considered
illiquid if they lack a readily available market or if valuation has not changed
for a certain period of time. The aggregate value of illiquid securities in
Davis Convertible Securities Fund was $4,238,520, or 1.66% of the Fund's net
assets as of December 31, 1999. Information concerning restricted and illiquid
securities is as follows:
<TABLE>
<CAPTION>
Acquisition Valuation per Unit as of
Fund Security Date Shares/Par Cost per Unit December 31, 1999
- ---- -------- ----------- ---------- ------------- ------------------------
<S> <C> <C> <C> <C> <C>
Davis CenterPoint Properties
Real Estate Corp. Private 04/02/98 300,000 $ 33.375 $ 34.978125
Davis
Convertible
Securities Bank One Corp., Conv.
Deb. 12.75%, 12/01/00 04/29/99 2,441,000 $291.84 $172.00
Davis
Convertible
Securities Florida West Airlines,
Inc., 8.00%, 03/25/99 03/23/94 500,000 $100.00 $ 8.00
</TABLE>
85
<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>
YEAR ENDED
DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 21.96 $ 22.49 $ 18.93 $ 17.25 $ 12.83
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Loss .................... -- (0.09) (0.10) (0.13) (0.11)
Net Realized and Unrealized Gains ...... 5.86 0.59 5.34 3.37 6.08
---------- ---------- ---------- ---------- ----------
Total From Investment Operations 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 ............ $ 22.17 $ 21.96 $ 22.49 $ 18.93 $ 17.25
========== ========== ========== ========== ==========
Total Return(1) ........................... 31.45% 2.32% 27.70% 18.73% 46.65%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 67,871 $ 52,212 $ 48,386 $ 27,158 $ 22,890
Ratio of Expenses to Average Net Assets 1.29% 1.32% 1.27% 1.49%(2) 1.51%
Ratio of Net Investment Loss to
Average Net Assets .................. (0.50)% (0.38)% (0.58)% (0.76)% (0.71)%
Portfolio Turnover Rate(3) ............. 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.
(2) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.48% For 1996. Prior to 1996, such
reductions were reflected in the expense ratios.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
SEE NOTES TO FINANCIAL STATEMENTS
86
<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>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 21.18 $ 21.88 $ 18.58 $ 17.08 $ 12.82
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Loss .................... -- (0.26) (0.25) (0.27) (0.26)
Net Realized and Unrealized Gains ...... 5.42 0.59 5.23 3.33 6.07
---------- ---------- ---------- ---------- ----------
Total From Investment
Operations ................... 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 ............ $ 20.95 $ 21.18 $ 21.88 $ 18.58 $ 17.08
========== ========== ========== ========== ==========
Total Return(1) ........................... 30.42% 1.61% 26.82% 17.86% 45.44%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 52,234 $ 60,587 $ 61,383 $ 39,343 $ 35,326
Ratio of Expenses to Average Net Assets 22.16% 2.10% 2.09%(2) 2.25%(2) 22.30%
Ratio of Net Investment Loss to Average
Net Assets .......................... (1.37)% (1.16)% (1.40)% (1.52)% (1.50)%
Portfolio Turnover Rate(3) ............. 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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
87
<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
OF CLASS)
YEAR ENDED DECEMBER 31, THROUGH
-------------------------- DECEMBER 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 21.71 $ 22.43 $ 25.56
--------- --------- ---------
Income (Loss) From Investment Operations
Net Investment Loss ...................... -- (0.30) (0.04)
Net Realized and Unrealized Gains (Losses) 5.56 0.61 (1.41)
--------- --------- ---------
Total From Investment
Operations ..................... 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 .............. $ 21.62 $ 21.71 $ 22.43
========= ========= =========
Total Return(1) ............................. 30.32% 1.48% (5.66)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) . $ 5,041 $ 3,644 $ 2,585
Ratio of Expenses to Average Net Assets .. 2.34%(2) 2.27% 2.19%*
Ratio of Net Investment Loss to
Average Net Assets ................... (1.54)% (1.33)% (1.51)%*
Portfolio Turnover Rate(3) ............... 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
88
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GROWTH OPPORTUNITY FUND
The following financial information represents selected data for each share
of capital stock outstanding throughout each period:
CLASS Y
<TABLE>
<CAPTION>
SEPTEMBER 18, 1997
(INCEPTION
OF CLASS)
YEAR ENDED DECEMBER 31, THROUGH
-------------------------- DECEMBER 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 21.96 $ 22.52 $ 27.19
--------- --------- ---------
Income (Loss) From Investment Operations
Net Investment Loss ...................... -- (0.14) --
Net Realized and Unrealized Gains (Losses) 6.00 0.61 (2.99)
--------- --------- ---------
Total From Investment
Operations ..................... 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 .............. $ 22.31 $ 21.96 $ 22.52
