<PAGE>
SEMI-ANNUAL REPORT JANUARY 31, 2000
DAVIS GROWTH &
INCOME FUND
[DAVIS FUNDS LOGO]
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
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.
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
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
March 16, 2000
2
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
PERFORMANCE OVERVIEW
The Davis Growth & Income Fund's Class A shares delivered a total return on net
asset value of 3.89% for the one-year period ended January 31, 2000.(2) By way
of comparison, the funds included in Lipper Analytical Services Multicap Value
Fund category provided a return of 1.69% for the same time period.(3)
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND ANDREW A. DAVIS, PORTFOLIO MANAGERS
Q. How would you describe the performance of the Fund last year?
A. Like 1998, 1999 was a year of remarkable narrowness in the market. The
handsome gains enjoyed by the S&P 500 Index(4) were produced by the
exceptionally strong performance of a very few stocks. The vast majority of
stocks posted weak performance. Market observers know 1999 was an extraordinary
year for the technology sector. While many of the gains in this sector were
reaped by companies with virtually no earnings and no clear path to developing
significant earnings, the performance of more old-fashioned technology
companies--if that is not an oxymoron--was also exceptional. Importantly, the
shares of technology companies that the Fund owns--such as Hewlett-Packard,
Applied Materials and Texas Instruments(5)--did not just reflect changes in
psychology or a new-era mania, but instead reflected substantial gains in their
core businesses.
Hewlett-Packard's wonderful printing business continues to benefit from the rise
of e-mail and digital photography. Applied Materials has strengthened its lead
as the dominant global supplier of manufacturing equipment to the semiconductor
industry. Texas Instruments, the Fund's star performer of the year, is beginning
to reap the rewards of its prescient commitment to the world of digital signal
processors--the computer chips that lie at the heart of everything from cellular
phones and digital cameras to new generation automobiles.
Q. What about the performance of financial stocks in 1999?
A. Most market observers would describe 1999 as a terrible year for financial
stocks. The PHLX/KBW Bank Index(4), for example, fell 2.12% in 1999 while the
threat of increasing interest rates spooked investors throughout the sector.
Although the Fund owns a number of financial stocks whose value declined and
whose earnings outlook deteriorated somewhat last year, two of our biggest
positions in the financial area achieved exceptional gains, handily
outperforming the S&P 500. American Express, the Fund's largest holding, rose
more than 60%, perhaps reflecting the fact that the Internet does not accept
cash. Our next largest holding in the financial sector, Citigroup, gained 68%
and remains a great beneficiary of worldwide privatization, the globalization of
trade and finance, unprecedented mergers and acquisitions activity, and strong
capital markets.
Q. What equity holdings performed unsatisfactorily last year?
A. As always, the Fund owned some companies whose stocks performed poorly. Among
these were Wells Fargo, Berkshire Hathaway, McDonald's, Household International,
and Martin Marietta Materials. Significantly, the poor performance of these
stocks was not a reflection of poor performance in their underlying businesses.
We distinguish these types of stocks from stocks where poor returns reflected a
substantial decline in the operating performance of those businesses. It is this
latter group that we categorize as mistakes, and we certainly had our share of
these in 1999.
3
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND ANDREW A. DAVIS, PORTFOLIO MANAGERS -
CONTINUED
Chief among these mistakes must be our mis-assessment of Waste Management. While
the Fund's holdings in this company were never among our largest, it was our
largest mistake. It now appears that the company's financial statements were
inaccurate and that senior management knowingly covered up deteriorating
operating results. We feel we were slow to pick up on the warning signs of
weakening operations and strained financials.
To this list, we must also add Philip Morris where we failed to anticipate
material setbacks for the company in the legal arena. In analyzing Progressive
Corp., still one of the best companies in the auto insurance business, we were
slow to recognize the huge impact that greater price competition would have on
earnings. In the case of another insurer, UnumProvident, we were mistaken in our
assessment of the profitability of the company's core business.
Nevertheless, we know that we are in a batting average business, and we must be
willing to swing at the ball to improve. But we must also remember that the only
value of mistakes lies in the lessons that we learn from them. As our
grandfather Shelby Cullom Davis once said, "If you do not admit you make
mistakes, you do not learn from them."
Q. What about the Fund's investments in real estate stocks?
A. Real estate investment trusts (REITs) remained in the doldrums in 1999 as
they have for some time and that also held back the Fund's performance. The
irony is that even after another year of positive earnings growth where the
earnings of real estate companies the Fund owns exceeded our expectations, their
stock prices continued to sag.
