DAVIS INTERNATIONAL SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==========================================================================
Dear Shareholder:
International investing provides sensible diversification to an investment
portfolio. The Davis International Total Return Fund offers a
professionally managed, convenient way to participate in both the
diversification and the above-average growth potential offered by non-U.S.
companies. We are pleased to note the Davis International Total Return
Fund-Class A shares from September 30, 1995 through March 31, 1996
performed well. The Class increased in value 10.10%* while the total
return of the Morgan Stanley Capital International EAFE** Index was
6.22%.
The Fund's portfolio manager, Edouard F. Iselin, draws on thirty years of
experience in international investing to carefully select regions,
countries, industries, and companies around the world that appear to offer
the most interesting investing opportunities. He strongly believes in
first-hand research and meeting with companies' managements.
Generally, Mr. Iselin spends two to three months of the year traveling to
research and interview investment possibilities around the world.
Although the Fund can invest around the world, it currently emphasizes
Asia. In 1996, the estimated Gross National Product ("GNP") growth of
the Asian countries in which the Fund invests is approximately double the
estimated GNP growth of less than 3% in Europe and the U.S. Investments
in three new countries were made in 1996. They include Belgium, China,
and India.
In Europe, the major corporate event of the first quarter of 1996 has been
the announcement of the merger of Sandoz Ltd. and Ciba-Geigy Ltd., two of
the three Swiss companies in the Davis International Total Return Fund, to
form the second largest drug company in the world after Glaxo Wellcome
of the United Kingdom. In Asia, foreign investors were given an
opportunity to increase their stakes in Korean companies from 15% to 18%
ownership.
The Swiss and U.K. stock markets remain attractive, in our opinion,
(despite real Gross Domestic Product ("GDP") growth estimated at about
one percent and two percent, respectively, for 1996) as corporate profit
growth remains solid in a number of sectors of the economy. Inflation
rates in the two countries are among the lowest of Europe. In South and
East Asia, we are keen, at this time, on Hong Kong, Indonesia, the
Philippines, South Korea, and Thailand. GDP real growth is estimated at
above 5% for Hong Kong in 1996 and at between 6% and 8% for Indonesia,
the Philippines, Thailand, and South Korea. Average corporate earnings
growth, except for a decline in South Korea, should range between 12% for
Hong Kong to some 25% for the Philippines. We believe that average
price-to-earnings ratios are attractive at 13 times (for Hong Kong) to 18
times (for the Philippines).
DAVIS INTERNATIONAL SERIES, INC.
P.O. Box 1688, 124 East Marcy Street
Santa Fe, New Mexico 87501
==========================================================================
We believe in maintaining a long-term perspective especially when
investing internationally. We recognize stock markets will fluctuate over
the short-term, yet provide one of the best opportunities for
wealth-building over the long-term. We encourage our shareholders to
have a similar long-term perspective when investing internationally.
Sincerely,
Shelby M.C. Davis Edouard F. Iselin
President Portfolio Manager
May 3, 1996
* Excluding the maximum sales charge of 4.75%. Average annual total
return for Class A shares, including the maximum sales charge of 4.75%,
for the year ended March 31, 1996 and for the period of February 1, 1995
through March 31, 1996 (life of Class) was 17.70% and 20.56%,
respectively. Average annual total return for Class B shares, including
applicable contingent deferred sales charges for the year ended March 31,
1996 and for the period of February 1, 1995 through March 31, 1996 (life
of Class) was 19.75% and 22.28%, respectively.
** A recognized international index in which direct investments are not
permitted.
<TABLE>
Davis International Series, Inc.
Davis International Total Return Fund
At March 31, 1996
==========================================================================
Ten Largest Holdings
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
1,150,000 Swire Pacific Ltd............................... $ 2,689,424
1,000,000 Hong Kong Land Holdings Ltd..................... 2,400,000
500,000 Krung Thai Bank Public Co. Ltd.................. 2,356,622
1,500 Ciba - Geigy Ltd., Registered................... 1,877,838
1,500 Sandoz Ltd., Registered......................... 1,759,290
100,000 BSES Ltd., GDR.................................. 1,650,500
1,000,000 Philipino Telephone Corp........................ 1,355,997
5,000,000 Tingyi (Cayman Islands) Holdings Corp........... 1,309,154
125,000 Acer Inc., GDR.................................. 1,306,250
200,000 Hutchison Whampoa Ltd........................... 1,256,788
------------
$ 17,961,863
============
</TABLE>
==========================================================================
<TABLE>
Industry Diversification
<S> <C>
Automotive.................................................. 1.03%
Aviation.................................................... 6.41
Banks....................................................... 20.10
Building Materials.......................................... 0.17
Chemicals................................................... 2.20
Consumer Products........................................... 5.05
Diversified................................................. 9.88
Electronics................................................. 5.16
Financial................................................... 1.49
Food and Beverages.......................................... 3.12
Hotels & Lodging............................................ 2.15
Manufacturing............................................... 4.89
Pharmaceuticals............................................. 8.68
Real Estate................................................. 9.30
Shipyard.................................................... 0.71
Telecommunications.......................................... 7.62
Utilities................................................... 12.04
---------
100.00%
=========
</TABLE>
<PAGE>
<TABLE>
Davis International Series, Inc.