========= ========= =========
Total Return(1) ............................. 32.16% 2.18% (10.98)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) . $ 5 $ 73 $ 94
Ratio of Expenses to Average Net Assets .. 1.06%(2) 1.33%(2) 1.01%*
Ratio of Net Investment Loss to
Average Net Assets ................... (0.26)% (0.38)% (0.33)%*
Portfolio Turnover Rate(3) ............... 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 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
89
<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>
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 5.90 $ 5.87 $ 5.76 $ 6.00 $ 5.79
Income (Loss) From Investment Operations
Net Investment Income ................. 0.28 0.29 0.33 0.33 0.39
Net Realized and Unrealized Gains (Losses) (0.48) 0.07 0.11 (0.14) 0.27
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (0.20) 0.36 0.44 0.19 0.66
---------- ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .................. (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 (0.32) (0.33) (0.33) (0.43) (0.45)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 5.38 $ 5.90 $ 5.87 $ 5.76 $ 6.00
========== ========== ========== ========== ==========
Total Return(1) ........................... (3.47)% 6.31% 7.92% 3.40% 11.82%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 18,002 $ 21,285 $ 17,589 $ 18,129 $ 21,485
Ratio of Expenses to Average Net Assets 1.20% 1.43% 1.27%(2) 1.77% 1.74%
Ratio of Net Investment
Income to Average Net Assets ......... 5.07% 4.87% 5.82% 5.88% 6.54%
Portfolio Turnover Rate(3)
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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
90
<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>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... 5.88 $ 5.86 $ 5.75 $ 5.98 $ 5.79
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income ................. 0.24 0.27 0.29 0.29 0.34
Net Realized and Unrealized Gains (Losses) (0.48) 0.04 0.11 (0.13) 0.26
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (0.24) 0.31 0.40 0.16 0.60
---------- ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .................. (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 (0.27) (0.29) (0.29) (0.39) (0.41)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 5.37 $ 5.88 $ 5.86 $ 5.75 $ 5.98
========== ========== ========== ========== ==========
Total Return(1) ........................... (4.12)% 5.38% 7.12% 2.78% 10.62%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 28,344 $ 36,005 $ 12,703 $ 12,959 $ 15,976
Ratio of Expenses to Average Net Assets 1.95% 2.18%(2) 2.01%(2) 2.53%(2) 2.51%
Ratio of Net Investment Income
to Average Net Assets ............... 4.32% 4.13% 5.07% 5.13% 5.77%
Portfolio Turnover Rate(3) ............. 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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
91
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS GOVERNMENT BOND FUND
The following financial information represents selected data for each share
of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS C CLASS Y
------------------------------------------- --------------------------------
AUGUST 19, 1997 SEPTEMBER 1, 1998
(INCEPTION (INCEPTION
OF CLASS) YEAR OF CLASS)
YEAR ENDED DECEMBER 31, THROUGH ENDED THROUGH
------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1999(4) 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 5.90 $ 5.88 $ 5.79 $ 5.92 $ 5.92
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income ................ 0.23 0.27 0.08 0.24 0.07
Net Realized and Unrealized Gains (Losses) (0.47) 0.04 0.09 (0.40) 0.02
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (0.24) 0.31 0.17 (0.16) 0.09
---------- ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .................. (0.23) (0.27) (0.08) (0.30) (0.07)
Return of Capital ...................... (0.04) (0.02) -- (0.04) (0.02)
---------- ---------- ---------- ---------- ----------
Total Dividend and Distributions (0.27) (0.29) (0.08) (0.34) (0.09)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 5.39 $ 5.90 $ 5.88 $ 5.42 $ 5.92
========== ========== ========== ========== ==========
Total Return(1) ........................... (4.15)% 5.42% 2.97% (2.73)% 1.59%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 4,791 $ 8,178 $ 215 $ 17 $ 352
Ratio of Expenses to Average Net Assets 1.96% 2.18% 1.97%*(2) 0.92% 1.05%*
Ratio of Net Investment Income to
Average Net Assets ............... 4.31% 4.12% 5.11%* 5.35% 5.25%*
Portfolio Turnover Rate(3) ............. 150.54% 18.40% 24.35% 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) Ratio of expenses to average net assets after the reduction of custodian
fees under a custodian agreement was 1.96% for Class C for 1997.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(4) Per share calculations other than distributions were based on average
shares outstanding for the period.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
92
<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.