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. However, the cycle
should be substantially less dramatic because the tax incentives that encouraged
overbuilding and created such excess supply last time around no longer exist. In
short, the rules in real estate have changed, but many investors are acting as
if the old rules were still in effect.
Q. What are some of your favorite real estate holdings today?
A. Among our favorite real estate companies are Centerpoint Properties, an
industrial REIT; Home Properties of New York, an apartment REIT; Vornado, a
diversified REIT; and General Growth Properties, a shopping mall REIT. These
companies have terrific earnings growth rates but, unfortunately, that earnings
performance was not reflected in their stock prices last year. While we find
these short-term results disappointing, we think the ultimate upside from the
Fund's real estate investments is a return of between 10% to 15%, year in and
year out. We continue to believe that real estate stocks represent outstanding
long-term opportunities today. We also think the Fund is strategically poised to
take advantage of these opportunities once the investment climate improves.(6)
4
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
AN INTERVIEW WITH CHRISTOPHER C. DAVIS AND ANDREW A. DAVIS, PORTFOLIO MANAGERS -
CONTINUED
Q. What is your outlook going forward?
A. In his commentary at the beginning of this semiannual report, our father
Shelby M.C. Davis has clearly described the challenges that in all likelihood
lie ahead and the issues on which we must always remain focused. A wag once
famously said that the four most expensive words on Wall Street are, "This time
is different." But clearly as we look out at this new economy, some things are
different. Venerable companies with stable businesses are under attack from this
new juggernaut called the Internet. Business plans that once could have been
carved in stone must be completely reassessed.
In addition to these changes in technology, other powerful forces are at work
creating an environment of uncertainty. For example, investors have been lulled
into a sense of complacency by the seemingly routine predictability of quarterly
earnings gains that may have been more the result of elastic accounting than a
true reflection of the underlying businesses. Finally, without making economic
predictions, we must always remember that the level of interest rates plays a
vital role in our evaluation of companies. Warren Buffett once said that
interest rates act like gravity in the financial markets. Higher rates would
certainly weigh down stock valuations.
We would like to end with an interesting quotation from an interview given by
our father that appeared in Business Week magazine. In it he says, we guarantee
that we "will never be number one in a roaring speculative bull market. [We]
eschew the go-go philosophy that made instant winners [last year] of funds that
favored letter stock, new issues and hotshot over-the-counter securities." What
makes this observation so interesting is that it appeared in the February 7th
issue of Business Week in the year 1970, not long before the onset of the worst
bear market since the depression.
But lest we become too pessimistic, it is notable that in the same interview our
father states, "In a bull market, all you need is a great stock. In a bear
market, you need a great company." We feel that in Davis Growth & Income Fund we
own many great companies run by great executives. While we think that the next
five years may be difficult ones for the overall market, we believe that, at
today's prices, the valuations for the companies we own are not excessive and
that patient, long-term investors will be rewarded for riding through the
inevitable financial storms that are likely to follow the smooth sailing of the
last decade.(7)
5
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
===============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
This Semi-Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of Davis Growth & Income Fund containing more
information about risks, fees and expenses. Please read the prospectus carefully
before investing or sending money.
(1) This hypothetical 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.
(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 they were they were purchased. Below are
the average annual total returns for Davis Growth & Income Fund's Class A shares
for periods ended January 31, 2000. Returns for other classes of shares will
vary from the following returns:
* (WITHOUT a 4.75% Sales Charge taken into consideration for the period ended
January 31, 2000)
- ----------------------------------- ------------------ -----------------------
FUND NAME 1 YEAR INCEPTION
- ----------------------------------- ------------------ -----------------------
Davis Growth & Income Fund A 3.89% 3.74% - 05/01/98
- ----------------------------------- ------------------ -----------------------
** (WITH a 4.75% Sales Charge taken into consideration for the period ended
January 31, 2000)
- ----------------------------------- ------------------ -----------------------
FUND NAME 1 YEAR INCEPTION
- ----------------------------------- ------------------ -----------------------
Davis Growth & Income Fund A (1.07%) 0.89% - 05/01/98
- ----------------------------------- ------------------ -----------------------
(3) The Lipper Analytical Services Multicap Value Fund category is composed of
funds that, by portfolio practice, invest in a variety of market capitalization
ranges and seek long-term growth of capital by investing in companies that are
considered to be undervalued based on a price-to-current earnings, book value,
asset value, or other factors. Funds in the index are equally weighted, and
returns include the reinvestment of all dividends and are net of expenses.
Investments cannot be made directly in the index. Lipper Analytical Services'
performance, rankings and comparisons are based on total returns unadjusted for
commissions.
(4) The definitions of indices quoted in this newsletter appear below.
Investments cannot be made directly in either of these indices.
