Davis International Series, Inc.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
Dear Shareholder:
While U.S. markets have moved ahead during the third quarter foreign
stock markets in general have been relatively flat. Regardless of the
lackluster performance of most foreign stock markets the Davis
International Total Return Fund performed well by actively selecting
strong countries and companies. We are pleased to note that Class A
shares of the Davis International Total Return Fund, from inception on
February 1, 1995 to the period covered by this report ending September
30, 1995, increased in value 18.5%* while the total return of the Morgan
Stanley Capital International EAFE Index+ was 11.1%.
The fund emphasizes the selected regions, selected countries, and
selected industries around the world which appear to offer the most
interesting investment opportunities. The fund does not try to invest all
over the world. As a result, it currently emphasizes countries and
companies in Asia. The GNPs of the seven countries in Asia in which the
fund invests are expected to grow by approximately 7% in 1996. This
compares with expected GNP growth of less than 3% in Europe and the U.S.
We believe in maintaining a long-term perspective especially when
investing internationally. Stock markets fluctuate over the short-term,
but provide one of the best opportunities for building long-term wealth.
Investing internationally through the Davis International Total Return
Fund provides the opportunity to participate in the above-average growth
potential offered by non-U.S. companies.
Sincerely,
/s/ Shelby M.C. Davis /s/ Edouard F. Iselin
Shelby M.C. Davis Edouard F. Iselin
President Portfolio Manager
November 3, 1995
* Excluding the maximum sales charge of 4.75%. Total return for
Class A shares, including the maximum sales charge of 4.75%, for the
eight months ended September 30, 1995 is 12.87%. Total return for Class
B shares, including the maximum contingent deferred sales charge of 4%,
for the eight months ended September 30, 1995 is 13.9%.
+ A recognized international index in which direct investments are not
permitted.
<PAGE>
Davis International Series, Inc.
Management's Discussion of Fund Performance
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
An interview with Edouard F. Iselin, portfolio manager of the Davis
International Total Return Fund.
Q. What strategies have you used to outperform the EAFE Index and
achieve a net asset value total return of 18.5%?
A. Investments have been made in selected countries which continue to
have growth rates at least twice those of most European countries and the
United States. The fund favors investments in Asia because the GNP of the
seven countries in this region in which the funds invests are expected to
grow by approximately 7% in 1996. This compares with expected GNP
growth of less than 3% in Europe and the U.S.
Q. What do you look for in the countries in which you invest?
A. The fund invests in those countries which are growing and may
continue to grow fast, where economic indicators look good, corporate
profits are robust, finances are sound, governments are pro-business, and
people work hard.
Q. Which countries and industries do you find most attractive to invest in?
A. I find the most attractive countries in Asia. Currently, the fund
emphasizes the following countries, including the Philippines (19.2%),
Hong Kong (19.7%), Thailand (15.9%) and the United Kingdom (12.3%). The
industries I find the most attractive include: Banking, Real Estate,
Telecommunications, Utilities and Electrical Equipment.
<PAGE>
Davis International Total Return Fund - Class A shares
Comparison of Davis International Total Return Fund and Europe Australia
Far East Index
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Return was 12.9% for the period ended September 30, 1995. (This
calculation includes an initial sales charge of 4 3/4%.)
$10,000 invested over the life of Class A shares of the Fund. Let's say you
invested $10,000 in Class A shares of Davis International Total Return
Fund on February 1, 1995. As the chart shows, by September 30, 1995 the
value of your investment would have grown to $11,285 - a 12.9% increase
on your initial investment. For comparison, the Europe Australia Far East
Index is also presented on the chart below.
<TABLE>
<CAPTION>
Measurement period Davis International EAFE Index
Total Return Fund
------------------ ------------------- ----------
<S> <C> <C>
February 1, 1995 $ 9,525 $10,000
September 30, 1995 11,285 11,110
</TABLE>
Europe Australia Far East Index is an unmanaged index and has no specific
investment objective. The index used does not take into account any sales
charges and has no expenses.
The performance data for Davis International Total Return 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.
<PAGE>
Davis International Total Return Fund - Class B shares
Comparison of Davis International Total Return Fund and Europe Australia
Far East Index
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Return was 13.9% for the period ended September 30, 1995. (This
calculation includes a contingent deferred sales charge of 4%.)