Davis International Total Return Fund
Schedule of Investments
At March 31, 1996 (Unaudited)
================================================================================================================================
COMMON STOCKS - (94.93%)
<CAPTION>
Value
Shares (Note 1)
- ------ ------
<S> <C> <C>
BELGIUM - (2.31%)
50,000 Xeikon NV, ADR <F3>.................................................................................. $ 975,000
-----------
CHINA - (3.11%)
5,000,000 Tingyi (Cayman Islands) Holding Corp................................................................. 1,309,154
-----------
HONG KONG - (24.37%)
360,000 Bank of East Asia Ltd................................................................................ 1,233,514
1,000,000 Cheung Kong (Holdings) Ltd. (Morgan Stanley warrants expiring
02/10/97)<F3>...................................................................................... 355,573
200,000 CITIC Pacific Ltd.................................................................................... 775,795
200,000 Dao Heng Bank Group Ltd.............................................................................. 827,515
1,000,000 Hong Kong Land Holdings Ltd.......................................................................... 2,400,000
2,000,000 HSBC Holdings PLC (Robert Fleming warrants expiring 06/27/97)<F3>.................................... 568,916
200,000 Hutchison Whampoa Ltd................................................................................ 1,256,788
1,000,000 Hutchison Whampoa Ltd. (Robert Fleming warrants expiring 09/27/97)<F3>............................... .159,038
150,000 Swire Pacific Ltd. - A............................................................................... 1,318,852
1,000,000 Swire Pacific Ltd. - B............................................................................... 1,370,572
-----------
10,266,563
-----------
INDIA - (3.92%)
100,000 BSES Ltd., GDR....................................................................................... 1,650,500
-----------
INDONESIA - (4.22%)
300,000 PT Astra International <F4>.......................................................................... 429,855
1,000,000 PT Dharmala Sakti Sejahtera.......................................................................... 534,645
50,000 PT Unilever Indonesia................................................................................ 812,660
-----------
1,777,160
-----------
MALAYSIA - (2.96%)
200,000 Chemical Company of Malaysia Bhd..................................................................... 679,842
200,000 Leader Universal Holdings Bhd........................................................................ 569,170
-----------
1,249,012
-----------
PHILIPPINES - (10.44%)
5,000,000 Aboitiz Equity Ventures Inc.<F3>..................................................................... 954,927
300,000 Davao Union Cement Corp. - B......................................................................... 72,193
2,000,000 Filinvest Land Inc. <F3>............................................................................. 935,829
1,000,000 Pilipino Telephone Corp. <F3>........................................................................ 1,355,997
3,000,000 Republic Glass Holdings Corp......................................................................... 1,077,158
-----------
4,396,104
-----------
SINGAPORE - (3.34%)
500,000 Hotel Properties Ltd................................................................................. 902,181
50,000 Jurong Shipyard Ltd.................................................................................. 296,583
Davis International Series, Inc.