I. The S&P 500 Index is an unmanaged index of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The index is
adjusted for dividends, weighted towards stocks with large market
capitalizations, and represents approximately two-thirds of the total
market value of all domestic common stocks.
II. The PHLX/KBW Bank Index is a capitalization-weighted index consisting
of 24 exchange-listed and National Market System stocks, representing
national money center banks and leading regional institutions. The
index is intended to reflect the evolving financial sector and was
developed with a base value of 195 as of 10-21-91.
6
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
(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.
(6) Investments in real estate securities are subject to risks associated with
the direct ownership of real estate. These risks include declines in the value
of real estate, risks related to general and local economic conditions,
over-building or condemnation losses, fluctuations in rental income, changes in
neighborhood values, the appeal of properties to tenants, and increases in
interest rates.
(7) This report reflects the professional opinions of the Fund's 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 and, when redeemed, an investor's shares may be worth more or
less than their original cost.
An investment in the Fund is not a deposit in a bank and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
7
<PAGE>
DAVIS GROWTH & INCOME FUND
Schedule of Investments
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
VALUE
SHARES SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - (88.18%)
BANKS AND SAVINGS & LOANS - (8.91%)
36,000 Golden West Financial Corp.................. $ 1,059,750
100,000 Household International, Inc................ 3,525,000
100,000 Wells Fargo & Co............................ 4,000,000
-------------
8,584,750
-------------
BUILDING MATERIALS - (5.72%)
60,000 Martin Marietta Materials, Inc.............. 2,520,000
150,000 Masco Corp.................................. 2,990,625
-------------
5,510,625
-------------
CONSUMER PRODUCTS - (2.65%)
39,000 Gillette Co................................. 1,467,375
52,000 Philip Morris Cos., Inc..................... 1,088,750
-------------
2,556,125
-------------
DIVERSIFIED - (2.23%)
42 Berkshire Hathaway, Inc. - Class A*......... 2,150,400
-------------
DIVERSIFIED FINANCIAL SERVICES - (18.28%)
59,500 American Express Co......................... 9,806,344
73,750 Citigroup, Inc.............................. 4,236,016
22,000 Donaldson, Lufkin & Jenrette, Inc........... 1,051,875
20,000 Freddie Mac................................. 1,003,750
17,900 Providian Financial Corp.................... 1,510,313
-------------
17,608,298
-------------
ELECTRONICS - (10.47%)
30,000 Applied Materials, Inc.* .................. 4,116,563
15,500 Molex Inc................................... 788,078
48,000 Texas Instruments Inc....................... 5,178,000
-------------
10,082,641
-------------
FOOD & RESTAURANT - (2.97%)
77,000 McDonald's Corp............................. 2,863,438
-------------
HOTELS & MOTELS - (2.23%)
69,000 Marriott International, Inc................. 2,143,312
-------------
MACHINERY - (1.30%)
31,100 Dover Corp.................................. 1,253,719
-------------
PHARMACEUTICAL AND HEALTHCARE - (1.91%)
39,000 American Home Products Corp................. 1,835,438
-------------
PROPERTY/CASUALTY INSURANCE - (5.41%)
33,000 Progressive Corp. (Ohio).................... 2,054,250
42,000 Transatlantic Holdings, Inc................. 3,150,000
-------------
5,204,250
-------------
</TABLE>
8
<PAGE>
DAVIS GROWTH & INCOME FUND
Schedule of Investments - Continued
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
VALUE
SHARES SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - CONTINUED
REAL ESTATE - (12.64%)
66,900 Alexandria Real Estate Equities, Inc........ $ 1,973,550
48,000 Apartment Investment & Management Co........ 1,818,000
224,300 Boardwalk Equities, Inc.*................... 1,344,409
55,600 Boston Properties, Inc...................... 1,668,000
67,500 Centerpoint Properties Corp................. 2,392,031
2,900 General Growth Properties. Inc.............. 82,650
17,800 Home Properties of New York, Inc............ 481,713
46,000 Spieker Properties, Inc..................... 1,788,250
20,000 Vornado Realty Trust........................ 626,250
-------------
12,174,853
-------------
TECHNOLOGY - (9.44%)
44,500 Hewlett-Packard Co.......................... 4,817,125
20,000 Intel Corp.................................. 1,978,125
10,400 International Business Machines Corp........ 1,166,750
12,000 Lexmark International Group, Inc., Class A*. 1,131,000
-------------
9,093,000
-------------
TELECOMMUNICATIONS - (1.10%)
20,000 AT&T Corp................................... 1,055,000
-------------
THEME PARKS - (2.92%)
100,200 Premier Parks Inc.*......................... 2,811,860
-------------
Total Common Stocks -
(identified cost $74,414,706)....... 84,927,709
-------------
CONVERTIBLE BONDS - (1.43%)
$ 660,000 Cincinnati Financial Corp., Conv. Sub.