$10,000 invested over the life of Class B shares of the Fund. Let's say you
invested $10,000 in Class B shares of Davis International Total Return
Fund on February 1, 1995. As the chart shows, by September 30, 1995 the
value of your investment would have grown to $11,390 - a 13.9% increase
on your initial investment. For comparison, the Europe Australia Far East
Index is also presented on the chart below.
<TABLE>
<CAPTION>
Measurement period Davis International EAFE Index
Total Return Fund
------------------ ------------------- ----------
<S> <C> <C>
February 1, 1995 $10,000 $10,000
September 30, 1995 11,390 11,110
</TABLE>
Europe Australia Far East Index is an unmanaged index and has no specific
investment objective. The index used does not take into account any sales
charges and has no expenses.
The performance data for Davis International Total Return 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.
<PAGE>
<TABLE>
Davis International Series, Inc.
Davis International Total Return Fund
At September 30, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ten Largest Holdings
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
200,000 Krung Thai Bank Public Co. Ltd. (Thailand)................................................... $ 796,971
1,000 Sandoz Ltd., Registered (Switzerland)........................................................ 761,246
1,200,000 C & P Homes Inc. (Philippines)............................................................... 748,417
100,000 Standard Chartered Banking PLC (United Kingdom).............................................. 712,472
600 BBC Brown Boveri Ltd., Bearer (Switzerland).................................................. 694,983
200,000 Dao Heng Bank Group Ltd. (Hong Kong)......................................................... 663,502
100,000 Cable & Wireless PLC (United Kingdom)........................................................ 655,712
2,000,000 Filinvest Land Inc. (Philippines)............................................................ 644,790
200,000 CITIC Pacific Ltd. (Hong Kong)............................................................... 604,007
40,000 Unilever Indonesia (Indonesia)............................................................... 600,309
-------------
TOTAL MARKET VALUE OF TEN LARGEST HOLDINGS................................................... $ 6,882,409
-------------
-------------
</TABLE>
<TABLE>
Industry Diversification
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Banks and Savings & Loan Associations.................................................................... 25.75%
Chemicals................................................................................................ 2.07
Consumer Products........................................................................................ 3.97
Diversified.............................................................................................. 12.20
Electrical Equipment..................................................................................... 4.70
Financial Services....................................................................................... 3.55
Hotels & Lodging......................................................................................... 3.47
Manufacturing............................................................................................ 3.23
Pharmaceuticals.......................................................................................... 5.03
Real Estate.............................................................................................. 13.16
Shipyard................................................................................................. 2.37
Telecommunications....................................................................................... 13.27
Utilities................................................................................................ 7.23
-------
100.00%
-------
-------
</TABLE>
<PAGE>
<TABLE>
Davis International Series, Inc.
Davis International Total Return Fund
Schedule of Investments
At September 30, 1995
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (91.04%)
<CAPTION>
Shares VALUE
------ (NOTE 1)
<S> <C> <C> ------
HONG KONG - (19.67%)
500,000 Cheung Kong (Holdings) Ltd. (Morgan Stanley warrants expiring
02/10/97)(c)............................................................................... $ 104,763
200,000 CITIC Pacific Ltd............................................................................ 604,007
200,000 Dao Heng Bank Group Ltd...................................................................... 663,502
200,000 Hong Kong Land Holdings Ltd.................................................................. 350,000
200,000 HSBC Holdings PLC (Morgan Stanley warrants expiring 02/10/97)(c)............................. 104,117
100,000 Hutchison Whampoa Ltd........................................................................ 541,925
507,182 Mandarin Oriental International Ltd.......................................................... 527,469
100,000 New World Development Co. Ltd. (warrants expiring 04/05/96)(c)............................... 139,038
-------------
3,034,821
INDONESIA - (7.32%) -------------
1,000,000 Dharmala Sakti Sejahtera..................................................................... 529,684
40,000 Unilever Indonesia........................................................................... 600,309
-------------
1,129,993
MALAYSIA - (5.60%) -------------
200,000 DCB Holdings BHD............................................................................. 557,325
100,000 Leader Universal Holdings Bhd................................................................ 306,528
-------------
863,853
PHILIPPINES - (15.86%) -------------
3,000,000 Aboitiz Equity Venture Inc.(c).............................................................. 564,191
1,200,000 C & P Homes Inc.(c)......................................................................... 748,417
2,000,000 Filinvest Land Inc.(c)...................................................................... 644,790
1,700,000 Republic Glass Holdings Corp.(c)............................................................ 489,349
-------------
2,446,747
SINGAPORE - (2.32%) -------------
50,000 Jurong Shipyard Ltd......................................................................... 358,347
SOUTH KOREA _ (6.02%) -------------
14,000 Korea Electric Power Corp.(c)............................................................... 526,686
12,000 L.G. Electronics Inc........................................................................ 403,020
-------------
929,706
SWITZERLAND - (9.44%) -------------
600 BBC Brown Boveri Ltd., Bearer............................................................... 694,983
1,000 Sandoz Ltd., Registered..................................................................... 761,246
-------------
1,456,229
THAILAND - (15.94%) -------------
70,000 Jasmine International Public Co. Ltd........................................................ 396,095
200,000 Krung Thai Bank Public Co. Ltd.............................................................. 796,971
150,000 National Petrochemical Public Co. Ltd....................................................... 313,808
<PAGE>
Davis International Series, Inc.