<TABLE>
<CAPTION>
CLASSES A, B & C
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income ................ .044 .048 .049 .047 .051
Dividends
Net Investment Income ................. (.044) (.048) (.049) (.047) (.051)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
Total Return(1) ........................... 4.51% 4.94% 5.02% 4.80% 5.25%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 553,977 $ 514,474 $ 464,459 $ 411,416 $ 360,290
Ratio of Expenses to Average Net Assets 0.61% 0.61% 0.57% 0.66% 0.73%
Ratio of Net Investment Income to
Average Net Assets .................. 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.
SEE NOTES TO FINANCIAL STATEMENTS
93
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS FINANCIAL FUND
The following financial information for each respective fund represents selected
data for each share of capital stock outstanding throughout each period.
<TABLE>
<CAPTION>
CLASS A
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 29.32 $ 25.68 $ 18.06 $ 14.50 $ 10.68
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income .................. 0.11 0.09 0.13 0.14 0.07
Net Realized and Unrealized Gains (Losses) (0.36) 3.55 7.92 4.44 5.32
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (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)
Return of Capital ...................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Dividend and Distributions . -- -- (0.43) (1.02) (1.57)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 29.07 $ 29.32 $ 25.68 $ 18.06 $ 14.50
========== ========== ========== ========== ==========
Total Return(1) ........................... (0.85)% 14.17% 44.53% 31.50% 50.51%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 425,584 $ 460,799 $ 292,059 $ 107,579 $ 79,874
Ratio of Expenses to Average Net Assets 1.04% 1.07%(2) 1.07%(2) 1.15%(2) 1.18%(2)
Ratio of Net Investment Income
to Average Net Assets ............... 0.36% 0.34% 0.77% 0.92% 0.53%
Portfolio Turnover Rate(3) ............. 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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
94
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS FINANCIAL FUND
The following financial information for each respective fund represents selected
data for each share of capital stock outstanding throughout each period.