Deb., 5.50%, 05/01/02 - (identified
cost $1,672,963)......................... 1,376,925
</TABLE>
9
<PAGE>
DAVIS GROWTH & INCOME FUND
Schedule of Investments - Continued
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
VALUE
SHARES SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK - (11.50%)
80,000 General Growth Properties, 7.25%, Cum. Conv. Pfd....... $ 1,650,000
1,000 Globalstar Telecommunications Ltd, 8.00%, Conv. Pfd.... 73,625
35,900 Globalstar Telecommunications Ltd, 8.00%, Ser. 144A
Conv. Pfd.(b)....................................... 2,643,138
100,000 Sealed Air Corp., $2.00, Ser. A, Cum. Conv. Pfd........ 5,325,000
30,000 Vornado Realty Trust, 6.50%, Ser. A, Cum. Conv. Pfd.... 1,387,500
------------
Total Preferred Stocks - (identified cost $
10,179,889).................................... 11,079,263
------------
Total Investments - (identified cost $86,267,558)
(101.11%)(a)................................... 97,383,897
Liabilities Less Other Assets - (1.11%)........... (1,069,112)
------------
Net Assets - ( 100%)..................... $ 96,314,785
============
(a) Aggregate cost for Federal Income Tax purposes is $86,267,558. At January
31, 2000 unrealized appreciation (depreciation) of securities for Federal Income
Tax purposes was as follows:
Unrealized appreciation........................... $ 19,982,601
Unrealized depreciation........................... (8,866,262)
-----------------
Net appreciation............................. $ 11,116,339
=================
</TABLE>
(b) This security is subject to Rule 144A. The Board of Directors of the Fund
has determined that there is sufficient liquidity in such security to realize
current valuations. The security amounts to $2,643,138 or 2.74% of the Fund's
net assets as of January 31, 2000.
* Non-Income Producing Security
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
DAVIS GROWTH & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
At January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
<S> <C>
ASSETS:
Investments in securities, at value (identified cost
$86,267,558) (see accompanying Schedule of Investments).. $97,383,897
Receivables:
Capital stock sold....................................... 115,612
Dividends and interest................................... 147,171
-----------
Total assets........................................ 97,646,680
-----------
LIABILITIES:
Cash overdraft............................................... 896,445
Payable for capital stock redeemed........................... 237,447
Accrued expenses ............................................ 198,003
-----------
Total liabilities................................... 1,331,895
-----------
NET ASSETS ....................................................... $96,314,785
===========
NET ASSETS CONSIST OF:
Par value of shares of capital stock......................... $ 462,038
Additional paid-in capital................................... 89,238,708
Undistributed net investment income.......................... 10,806
Net unrealized appreciation on investments................... 11,116,339
Accumulated net realized loss................................ (4,513,106)
-----------
Net assets.......................................... $96,314,785
===========
CLASS A SHARES
Net assets............................................... $50,940,618
Shares outstanding....................................... 4,878,969
Net asset value and redemption price per share .......... $ 10.44
=========
Maximum offering price per share (100/95.25 of $10.44)*.. $ 10.96
=========
CLASS B SHARES
Net assets............................................... $27,949,103
Shares outstanding....................................... 2,689,035
Net asset value and redemption price per share .......... $ 10.39
=========
CLASS C SHARES
Net assets............................................... $ 9,897,613
Shares outstanding....................................... 952,335
Net asset value and redemption price per share .......... $ 10.39
=========
CLASS Y SHARES
Net assets............................................... $ 7,527,451
Shares outstanding....................................... 720,427
Net asset value and redemption price per share .......... $ 10.45
=========
</TABLE>
* On purchases of $100,000 or more, the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
DAVIS GROWTH & INCOME FUND
Statement of Operations
For the six months ended January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends................................................... $ 1,122,701
Interest ................................................... 21,648
-----------
Total income........................................ 1,144,349
Expenses:
Management fees (Note 3)...........................$ 394,367
Custodian fees..................................... 25,077
Transfer agent fees
Class A....................................... 16,528
Class B....................................... 25,506
Class C....................................... 8,862
Class Y....................................... 639
Audit fees......................................... 5,600
Legal fees......................................... 1,676
Accounting fees (Note 3)........................... 3,000
Reports to shareholders............................ 23,661
Directors' fees and expenses....................... 4,118
Registration and filing fees....................... 55,606
Miscellaneous...................................... 9,877
Payments under distribution plan (Note 4)
Class A....................................... 28,596
Class B....................................... 158,396
Class C....................................... 56,640
---------
Total expenses..................................... 818,149
Expenses paid indirectly (Note 6).................. (412)
-----------
Net expenses....................................... 817,737
-----------
Net investment income.......................... 326,612
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from investment transactions.................. (3,215,616)