Davis International Total Return Fund
Schedule of Investments - Continued
At September 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - Continued
Value
Shares/Principal (Note 1)
---------------- ------
THAILAND - Continued
200,000 Shinawatra Satelite Public Co. Ltd.<F3>..................................................... $ 376,569
50,000 Total Access Communication Public Co. Ltd................................................... 315,625
20,000 United Telecommunications Industry Public Co. Ltd........................................... 259,813
-------------
2,458,881
-------------
UNITED KINGDOM - (8.87%)
100,000 Cable & Wireless PLC........................................................................ 655,712
100,000 Standard Chartered Banking PLC.............................................................. 712,472
-------------
1,368,184
-------------
TOTAL COMMON STOCKS (identified cost $13,980,109)......................................... 14,046,761
-------------
CONVERTIBLE BONDS - (6.78%)
$ 500,000 Ayala International Finance, Conv. Bds., 3.00%, 06/08/00 - United
Kingdom <F2>................................................................................. 536,250
500,000 Metrobank, Conv. Bds., 2.75%, 09/10/00 - Philippines......................................... 510,000
-------------
TOTAL CONVERTIBLE BONDS (identified cost $1,000,000)....................................... 1,046,250
-------------
SHORT-TERM INVESTMENTS - (3.89%)
600,000 State Street Bank and Trust Company Repurchase Agreement, 5.75%,
10/02/95, dated 09/29/95, repurchase value of $600,288 (collateralized by
$610,000 par value U.S. Treasury Notes, 6.25%, 08/31/96, market value
$614,944) (identified cost $600,000)....................................................... 600,000
-------------
TOTAL INVESTMENTS (identified cost $15,580,109) -
(101.71%) <F1>......................................................................... 15,693,011
Liabilities less other assets - (1.71%).................................................. (263,442)
-------------
NET ASSETS - 100%........................................................................ $ 15,429,569
-------------
<FN> -------------
<F1> Aggregate cost for Federal income tax purposes is $15,580,109.
<F2> This security is subject to Rule 144A. The Board of Directors of the
Fund has determined that there is sufficient liquidity in this security to
realize its current valuation.
<F3> Non income-producing security.
</FN>
At September 30, 1995, unrealized appreciation (depreciation) of
securities for Federal income tax purposes was as follows:
Unrealized appreciation............................................................................. $ 713,441
Unrealized depreciation............................................................................. (600,539)
-------------
Net unrealized appreciation......................................................................... $ 112,902
-------------
See Notes to Financial Statements -------------
</TABLE>
<PAGE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES - At September 30, 1995
DAVIS INTERNATIONAL TOTAL RETURN FUND
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value (identified cost - $15,580,109) (Note 1)........................... $ 15,693,011
Cash................................................................................................... 523,873
Receivables:
Dividends and interest............................................................................... 27,700
Capital stock sold................................................................................... 7,582
Investments sold..................................................................................... 570,512
Due from advisor....................................................................................... 3,042
-------------
Total assets..................................................................................... 16,825,720
-------------
LIABILITIES:
Payable for investments purchased...................................................................... 1,376,623
Accrued expenses....................................................................................... 5,592
Other payables......................................................................................... 13,936
-------------
Total liabilities................................................................................ 1,396,151
-------------
NET ASSETS............................................................................................... $ 15,429,569
-------------
-------------
CLASS A SHARES
Net assets........................................................................................... $ 13,427,394
Shares outstanding................................................................................... 1,133,028
Net asset value and redemption price per share (net assets/shares outstanding)....................... $ 11.85
-------
-------
Maximum offering price per share (100/95.25 of $11.85)............................................... $ 12.44
-------
-------
CLASS B SHARES
Net assets........................................................................................... $ 2,002,175
Shares outstanding................................................................................... 169,787
Net asset value, offering and redemption price per share (net assets/shares
outstanding)....................................................................................... $11.79
------
Net assets consist of: ------
Undistributed net investment income.................................................................... $ 59,094
Unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies.................................................................... 115,084
Accumulated net realized gains from investments and foreign currency transactions...................... 1,319,814
Paid-in capital........................................................................................ 13,935,577
-------------
Net assets....................................................................................... $ 15,429,569
-------------
-------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
STATEMENT OF OPERATIONS - For the eight months ended September 30, 1995
DAVIS INTERNATIONAL TOTAL RETURN FUND
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Income:
Dividends (net of foreign taxes withheld of $15,507)................................................. $ 108,569
Interest............................................................................................. 69,991
-------------
Total income..................................................................................... 178,560
-------------
Expenses:
Management fees (Note 3)................................................................. $ 67,449
Custodian fees........................................................................... 39,129
Transfer agent fees (Note 3)............................................................. 7,964
Audit fees............................................................................... 5,975
Legal fees............................................................................... 13,341
Accounting fees (Note 3)................................................................. 5,336
Reports to shareholders.................................................................. 5,326
Directors fees and expenses.............................................................. 19,583
Registration and filing fees............................................................. 17,848
Miscellaneous............................................................................ 5,389
Distribution plan payments (Note 3)
Class A................................................................................ 5,565
Class B................................................................................ 4,522
-----------
Total expenses................................................................................... 197,427
Reimbursement of expenses by adviser (Note 3).................................................. (77,961)
-------------
Net expenses..................................................................................... 119,466
-------------
Net investment income.......................................................................... 59,094
-------------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:
Net realized gain (loss) from:
Investment transactions.............................................................................. 1,404,593
Foreign currency transactions........................................................................ (15,101)
Net increase in unrealized appreciation on:
Investments1......................................................................................... 12,902
Translation of assets and liabilities denominated in foreign currencies.............................. 2,182
Foreign taxes on gains on investments (including deferred taxes of $8,665)............................. (69,678)
-------------
Net realized and unrealized gain on investments and foreign currency............................. 1,434,898
-------------
Net increase in net assets resulting from operations........................................... $ 1,493,992
--------------
--------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
DAVIS INTERNATIONAL TOTAL RETURN FUND
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Eight
Months Ended
September 30,
1995
----
OPERATIONS:
<S> <C>
Net investment income.................................................................................. $ 59,094
Net realized gain from investments and foreign currency transactions................................... 1,389,492
Increase in unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies.......................................... 115,084
Foreign taxes on gains on investments.................................................................. (69,678)
--------------
Net increase in net assets resulting from operations................................................. 1,493,992
CAPITAL SHARE TRANSACTIONS (NOTE 5)...................................................................... 13,935,577
--------------
Total increase in net assets....................................................................... 15,429,569
NET ASSETS:
Beginning of period.................................................................................... _
--------------
End of period (including undistributed net investment income of $59,094)............................... $ 15,429,569
--------------
--------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment
company. The Company currently offers one series, Davis International
Total Return Fund ("Fund"). The Fund offers shares in two classes, Class
A and Class B. The Class A shares are sold with a front-end sales charge
and the Class B shares are sold at net asset value and may be subject to a
contingent deferred sales charge upon redemption. Both 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 Fund in the
preparation of its financial statements.
Security Valuation - Portfolio securities are normally valued using
current market valuations: either the last reported sales price, or in the
case of securities for which there is no reported last sale, the closing bid
price. Debt securities maturing in 60 days or less are usually valued at
amortized cost and longer term debt securities may be valued by an
independent pricing service. Securities for which market quotations are
not readily available and other assets are appraised at fair value as
determined in good faith in accordance with methods that are authorized
by the Board of Directors. Because of the difference in times of closing of
markets in which the Fund's securities are traded, events affecting
portfolio values that occur between the time their prices are determined
and the time the Fund's shares are priced will generally not be reflected
in the Fund's share price.
Foreign Currency - Amounts denominated in or expected to settle in
foreign currencies (FC) are translated into United States dollars (US$) at
current exchange rates computed by State Street Bank & Trust Company,
the Fund's custodian bank. Investment securities, other assets, and
liabilities are valued at the closing rate of exchange at the balance sheet
date. Purchases and sales of investment securities, income and expenses
are valued at the rate of exchange prevailing on the respective dates of
such transactions (or at an average rate if significant rate fluctuations
have not occurred). The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales and maturities of short-term securities, sales of FCs, 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.