<TABLE>
<CAPTION>
CLASS B
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 28.71 $ 25.36 $ 17.91 $ 14.41 $ 10.68
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income (Loss) ........... (0.16) (0.12) (0.01) 0.01 0.01
Net Realized and Unrealized Gains (Losses) (0.33) 3.47 7.76 4.37 5.22
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (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)
Return of Capital ...................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Dividend and Distributions . -- -- (0.30) (0.88) (1.50)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 28.22 $ 28.71 $ 25.36 $ 17.91 $ 14.41
========== ========== ========== ========== ==========
Total Return(1) ........................... (1.71)% 13.21% 43.25% 30.29% 49.00%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 376,541 $ 419,145 $ 193,257 $ 8,213 $ 1,762
Ratio of Expenses to Average Net Assets 1.90% 1.93%(2) 1.97% 2.04% 2.09%
Ratio of Net Investment Income
(Loss) to Average Net Assets ........ (0.50)% (0.52)% (0.12)% 0.19% (0.38)%
Portfolio Turnover Rate(3) ............. 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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
95
<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
YEAR (INCEPTION
ENDED OF CLASS)
DECEMBER 31, THROUGH
-------------------------- DECEMBER 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 29.12 $ 25.71 $ 23.76
Income (Loss) From Investment Operations
Net Investment Income (Loss) ............. (0.15) (0.10) --
Net Realized and Unrealized
Gains (Losses) ........................ (0.34) 3.51 2.25
--------- --------- ---------
Total From Investment Operations . (0.49) 3.41 2.25
--------- --------- ---------
Dividends and Distributions
Net Investment Income .................... -- -- --
Distributions from Realized Gains ........ -- -- (0.30)
--------- --------- ---------
Total Dividend and Distributions .. -- -- (0.30)
--------- --------- ---------
Net Asset Value, End of Period .............. $ 28.63 $ 29.12 $ 25.71
========= ========= =========
Total Return(1) ............................. (1.68)% 13.26% 9.45%
Ratios/Supplemental Data
Net Assets, End of Period(000 omitted) .. $ 89,128 $ 92,513 $ 19,515
Ratio of Expenses to Average Net Assets .. 1.89% 1.91% 1.93%*
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (0.49)% (0.51)% (0.09)%*
Portfolio Turnover Rate(2) ............... 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
96
<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
YEAR (INCEPTION
ENDED OF CLASS)
DECEMBER 31, THROUGH
-------------------------- DECEMBER 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 29.40 $ 25.66 $ 20.32
Income (Loss) From Investment Operations
Net Investment Income (Loss) ............. 0.20 0.14 0.09
Net Realized and Unrealized
Gains (Losses) ........................ (0.39) 3.60 5.74
--------- --------- ---------
Total From Investment Operations . (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 .............. $ 29.21 $ 29.40 $ 25.66
========= ========= =========
Total Return(1) ............................. (0.65)% 14.58% 28.66%
Ratios/Supplemental Data
Net Assets, End of Period(000 omitted) .. $ 8,260 $ 10,453 $ 3,805
Ratio of Expenses to Average Net Assets .. 0.86% 0.83%(2) 0.79%*
Ratio of Net Investment Income
(Loss) to Average Net Assets ........... 0.54% 0.58% 1.06%*
Portfolio Turnover Rate(3) ............... 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 Class Y shares for the year
ended December 31, 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
97
<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>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 23.76 $ 25.26 $ 21.22 $ 18.22 $ 15.57
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income .................. 0.77 0.77 0.67 0.71 0.67
Net Realized and Unrealized Gains (Losses) 2.22 (1.23) 5.33 4.56 3.42
---------- ---------- ---------- ---------- ----------
Total From Investment
Operations .................. 2.99 (0.46) 6.00 5.27 4.09
---------- ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .................. (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 (1.54) (1.04) (1.96) (2.27) (1.44)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 25.21 $ 23.76 $ 25.26 $ 21.22 $ 18.22
========== ========== ========== ========== ==========
Total Return(1) ........................... 12.97% (1.79)% 28.68% 29.46% 26.68%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 117,308 $ 132,856 $ 90,107 $ 42,841 $ 59,757
Ratio of Expenses to Average Net Assets 1.12% 1.16%(2) 1.08%(2) 1.05% 1.14%
Ratio of Net Investment Income
to Average Net Assets .............. 2.99% 3.27% 3.00% 3.34% 3.87%
Portfolio Turnover Rate(3) ............. 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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
98
<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
OF CLASS)
YEAR ENDED DECEMBER 31, THROUGH
---------------------------------------------------------- DECEMBER 31,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .................... $ 23.55 $ 25.03 $ 21.05 $ 18.14 $ 15.95
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment
Operations
Net Investment Income .................. 0.53 0.56 0.44 0.59 0.54
Net Realized and Unrealized
Gains (Losses) ...................... 2.22 (1.22) 5.26 4.45 2.97
---------- ---------- ---------- ---------- ----------