Net decrease in unrealized appreciation of investments......... (1,157,093)
-----------
Net realized and unrealized loss on investments............. (4,372,709)
-----------
Net decrease in net assets resulting
from operations.................................. $(4,046,097)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
DAVIS GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JANUARY 31, YEAR ENDED
2000 JULY 31,
UNAUDITED 1999
---------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income............................................. $ 326,612 $ 1,014,950
Net realized loss from investment transactions.................... (3,215,616) (1,297,490)
Net change in unrealized appreciation/(depreciation)
of investments................................................ (1,157,093) 13,791,154
---------------- ---------------
Net increase (decrease) in net assets resulting
from operations.......................................... (4,046,097) 13,508,614
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income:
Class A ..................................................... (231,755) (930,424)
Class B ..................................................... (37,422) (211,825)
Class C ..................................................... (12,690) (68,532)
Class Y ..................................................... (37,276) (135,448)
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets resulting
from capital share transactions (Note 5):
Class A ..................................................... (4,662,253) 2,056,131
Class B ..................................................... (4,348,070) 10,692,550
Class C ..................................................... (1,600,619) 5,323,001
Class Y ..................................................... 1,900 6,250,806
---------------- ---------------
Total increase (decrease) in net assets....................... (14,974,282) 36,484,873
NET ASSETS:
Beginning of year................................................. 111,289,067 74,804,194
---------------- ---------------
End of year (including undistributed net income of
$10,806 and $3,337, respectively) ................................ $ 96,314,785 $ 111,289,067
================ ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
DAVIS GROWTH & INCOME FUND
Notes to Financial Statements
January 31, 2000 (Unaudited)
===============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a separate series of Davis New York Venture Fund, Inc., which
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's investment
objective is both capital growth and income. The Fund commenced operations on
May 1, 1998. The Fund offers shares in four classes, Class A, Class B, Class C
and Class Y. The Class A shares are sold with a front-end sales charge and the
Class B and Class 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's
distribution arrangement), liquidation and distributions. The following is a
summary of significant accounting policies followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION - Portfolio securities traded on national securities
exchanges are valued at the published last sales prices on the exchange, or, in
the absence of recorded sales, at the average of closing bid and asked prices on
such exchange. Over-the-counter securities are valued at the average of closing
bid and asked prices. If no quotations are available, the fair value of the
investment is determined by or at the direction of the Board of Directors.
Investments in short-term securities (maturing in sixty days or less) are valued
at amortized cost unless the Board of Directors determines that such cost is not
a fair value. The valuation procedures are reviewed and subject to approval by
the Board of Directors.
FEDERAL INCOME TAXES - It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no provision for federal income or excise tax is required. At January 31, 2000,
the Fund had approximately $1,297,000 of capital loss carryovers available to
offset future capital gains, if any, which expire in 2008.
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. Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis. 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.
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 Fund.
The Fund adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations.
14
<PAGE>
DAVIS GROWTH & INCOME FUND
Notes to Financial Statements - Continued
January 31, 2000 (Unaudited)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities) for the six months ended January 31, 2000, were $20,950,187 and
$30,005,319 respectively.
NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Advisory fees are paid to Davis Selected Advisers, L.P. (the "Adviser")
at the annual rate of 0.75% of the average net assets for the first $250
million, 0.65% of the average net assets on the next $250 million and 0.55% of
the average net assets in excess of $500 million.
The Adviser is paid for registering Fund shares for sale in various
states. The fee for the six months ended January 31, 2000 amounted to $6,498.
State Street Bank & Trust Co. ("State Street Bank") is the Fund's primary
transfer agent. The Adviser is also paid for certain transfer agent services.
The fee for these services for the six months ended January 31, 2000 amounted to
$6,351. State Street Bank is the Fund's 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 amounted to $3,000 for the six months ended January 31, 2000.
Certain directors and the officers of the Fund 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 Fund. DSA-NY performs research and
portfolio management services for the Fund under a Sub-Advisory Agreement with
the Adviser. The Fund pays no fees directly to DSA-NY.
The Fund has adopted procedures to treat Shelby Cullom Davis & Co.
("SCD") as an affiliate of the Adviser. During the six months ended January 31,
2000, SCD received $720 in commissions on the purchases of portfolio securities
in the Fund.