Davis International Total Return Fund
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
COMMON STOCKS - Continued
Value
Shares (Note 1)
- ------ ------
SINGAPORE - Continued
200,000 United Overseas Land Ltd. (warrants expiring 06/09/97)<F3>........................................... $ 207,431
-----------
1,406,195
-----------
SOUTH KOREA - (6.87%)
14,000 Korea Electric Power Corp............................................................................ 545,861
30,000 L.G. Electronics Inc................................................................................. 816,874
2,060 Samsung Electronics Co. Ltd.......................................................................... 242,275
620 Samsung Electronics Co. Ltd.......................................................................... 72,918
1,808 Samsung Electronics Co. Ltd., GDR.................................................................... 107,124
26 Samsung Electronics Co. Ltd., GDR.................................................................... 1,541
6,000 Samsung Electronics Co. Ltd., GDR.................................................................... 355,500
10,000 Seoul City Gas Co. Ltd............................................................................... 752,956
-----------
2,895,049
-----------
SWITZERLAND - (11.52%)
1,000 BBC Brown Boveri Ltd., Bearer........................................................................ 1,216,580
1,500 Ciba - Geigy Ltd., Registered........................................................................ 1,877,838
1,500 Sandoz Ltd., Registered.............................................................................. 1,759,290
-----------
4,853,708
-----------
TAIWAN - (3.10%)
125,000 Acer Inc., GDR....................................................................................... 1,306,250
-----------
THAILAND - (9.68%)
100,000 Bank of Ayudhya Public Co. Ltd.<F4>.................................................................. 653,517
70,000 Jasmine International Public Co. Ltd................................................................. 259,228
500,000 Krung Thai Bank Public Co. Ltd. <F4>................................................................. 2,356,622
150,000 National Petrochemical Public Co. Ltd................................................................ 242,098
200,000 Shinawatra Satellite Public Co. Ltd.................................................................. 293,093
20,000 United Telecommunications Industry Public Co. Ltd.................................................... 274,081
-----------
4,078,639
-----------
UNITED KINGDOM - (9.09%)
300,000 Orange PLC........................................................................................... 1,011,905
100,000 Royal Bank of Scotland PLC........................................................................... 744,048
100,000 Southern Water PLC................................................................................... 1,143,926
100,000 Standard Chartered Banking PLC....................................................................... 928,724
-----------
3,828,603
-----------
TOTAL COMMON STOCKS (identified cost $37,344,313)............................................... 39,991,937
-----------
Davis International Series, Inc.
Davis International Total Return Fund
Schedule of Investments - Continued
At March 31, 1996 (Unaudited)
================================================================================================================================
COMMON STOCKS - Continued
Value
Principal (Note 1)
- --------- ------
CONVERTIBLE BONDS - (4.60%)
$ 500,000 Ayala International Finance, Conv. Bds., 3.00%,06/08/00 - Cayman
Islands <F2>....................................................................................... $ 622,500
500,000 Metrobank, Conv. Bds., 2.75%, 09/10/00 - Cayman Islands <F2>......................................... 581,250
750,000 Loxley, Conv. Bds., 2.50%, 04/04/01 - Thailand <F2>.................................................. 735,000
-----------
TOTAL CONVERTIBLE BONDS (identified cost $1,750,000)............................................ 1,938,750
-----------
SHORT-TERM INVESTMENTS - (3.81%)
1,605,000 Federal Home Loan Bank Discount Note, 5.25%, 04/01/96
(identified cost $1,604,532)....................................................................... 1,604,532
-----------
TOTAL INVESTMENTS (identified cost $40,698,845)-
(103.34%) <F1>................................................................................ 43,535,219
Liabilities less other assets - (3.34%)......................................................... (1,408,725)
-----------
NET ASSETS - 100%............................................................................... $42,126,494
===========
<FN>
<F1> Aggregate cost for Federal income tax purposes is $40,698,845.
<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.
(F4) Foreign registry.
At March 31, 1996, unrealized appreciation (depreciation) of securities
for Federal income tax purposes was as follows:
Unrealized appreciation................................................................................. $ 4,965,190
Unrealized depreciation................................................................................. (2,128,816)
-----------
Net unrealized appreciation........................................................................ $ 2,836,374
===========
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES - At March 31, 1996 (Unaudited)
INTERNATIONAL TOTAL RETURN FUND
================================================================================================================================
<S> <C>
ASSETS:
Investments in securities, at value (identified cost - $40,698,845)(Note 1).................................. $ 43,535,219
Cash......................................................................................................... 779,785
Receivables:
Dividends and interest..................................................................................... 112,473
Capital stock sold......................................................................................... 274,545
Investments sold........................................................................................... 528,155
Prepaid expenses............................................................................................. 49,176
Due from Advisor............................................................................................. 70,335
Other assets................................................................................................. 6,148
------------
Total assets............................................................................................ 45,355,836
------------
LIABILITIES:
Payables:
Capital stock reacquired................................................................................... 16,860
Investments purchased...................................................................................... 3,072,103
Accrued expenses............................................................................................. 81,138
Other payables............................................................................................... 59,241
------------
Total liabilities....................................................................................... 3,229,342
------------
NET ASSETS........................................................................................................ $ 42,126,494
============
CLASS A SHARES
Net assets................................................................................................. $ 37,581,299
Shares outstanding......................................................................................... 3,037,315
Net asset value and redemption price per share (net assets/shares outstanding)............................. $12.37
======
Maximum offering price per share (100/95.25 of $12.37)..................................................... $12.99
======
CLASS B SHARES