Total From Investment
Operations .................... 2.75 (0.66) 5.70 5.04 3.51
---------- ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income ................. (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 ............... (1.32) (0.82) (1.72) (2.13) (1.32)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 24.98 $ 23.55 $ 25.03 $ 21.05 $ 18.14
========== ========== ========== ========== ==========
Total Return(1) ........................... 12.01% (2.62)% 27.35% 28.21% 25.31%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ....................... $ 86,623 $ 90,827 $ 35,536 $ 2,075 $ 378
Ratio of Expenses to
Average Net Assets .................. 2.01% 2.04%(2) 2.11%(2) 2.01%(2) 2.01%*
Ratio of Net Investment Income
to Average Net Assets .............. 2.10% 2.39% 2.09% 2.40% 3.00%*
Portfolio Turnover Rate(3) ............. 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
99
<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
ENDED OF CLASS)
DECEMBER 31, THROUGH
-------------------------- DECEMBER 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period ...................... $ 23.86 $ 25.36 $ 24.91
--------- --------- ---------
Income (Loss) From Investment
Operations
Net Investment Income .................... 0.55 0.59 0.11
Net Realized and Unrealized
Gains (Losses) ........................ 2.23 (1.26) 1.72
--------- --------- ---------
Total From Investment
Operations ...................... 2.78 (0.67) 1.83
--------- --------- ---------
Dividends and Distributions
Net Investment Income ................... (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 ... (1.33) (0.83) (1.38)
--------- --------- ---------
Net Asset Value, End of Period .............. $ 25.31 $ 23.86 $ 25.36
========= ========= =========
Total Return(1) ............................. 11.98% (2.61)% 7.38%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ......................... $ 18,936 $ 26,406 $ 6,296
Ratio of Expenses to
Average Net Assets .................... 2.01% 2.03%(2) 2.08%*(2)
Ratio of Net Investment Income
to Average Net Assets ................ 2.10% 2.40% 2.01%*
Portfolio Turnover Rate(3) ............... 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 2.02% and 2.07% for 1998 and 1997,
respectively.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
100
<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.
<TABLE>
<CAPTION>
CLASS Y
NOVEMBER 13, 1996
(INCEPTION
YEAR ENDED OF CLASS)
DECEMBER 31, THROUGH
------------------------------------------ DECEMBER 31
1999 1998 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ............. $ 23.84 $ 25.34 $ 21.29 $ 21.39
---------- ---------- ---------- ----------
Income (Loss) From Investment
Operations
Net Investment Income ........... 0.82 0.89 0.69 0.07
Net Realized and Unrealized ..... 2.25 (1.27) 5.35 1.44
---------- ---------- ---------- ----------
Gains (Losses)
Total From Investment .... 3.07 (0.38) 6.04 1.51
Operations ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .......... (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 ........ (1.62) (1.12) (1.99) (1.61)
---------- ---------- ---------- ----------
Net Asset Value, End of Period ..... $ 25.29 $ 23.84 $ 25.34 $ 21.29
========== ========== ========== ==========
Total Return(1) .................... 13.30% (1.46)% 28.80% 7.01%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) ................ $ 33,221 $ 30,536 $ 36,543 $ 33,006
Ratio of Expenses to
Average Net Assets ........... 0.87% 0.86%(2) 0.95% 0.98%*
Ratio of Net Investment Income
to Average Net Assets ....... 3.24% 3.57% 3.09% 3.11%*
Portfolio Turnover Rate(3) ...... 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
101
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS REAL ESTATE FUND
The following financial information represents selected data for each share of
capital stock outstanding throughout the period.
<TABLE>
<CAPTION>
CLASS A
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996(1) 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 20.73 $ 25.41 $ 21.24 $ 16.44 $ 14.72
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income .................. 0.78 0.74 0.74 0.71 0.82
Net Realized and Unrealized Gains
(Losses) ............................ (2.32) (4.65) 4.51 5.22 1.71
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (1.54) (3.91) 5.25 5.93 2.53
---------- ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .................. (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 (0.92) (0.77) (1.08) (1.13) (0.81)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 18.27 $ 20.73 $ 25.41 $ 21.24 $ 16.44
========== ========== ========== ========== ==========
Total Return(2) ........................... (7.55)% (15.56)% 25.08% 37.05% 17.70%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 147,835 $ 198,328 $ 147,488 $ 32,507 $ 29,320
Ratio of Expenses to Average Net
Assets .............................. 1.21% 1.21% 1.18% 1.32%(3) 21.43%
Ratio of Net Investment Income to
Average Net Assets .................. 3.82% 3.40% 3.40% 3.95% 5.44%
Portfolio Turnover Rate(4) ............. 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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
102
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS REAL ESTATE FUND
The following financial information represents selected data for each share of
capital stock outstanding throughout the period.