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES
CLASS A SHARES
Class A shares of the Fund are sold at net asset value plus a sales
charge and are redeemed at net asset value.
During the six months ended January 31, 2000, Davis Distributors, LLC,
the Fund's Underwriter (the "Underwriter" or "Distributor") received $33,978
from commissions earned on sales of Class A shares of the Fund, of which $5,320
was retained by the Underwriter and the remaining $28,658 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 Fund's registration statement, sales
literature and other expenses assumed or incurred by it in connection with such
sales.
15
<PAGE>
DAVIS GROWTH & INCOME FUND
Notes to Financial Statements - Continued
January 31, 2000 (Unaudited)
===============================================================================
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES - CONTINUED
CLASS A SHARES - CONTINUED
The Underwriter is reimbursed for amounts paid to dealers as a service
fee with respect to Class A shares sold by dealers which remain outstanding
during the period. The service fee is paid at the annual rate of 1/4 of 1% of
the average net assets maintained by the responsible dealers. The Underwriter is
not reimbursed for accounts for which the Underwriter pays no service fees to
other firms. The service fee for Class A shares of the Fund for the six months
ended January 31, 2000 was $28,596.
CLASS B SHARES
Class B shares of the Fund are sold at net asset value and are redeemed
at net asset value less a contingent deferred sales charge if redeemed within
six years of purchase.
The Fund pays a distribution fee to reimburse the Distributor for
commission advances on the sale of the Fund's Class B shares. The National
Association of Securities Dealers, Inc., ("NASD") limits the percentage of the
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 rule also limits the aggregate amount the Fund may pay for
distribution to 6.25% of gross Fund sales since inception of the Rule 12b-1
plan, plus interest, at 1% over the prime rate on unpaid amounts. The
Distributor intends to seek full payment (plus interest at prime plus 1%) of
distribution charges that exceed the 1% annual limit in some future period or
periods when the plan limits have not been reached.
During the six months ended January 31, 2000, Class B shares of the Fund
made distribution plan payments which included distribution fees of $118,914 and
service fees of $39,482.
Commission advances by the Distributor during the six months ended
January 31, 2000 on the sale of Class B shares of the Fund amounted to $41,959,
of which $41,652 was re-allowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the Fund
in the amount of $781,912, representing the cumulative commission advances by
the Distributor on the sale of the Fund's Class B shares, plus interest, reduced
by cumulative distribution fees paid by the Fund and cumulative contingent
deferred sales charges paid by redeeming shareholders. The Fund has no
contractual obligation to pay any such distribution charges and the amount, if
any, timing and condition of such payment are solely within the discretion of
the Directors who are not interested persons of the Fund or the Distributor.
A contingent deferred sales charge is imposed upon redemption of
certain Class B shares of the Fund within six years of the original purchase.
The charge is a declining percentage starting at 4% of the lesser of net asset
value of the shares redeemed or the total cost of such shares. During the six
months ended January 31, 2000 the Distributor received $75,548 in contingent
deferred sales charges from Class B shares of the Fund.
16
<PAGE>
DAVIS GROWTH & INCOME FUND
Notes to Financial Statements - Continued
January 31, 2000 (Unaudited)
===============================================================================
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES - CONTINUED
CLASS C SHARES
Class C shares of the Fund 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 Fund pays the Distributor 1% of the Fund's
average annual net assets attributable to Class C shares, of which 0.75% may be
used to pay distribution expenses and 0.25% may be used to pay shareholder
service fees.
During the six months ended January 31, 2000, Class C shares of the Fund
made distribution payments of $56,640. During the six months ended January 31,
2000, the Distributor received $2,044 in contingent deferred sales charges from
Class C shares of the Fund.