Net assets................................................................................................. $ 4,545,195
Shares outstanding......................................................................................... 369,687
Net asset value, offering and redemption price per share (net assets/shares outstanding)................... $12.29
======
Net assets consist of:
Deficit in undistributed net investment income............................................................... $ (50,526)
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies.......................................................................................... 2,830,993
Accumulated net realized gains from investments and foreign currency transactions............................ 898,228
Paid-in capital.............................................................................................. 38,447,799
------------
Net assets.............................................................................................. $ 42,126,494
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
STATEMENT OF OPERATIONS - For the six months ended March 31, 1996 (Unaudited)
INTERNATIONAL TOTAL RETURN FUND
================================================================================================================================
<S> <C> <C>
Investment Income:
Income:
Dividends (net of foreign taxes withheld of $18,950).......................................................... $ 160,932
Interest...................................................................................................... 65,972
------------
Total Income............................................................................................ 226,904
------------
Expenses:
Management fees (Note 3)....................................................................... $ 150,111
Custodian fees................................................................................. 63,690
Transfer agent fees............................................................................ 16,932
Audit fees..................................................................................... 6,000
Legal fees..................................................................................... 4,000
Accounting fees (Note 3)....................................................................... 4,002
Reports to shareholders........................................................................ 8,039
Directors fees and expenses.................................................................... 25,613
Registration and filing fees................................................................... 27,735
Miscellaneous.................................................................................. 1,984
Distribution plan payments (Note 3)
Class A...................................................................................... 16,200
Class B...................................................................................... 14,559
-------------
Total expenses.......................................................................................... 338,865
------------
Reimbursement of expenses by adviser (Note 3)................................................................. (70,335)
------------
Net expenses............................................................................................ 268,530
------------
Net investment income................................................................................. (41,626)
------------
Realized and Unrealized Gain on Investments and Foreign Currency:
Net realized gain (loss) from:
Investment transactions....................................................................................... 1,078,921
Foreign currency transactions................................................................................. (30,040)
Net increase (decrease) in unrealized appreciation/depreciation on:
Investments................................................................................................... 2,721,290
Translation of assets and liabilities in foreign currencies .................................................. (5,381)
Foreign taxes on gains on investments (including deferred taxes of $40,784)..................................... (40,784)
------------
Net realized and unrealized gain on investments andforeign currency..................................... 3,724,006
------------
Net increase in net assets resulting from operations.................................................. $ 3,682,380
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
INTERNATIONAL TOTAL RETURN FUND
================================================================================================================================
<CAPTION>
Six
Months Ended Eight
March 31, Months Ended
1996 September 30,
(Unaudited) 1995
-------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)....................................................... $ (41,626) $ 59,094
Net realized gain from investments and foreign currency transactions............... 1,048,881 1,389,492
Increase in unrealized appreciation on investments and
translation of assets and liabilities in foreign currencies...................... 2,715,909 115,084
Foreign taxes on gains on investments.............................................. (40,784) (69,678)
----------- -----------
Net increase in net assets resulting from operations............................. 3,682,380 1,493,992
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ($0.03 per share)........................................................ (67,993) -
Realized gains from investment transactions
Class A ($0.58 per share)........................................................ (1,314,536) -
Class B ($0.58 per share)........................................................ (115,147) _
CAPITAL SHARE TRANSACTIONS (NOTE 5).................................................. 24,512,221 13,935,577
----------- -----------
Total increase in net assets............................................... 26,696,925 15,429,569
NET ASSETS:
Beginning of period................................................................ 15,429,569 _
----------- -----------
End of period (including undistributed net investment income
(deficit) of $(50,526) and $59,094 respectively)................................... $42,126,494 $15,429,569
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS
At March 31, 1996 (Unaudited)
============================================================================
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.
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 1996 (Unaudited)
============================================================================
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 six months ended March 31, 1996, were
$29,721,970 and $6,114,790, 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
reimburse 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 six months ended March
31, 1996 amounted to $6,000. The Adviser is paid for certain transfer
agent services. The fee for the six months ended March 31, 1996
amounted to $1,404. The Adviser is also paid for certain accounting
services. The fee amounted to $4,002 for the six months ended March 31,
1996. 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 six months ended March 31, 1996, the Fund's Underwriter,
Davis Selected Advisers, L.P., received $134,328 from commissions earned
on sales of Class A shares of the Fund of which $16,357 was retained by
the underwriter and the remaining $117,971 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.
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 1996 (Unaudited)
============================================================================
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 six months ended
March 31, 1996 was $16,200.
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 six months ended March 31, 1996, Class B shares of the
Fund made distribution plan payments which included commissions of
$10,758 and maintenance fees of $3,801.