Forward Currency Contracts - The Fund 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 as an
unrealized gain or loss equal to the difference between the value of the
forward currency contract at the time it was opened and value at the time
it was closed. Investments in forward currency contracts may expose the
company to risks resulting from unanticipated movements in foreign
currency exchange rates or failure of the counterparty to the agreement to
perform in accordance with the terms of the contract.
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 tax is
required.
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 1995
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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 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.
Dividends and Distributions to Shareholders - Dividends and distributions
to shareholders are recorded on the ex-dividend date.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities) during the eight months ended September 30, 1995, were
$21,791,245 and $8,218,262, respectively.
NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Advisory fees are paid monthly to the investment adviser, Davis
Selected Advisers, L.P., at the annual rate of 1.00% of the first $250
million of average net assets, 0.90% on the next $250 million of average
net assets, and 0.80% of average net assets in excess of $500 million.
Pursuant to applicable state Blue Sky requirements, the adviser will
re-imburse expenses (including the advisory fee but excluding interest,
taxes, brokerage fees and fees paid under any Rule 12b-1 Distribution
Plan) in excess of the most restrictive applicable expense limitation
prescribed by any statute or regulatory authority of any jurisdiction in
which the Fund's shares are qualified for offer and sale. The Adviser
believes that the most restrictive expense limitations presently
applicable are 2 1/2% for the first $30 million of average net assets, 2%
for the next $70 million of average net assets and 1 1/2% for any
additional average net assets. The Adviser is paid for registering Fund
shares for sale in various states. The fee for the eight months ended
September 30, 1995 amounted to $8,000. The Adviser is paid for certain
transfer agent services. The fee for the eight months ended September
30, 1995 amounted to $1,145. The Adviser is also paid for certain
accounting services. The fee amounted to $5,336 for the eight months
ended September 30, 1995. Certain directors and the officers of the Fund
are also directors and officers of the general partner of the Adviser.
Atlantic Advisers Limited (the "Sub-Adviser") acts as the
Sub-Adviser of the Fund. The Sub-Adviser manages the day-to-day
investment operations for the Fund. The Fund pays no fees directly to the
Sub-Adviser. The Sub-Adviser receives from the Adviser 50% of the total
annual investment advisory fees paid by the Fund to the Adviser.
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 (without a contingent deferred
sales charge).
During the eight months ended September 30, 1995, the Fund's
Underwriter, Davis Selected Advisers, L.P., received $134,207 from
commissions earned on sales of Class A shares of the Fund, all of which
was reallowed to investment dealers. Davis Selected Advisers, L.P. 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.
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 1995
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES
The Underwriter is reimbursed for amounts paid to dealers as a
maintenance fee with respect to Class A shares sold by dealers and
remaining outstanding during the period. The maintenance fee is paid at
the annual rate of 1/4 of 1% of the average net assets maintained by the
responsible dealers. The Underwriter is not reimbursed for accounts in
which the Underwriter pays no service fees to other firms. The
maintenance fee for Class A shares of the Fund for the eight months ended
September 30, 1995 was $5,565.
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 compensates the Distributor with a 4% commission on the
proceeds from the sale of the Fund's Class B shares (subject to the limits
described below) and the Distributor pays 4% to the qualified dealer
responsible for the sale of the shares. A rule implemented by the National
Association of Securities Dealers, Inc., ("NASD") limits the percentage of
the Fund's annual average net assets attributable to Class B shares which
may be paid to the Distributor in connection with the distribution of its
shares. 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-related services 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 eight months ended September 30, 1995, Class B shares
of the Fund made distribution plan payments which included commissions
of $3,808 and maintenance fees of $714.
Commissions earned by the Distributor during the eight months
ended September 30, 1995 on the sale of Class B shares of the Fund
amounted to $73,453, all of which was reallowed to qualified selling
dealers.
The Distributor intends to seek payment from Class B shares of the
Fund in the amount of $71,507, representing the cumulative commissions
earned by the Distributor on the sale of the Fund's Class B shares, plus
interest, reduced by cumulative commissions 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 eight months ended September 30, 1995 the Distributor
received no contingent deferred sales charges from Class B shares of the
Fund.
<PAGE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
September 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NOTE 5 - CAPITAL STOCK
At September 30, 1995, there were 5 billion shares of capital stock
($0.001 par value per share) authorized.