NOTE 5 - CAPITAL STOCK
At January 31, 2000, there were 3,000,000,000 shares of capital stock
($0.05 par value per share) authorized, 1,000,000,000 of which shares are
classified as Davis Growth & Income Fund. Transactions in capital stock were as
follows:
CLASS A
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31,
(UNAUDITED) 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares subscribed.............................. 159,530 $ 1,661,301 1,424,482 $ 13,883,526
Shares issued in reinvestment of distributions. 21,764 218,943 88,554 891,665
------------- ---------------- ------------ --------------
181,294 1,880,244 1,513,036 14,775,191
Shares redeemed................................ (632,330) (6,542,497) (1,251,969) (12,719,060)
------------- ---------------- ------------ --------------
Net increase (decrease)................... (451,036) $ (4,662,253) 261,067 $ 2,056,131
============= ================ ============ ==============
</TABLE>
CLASS B
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31,
(UNAUDITED) 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares subscribed.............................. 220,149 $ 2,277,430 1,814,613 $ 17,831,888
Shares issued in reinvestment of distributions. 2,773 27,588 17,900 179,921
------------- ---------------- ------------ --------------
222,922 2,305,018 1,832,513 18,011,809
Shares redeemed................................ (642,628) (6,653,088) (723,688) (7,319,259)
------------- ---------------- ------------ --------------
Net increase (decrease)................... (419,706) $ (4,348,070) 1,108,825 $ 10,692,550
============= ================ ============ ==============
</TABLE>
17
<PAGE>
DAVIS GROWTH & INCOME FUND
Notes to Financial Statements - Continued
January 31, 2000 (Unaudited)
===============================================================================
NOTE 5 - CAPITAL STOCK - CONTINUED
CLASS C
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31,
(UNAUDITED) 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares subscribed.............................. 141,379 $ 1,482,526 871,308 $ 8,619,196
Shares issued in reinvestment of distributions. 952 9,471 5,844 58,855
------------- ---------------- ------------ ---------------
142,331 1,491,997 877,152 8,678,051
Shares redeemed................................ (299,013) (3,092,616) (331,361) (3,355,050)
------------- ---------------- ------------ ---------------
Net increase (decrease)................... (156,682) $ (1,600,619) 545,791 $ 5,323,001
============= ================ ============ ===============
</TABLE>
CLASS Y
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31,
(UNAUDITED) 1999
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares subscribed.............................. 24 $ 234 707,983 $ 6,134,544
Shares issued in reinvestment of distributions. 3,663 37,007 13,435 134,598
------------- ---------------- ------------ ---------------
3,687 37,241 721,418 6,269,142
Shares redeemed................................ (3,467) (35,341) (1,832) (18,336)
------------- ---------------- ------------ ---------------
Net increase ............................. 220 $ 1,900 719,586 $ 6,250,806
============= ================ ============ ===============
</TABLE>
NOTE 6 - CUSTODIAN FEES
Under an agreement with the custodian bank, custodian fees are reduced
for earnings on cash balances maintained at the custodian by the Fund. Such
reductions amounted to $412 during the six months ended January 31, 2000.
18
<PAGE>
DAVIS GROWTH & INCOME FUND
Financial highlights
Class A
===============================================================================
Financial Highlights for a share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
MAY 1, 1998
SIX MONTHS YEAR (COMMENCEMENT
ENDED ENDED OF OPERATIONS)
JANUARY 31, 2000 JULY 31, THROUGH
(UNAUDITED) 1999 JULY 31, 1998
----------- ---- -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 10.85 $ 9.81 $ 10.00
------- ------ --------
Income(Loss) From Investment Operations
Net Investment Income....................... 0.06 0.16 0.03
Net Realized and Unrealized Gains (Losses).. (0.42) 1.05 (0.22)
------- ------ --------
Total From Investment Operations.......... (0.36) 1.21 (0.19)
Dividends and Distributions
Dividends from Net Investment Income........ (0.05) (0.17) -
------- ------ --------
Total Dividends and Distributions......... (0.05) (0.17) -
Net Asset Value, End of Period ................. $ 10.44 $ 10.85 $ 9.81
======= ======= ========
Total Return(1)..................................
(3.35)% 12.48% (1.90)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)..... $50,941 $57,824 $49,715
Ratio of Expenses to Average Net Assets..... 1.16%* 1.16% 1.44%*
Ratio of Net Investment Income to Average
Net Assets................................ 1.02%* 1.39% 1.87%*
Portfolio Turnover Rate(2).................. 20% 18% 0
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one year.
(2) 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.
19
<PAGE>
DAVIS GROWTH & INCOME FUND
Financial highlights
Class B
================================================================================
Financial Highlights for a share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
MAY 4, 1998
SIX MONTHS YEAR (INCEPTION
ENDED ENDED OF CLASS)
JANUARY 31, 2000 JULY 31, THROUGH
(UNAUDITED) 1999 JULY 31, 1998
---------- -------- -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 10.82 $ 9.79 $ 10.00
--------- -------- ---------
Income(Loss) From Investment Operations
Net Investment Income..................... - 0.05 0.01
Net Realized and Unrealized Gains (Losses) (0.42) 1.05 (0.22)
-------- -------- --------
Total From Investment Operations ....... (0.42) 1.10 (0.21)
Dividends and Distributions
Dividends from Net Investment Income ..... (0.01) (0.07) -
--------- -------- ---------
Total Dividends and Distributions ...... (0.01) (0.07) -
--------- -------- ---------
Net Asset Value, End of Period ............... $ 10.39 $ 10.82 $ 9.79
========= ========= ========
Total Return (1)...............................