Commissions earned by the Distributor during the six months ended
March 31, 1996 on the sale of Class B shares of the Fund amounted to
$77,889, all of which $68,902 was reallowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the
Fund in the amount of $142,899, 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 six months ended March 31, 1996 the Distributor
received contingent deferred sales charges from Class B shares of the
Fund of $98.
DAVIS INTERNATIONAL SERIES, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 1996 (Unaudited)
============================================================================
NOTE 5 - CAPITAL STOCK
At March 31, 1996, there were 5 billion shares of capital stock
($0.001 par value per share) authorized. Transactions in capital stock
were as follows:
<TABLE>
<CAPTION>
Six Months Ended
Class A March 31, 1996
- ------- (Unaudited)
---------
Shares Amount
------ ------
<S> <C> <C>
Shares subscribed................................................................. 2,010,754 $ 23,532,387
Shares issued in reinvestment of distributions.................................... 121,746 1,357,471
------------ -------------
2,132,500 24,889,858
Shares reacquired................................................................. (228,213) (2,753,851)
------------ -------------
Net increase................................................................. (1,904,287) $ (22,136,007)
============ =============
Eight Months Ended
September 30, 1995
----------------------------
Shares Amount
------ ------
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
============ =============
Six Months Ended
Class B March 31, 1996
- ------- (Unaudited)
---------
Shares Amount
------ ------
Shares subscribed................................................................. 193,046 $ 2,302,202
Shares issued in reinvestment of distributions.................................... 10,289 114,212
------------ -------------
203,335 2,416,414
Shares reacquired................................................................. (3,435) (40,200)
------------ -------------
Net increase................................................................. 199,900 $ 2,376,214
============ =============
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................................................................. 391,813 $ 1,950,710
============ =============
</TABLE>
<TABLE>
DAVIS INTERNATIONAL SERIES, INC.
FINANCIAL HIGHLIGHTS
INTERNATIONAL TOTAL RETURN FUND
===============================================================================================================================
The following represents financial highlights for a share of capital stockoutstanding throughout each period.
<CAPTION>
-------------------CLASS A----------------- ---------------CLASS B---------------
Six Months Six Months
ended Eight ended Eight
March 31, Months ended March 31, Months ended
1996 September 30, 1996 September 30,
(Unaudited) 1995 (Unaudited) 1995
--------- ---- --------- ----
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.................... $ 11.85 $ 10.00 $ 11.79 $ 10.00
------- ------- ------- -------
Income From Investment Operations
- ---------------------------------
Net Investment Income.................. (.03) .05 (.03) (.01)
Net Gains on Securities
(both realized and unrealized)....... 1.16 1.80 1.11 1.80
------- ------- ------- -------
Total From Investment Operations... 1.13 1.85 1.08 1.79
Less Distributions
- ------------------
Dividends (from net
investment income)................... (.03) _ _ _
Distributions From
Realized Capital Gains.............. (.58) _ (.58) _
Distributions From
Paid In Capital...................... _ _ _ _
------- ------- ------- -------
Total Distributions................ (.61) _ (.58) _
------- ------- ------- -------
Net Asset Value,
End of Period......................... $ 12.37 $ 11.85 $ 12.29 $ 11.79
======= ======= ======= =======
Total Return <F1>........................ 10.10% 18.50% 9.69% 17.90%
- ------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of
Period (000 omitted)................. 37,581 13,427 4,545 2,002
Ratio of Expenses
to Average Net Assets.............. 1.61%<F2><F3> 1.72%<F2><F3> 2.50%<F2><F3> 2.46%<F2><F3>
Ratio of Net Income
to Average Net Assets................ (.10)%<F3> .95%<F3> (.98)%<F3> (.09)%<F3>
Portfolio Turnover
Rate................................. 21% 85% 21% 85%
<FN>
<F1> Sales charges are not reflected in calculation.
<F2> Had the Adviser not absorbed certain expenses, the ratio of expenses
for the six months ended March 31, 1996 would have been 2.08% and 2.97%
for Class A shares and Class B shares, respectively. Had the Adviser not
absorbed certain expenses, the ratio of expenses for the eight months
ended September 30, 1995 would have been 2.88% and 3.62% for Class A
shares and Class B shares, respectively.
<F3> Annualized.
</FN>
</TABLE>
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
Christopher C. Davis
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
===============================================================================
For more information about Davis International Series, Inc., Davis
International Total Return Fund, Inc. including management fee, charges
and expenses, see the current prospectus which must precede or
accompany this report.
===============================================================================
9605-05 DISI70