<TABLE>
<CAPTION>
CLASS B
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
1999 1998 1997 1996(1) 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 20.67 $ 25.32 $ 21.19 $ 16.41 $ 14.72
---------- ---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income .................. 0.61 0.56 0.54 0.56 0.68
Net Realized and Unrealized Gains
(Losses) ......................... (2.32) (4.63) 4.47 5.21 1.70
---------- ---------- ---------- ---------- ----------
Total From Investment Operations (1.71) (4.07) 5.01 5.77 2.38
---------- ---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .................. (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 . (0.75) (0.58) (0.88) (0.99) (0.69)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 18.21 $ 20.67 $ 25.32 $ 21.19 $ 16.41
========== ========== ========== ========== ==========
Total Return(2) ........................... (8.37)% (16.21)% 23.88% 35.99% 16.59%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 93,585 $ 143,993 $ 114,283 $ 10,919 $ 414
Ratio of Expenses to Average Net Assets 2.06% 2.02% 2.04% 2.22% 2.39%
Ratio of Net Investment Income to
Average Net Assets ..................... 2.97% 2.59% 2.60% 3.46% 4.48%
Portfolio Turnover Rate(3) ............. 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.
(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.
SEE NOTES TO FINANCIAL STATEMENTS
103
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS REAL ESTATE FUND
The following financial information represents selected data for each share of
capital stock outstanding throughout the period.
<TABLE>
<CAPTION>
CLASS C
AUGUST 13, 1997
YEAR (INCEPTION
ENDED OF CLASS)
DECEMBER 31, THROUGH
-------------------------- DECEMBER 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 20.81 $ 25.49 $ 23.41
--------- --------- ---------
Income (Loss) From Investment Operations
Net Investment Income .................... 0.61 0.53 0.18
Net Realized and Unrealized Gains (Losses) (2.33) (4.62) 2.42
--------- --------- ---------
Total From Investment Operations .. (1.72) (4.09) 2.60
--------- --------- ---------
Dividends and Distributions
Net Investment Income .................... (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 ... (0.75) (0.59) (0.52)
--------- --------- ---------
Net Asset Value, End of Period .............. $ 18.34 $ 20.81 $ 25.49
========= ========= =========
Total Return(1) ............................. (8.34)% (16.20)% 11.12%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) . $ 29,952 $ 34,336 $ 8,322
Ratio of Expenses to Average Net Assets .. 2.01% 2.02% 2.03%*
Ratio of Net Investment Income
to Average Net Assets .................. 3.02% 2.59% 2.56%*
Portfolio Turnover Rate(2) ............... 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
104
<PAGE>
DAVIS SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS REAL ESTATE FUND
The following financial information represents selected data for each share of
capital stock outstanding throughout the period.
<TABLE>
<CAPTION>
CLASS Y
NOVEMBER 8,1996
(INCEPTION
YEAR ENDED OF CLASS)
DECEMBER 31, THROUGH
------------------------------------------- DECEMBER 31,
1999 1998 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 20.86 $ 25.56 $ 21.37 $ 19.29
---------- ---------- ---------- ----------
Income (Loss) From Investment Operations
Net Investment Income .................... 0.80 0.83 0.79 0.13
Net Realized and Unrealized Gains (Losses) (2.28) (4.67) 4.54 2.35
---------- ---------- ---------- ----------
Total From Investment Operations ..... (1.48) (3.84) 5.33 2.48
---------- ---------- ---------- ----------
Dividends and Distributions
Net Investment Income .................... (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 .. (1.00) (0.86) (1.14) (0.40)
---------- ---------- ---------- ----------
Net Asset Value, End of Period .............. $ 18.38 $ 20.86 $ 25.56 $ 21.37
========== ========== ========== ==========
Total Return(1) ............................. (7.21)% (15.20)% 25.29% 12.89%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) . $ 43,136 $ 37,054 $ 27,147 $ 18,165
Ratio of Expenses to Average Net Assets .. 0.85% 0.83%(2) 1.00% 1.18%*
Ratio of Net Investment Income to Average
Net Assets ............................ 4.18% 3.79% 3.47% 4.22%*
Portfolio Turnover Rate(3) ............... 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 0.82% for 1998.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
* Annualized
SEE NOTES TO FINANCIAL STATEMENTS
105
<PAGE>
DAVIS SERIES, INC.