(3.86)% 11.34% (2.10)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $27,949 $33,643 $19,571
Ratio of Expenses to Average Net Assets 2.15%* 2.17% 2.32%*
Ratio of Net Investment Income to Average
Net Assets.............................. 0.03%* 0.38% 0.99%*
Portfolio Turnover Rate(2)................ 20% 18% 0%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one year.
(2) 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.
20
<PAGE>
DAVIS GROWTH & INCOME FUND
Financial highlights
Class C
===============================================================================
Financial Highlights for a share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
MAY 4, 1998
SIX MONTHS YEAR (INCEPTION
ENDED ENDED OF CLASS)
JANUARY 31, 2000 JULY 31, THROUGH
(UNAUDITED) 1999 JULY 31, 1998
---------- ---- -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 10.82 $ 9.79 $ 10.00
------- -------- -------
Income(Loss) From Investment Operations
Net Investment Income..................... - 0.05 0.01
Net Realized and Unrealized Gains (Losses) (0.42) 1.05 (0.22)
------- -------- -------
Total From Investment Operations ....... (0.42) 1.10 (0.21)
Dividends and Distributions
Dividends from Net Investment Income ..... (0.01) (0.07) -
------- -------- -------
Total Dividends and Distributions....... (0.01) (0.07) -
Net Asset Value, End of Period ............... $ 10.39 $ 10.82 $ 9.79
======= ======== =======
Total Return (1)............................... (3.87)% 11.32% (2.10)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)... $9,898 12,002 $5,512
Ratio of Expenses to Average Net Assets.. 2.15%* 2.17% 2.32%*
Ratio of Net Investment Income to Average
Net Assets.............................. 0.03%* 0.38% 0.99%*
Portfolio Turnover Rate(2)................ 20% 18% 0%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one year.
(2) 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.
21
<PAGE>
DAVIS GROWTH & INCOME FUND
Financial highlights
Class Y
===============================================================================
Financial Highlights for a share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
MAY 4, 1998
SIX MONTHS YEAR (INCEPTION
ENDED ENDED OF CLASS)
JANUARY 31, 2000 JULY 31, THROUGH
(UNAUDITED) 1999 JULY 31, 1998
----------- ---- -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 10.86 $ 9.82 $ 10.00
--------- --------- --------
Income(Loss) From Investment Operations
Net Investment Income..................... 0.06 0.18 0.04
Net Realized and Unrealized Gains (Losses) (0.42) 1.05 (0.22)
--------- --------- --------
Total From Investment Operations........ (0.36) 1.23 (0.18)
Dividends and Distributions
Dividends from Net Investment Income ..... (0.05) (0.19) -
--------- --------- --------
Total Dividends and Distributions....... (0.05) (0.19) -
Net Asset Value, End of Period ............... $ 10.45 $ 10.86 $ 9.82
========= ========= ========
Total Return(1)................................ (3.28)% 12.72% (1.80)%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)... $7,527 $7,819 $6
Ratio of Expenses to Average Net Assets .. 1.01%* 1.01% 1.14%*
Ratio of Net Investment Income to Average
Net Assets.............................. 1.17%* 1.54% 2.17%*
Portfolio Turnover Rate(2) 20% 18% 0%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total returns
are not annualized for periods of less than one year.
(2) 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.
22
<PAGE>
DAVIS GROWTH & INCOME FUND
2949 East Elvira Road, Tucson, Arizona 85706
DIRECTORS OFFICERS
Wesley E. Bass, Jr. Jeremy H. Biggs
Jeremy H. Biggs Chairman
Marc P. Blum Christopher 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 & Assistant Secretary
Christian R. Sonne Thomas D. Tays
Marsha Williams Vice President & Secretary
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, Massachusetts 02266-8406
COUNSEL
D'Ancona & Pflaum
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
AUDITORS
KPMG LLP
707 Seventeenth Street
Suite 2300
Denver, Colorado 80202
================================================================================
FOR MORE INFORMATION ABOUT DAVIS GROWTH & INCOME FUND INCLUDING MANAGEMENT FEES,
CHARGES AND EXPENSES, SEE THE CURRENT PROSPECTUS WHICH MUST PRECEDE OR ACCOMPANY
THIS REPORT.
================================================================================
<PAGE>
SEMI-ANNUAL REPORT
DAVIS SELECTED ADVISERS, L.P.
2949 EAST ELVIRA ROAD
SUITE 101
TUCSON, AZ 85706
1-800-279-0279
www.davisfunds.com
[DAVIS FUNDS LOGO]