Transactions in capital stock were as follows:
<CAPTION>
Class A Eight Months Ended
September 30, 1995
------------------
Shares Amount
------ ------
<S> <C> <C>
Shares subscribed............................................... 1,191,010 $ 12,666,427
Shares issued in reinvestment of distributions.................. _ _
---------- ------------
1,191,010 12,666,427
Shares reacquired............................................... (57,982) (681,560)
---------- ------------
Net increase.................................................. 1,133,028 $ 11,984,867
---------- ------------
---------- ------------
Class B
Eight Months Ended
September 30, 1995
------------------
Shares Amount
------ ------
Shares subscribed............................................... 170,015 $ 1,953,436
Shares issued in reinvestment of distributions.................. _ _
---------- -----------
170,015 1,953,436
Shares reacquired............................................... (228) (2,726)
---------- -----------
Net increase................................................ 169,787 $ 1,950,710
---------- -----------
---------- -----------
</TABLE>
<PAGE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
FINANCIAL HIGHLIGHTS
DAVIS INTERNATIONAL TOTAL RETURN FUND
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
The following represents financial highlights for a share of capital stock
outstanding throughout each period.
<CAPTION>
CLASS A CLASS B
Eight Months Eight Months
ended ended
9/30/95 9/30/95
------- -------
<S> <C> <C>
Net Asset Value,
Beginning of Period.......................................... $ 10.00 $ 10.00
Income From Investment Operations -------- --------
- ---------------------------------
Net Investment Income........................................ 05 (.01)
Net Gains on Securities
(both realized and unrealized)............................. 1.80 1.80
-------- --------
Total From Investment Operations............................. 1.85 1.79
Net Asset Value, -------- --------
End of Period............................................... $ 11.85 $ 11.79
-------- --------
-------- --------
Total Return <F1>.............................................. 18.50% 17.90%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of
Period (000 omitted)....................................... $ 13,427 $ 2,002
Ratio of Expenses
to Average Net Assets..................................... 1.72%<F2> 2.46%<F2>
Ratio of Net Investment Income (Loss)
to Average Net Assets...................................... .95%<F2> (.09)%<F2>
Portfolio Turnover
Rate....................................................... 85% 85%
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Annualized.
</FN>
</TABLE>
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
Davis International Total Return Fund
Report of Independent Certified Public Accountants
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Davis International Series, Inc.
We have audited the accompanying statement of assets and liabilities of
Davis International Total Return Fund, Inc. including the schedule of
portfolio investments, as of September 30, 1995, and the related statement of
operations, the statement of changes in net assets and the financial highlights
for the eight months then ended. These financial statements and financial
highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these fi-nancial statements and
financial highlights based on our audit.
We conducted our audit 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 September 30, 1995, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and signifi-cant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Davis International Total Return Fund, Inc. as of September 30,
1995, and the results of its operations, the changes in its net assets, and
the financial highlights for the eight months then ended, in conformity
with generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
November 3, 1995
<PAGE>
DAVIS INTERNATIONAL
SERIES, INC.
DAVIS INTERNATIONAL TOTAL
RETURN FUND
124 East Marcy Street Santa Fe, New Mexico 87501
- -------------------------------------------------
- -------------------------------------------------
Directors Officers
Jeremy H. Biggs Jeremy H. Biggs
Shelby M.C. Davis Chairman
Keith R. Kroeger Shelby M.C. Davis
The Very Reverend President
James R. Leo Carl R. Luff
Richard M. Murray Vice President, Treasurer,
Martin H. Proyect & Assistant Secretary
Theodore B. Smith Jr. Raymond O. Padilla
Vice President, Secretary,
& Assistant Treasurer
Carolyn H. Spolidoro
Vice President
Louis R. Proyect
Vice President
Andrew A. Davis
Vice President
Eileen R. Street
Assistant Treasurer
& Assistant Secretary
Investment Adviser & Distributor
Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, New Mexico 87501
Transfer Agent & Custodian
State Street Bank and Trust Company
c/o The Davis Funds
P.O. Box 8406
Boston, Massachusetts 02266-8406
Counsel
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
Auditors
Tait, Weller & Baker
Two Penn Center, Suite 700
Philadelphia, Pennsylvania 19102-1707
- ----------------------------------------------
- ----------------------------------------------
For more information about Davis International Series,
Inc., DavisInternational Total Return Fund including
management fee, charges and expenses, see the current
prospectus which must precede or accompany this report.
9511-05 VSI70