INCOME TAX INFORMATION (UNAUDITED)
December 31, 1999
In early 2000, shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar year 1999.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
DAVIS GROWTH OPPORTUNITY FUND
Distributions of $5.65 per share were paid to Class A, Class B, Class C and
Class Y shareholders during the calendar year 1999, of which $5.52 was
designated as a "capital gain distribution" for federal income tax purposes.
Whether received in stock or cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of capital assets held for more
than one year (long-term capital gains).
Dividends paid by the Fund during the calendar year ended 1999 which are
not designated as capital gain distributions should by multiplied by 61% to
arrive at the net amount eligible for the corporate dividend- received
deduction.
DAVIS GOVERNMENT BOND FUND
None of the dividends paid by the Fund during the calendar year ended 1999
are eligible for the corporate dividend-received deduction.
DAVIS CONVERTIBLE SECURITIES FUND
Distributions of $1.54, $1.3196, $1.3295 and $0.853 per share were paid to
Class A, Class B, Class C and Class Y shareholders during the calendar year
1999.
Dividends paid by the Fund during the calendar year ended 1999 which are
not designated as capital gain distributions should be multiplied by 52% to
arrive at the net amount eligible for the corporate dividend- received
deduction.
DAVIS REAL ESTATE FUND
Dividends paid by the Fund during the calendar year ended 1999 which are
not designated as capital gain distributions should be multiplied by 100% to
arrive at the net amount eligible for the corporate dividend- received
deduction.
The foregoing information is presented to assists shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local regulations, we recommend that
you consult your tax adviser for specific guidance.
106
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DAVIS SERIES, INC.
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DAVIS SERIES, INC.:
We have audited the accompanying statements of assets and liabilities of
Davis Growth Opportunity Fund, Davis Government Bond Fund, Davis Government
Money Market Fund, Davis Financial Fund, Davis Convertible Securities Fund and
Davis Real Estate Fund including the schedules of investments as of December 31,
1999, and the related statements of operations for the year then ended, and the
statements of changes in net assets and the financial highlights for each of the
years in the two-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each of
the years in the three-year period ended December 31, 1997 were audited by other
auditors whose report dated February 13, 1998, expressed an unqualified opinion
of this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
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 as of December 31, 1999, the results of operations for
the year then ended, and the changes in net assets and the financial highlights
for each of the years in the two-year period then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
February 4, 2000
107
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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 Shelby M.C. Davis
Andrew A. Davis President
Christopher C. Davis Kenneth C. Eich
Jerry D. Geist Vice President
D. James Guzy Sharra L. Reed
G. Bernard Hamilton Vice President,
Laurence W. Levine Treasurer &
Christian R. Sonne Assistant Secretary
Marsha Williams Thomas D. Tays
Vice President & Secretary
Christopher C. Davis
Vice President
Andrew A. Davis
Vice President
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, MA 02266-8406
COUNSEL
D'Ancona & Pflaum
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
AUDITORS
KPMG LLP
707 Seventeenth Street, Suite 2300
Denver, CO 80202
FOR MORE INFORMATION ABOUT DAVIS SERIES, INC. INCLUDING MANAGEMENT FEE, CHARGES
AND EXPENSES, SEE THE CURRENT PROSPECTUS WHICH MUST PRECEDE OR ACCOMPANY THIS
REPORT.
108
<PAGE>
ANNUAL REPORT
DAVIS SELECTED ADVISERS, L.P.
2949 EAST ELVIRA ROAD, SUITE 101
TUCSON, AZ 85706
800-279-0279
www.davisfunds.com
[DAVIS FUNDS LOGO]
