<PAGE>
March 31, 2000
DAVIS INTERNATIONAL
TOTAL RETURN FUND
SEMI-ANNUAL REPORT
DAVIS FUNDS
OVER 25 YEARS OF RELIABLE INVESTING
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
Dear Fellow Shareholder:
The Davis International Total Return Fund's Class A shares delivered a total
return on net asset value of 21.23% for the six-month period and 20.56% for the
one-year period ended March 31, 2000.1 During the same time periods, the Morgan
Stanley Capital International EAFE (Europe, Australia, Far East) Index generated
returns of 17.00% and 25.40%, respectively.(2)
While the Davis International Total Return Fund produced satisfactory results
during the first six months of its fiscal year 2000, the long-term performance
of the Fund has not been adequate, as long-term shareholders are well aware.
Over a year ago, we took the first step in the process of addressing this
performance by removing the previous sub-adviser from the management of the
Fund. Throughout much of the past year, a team of analysts and portfolio
managers at Davis Selected Advisers contributed to constructing a portfolio of
world-class companies, and the Fund's relative performance improved somewhat
over this time frame.
In the first half of this fiscal year, we turned from addressing the past to
addressing the future by retaining Fiduciary International, Inc., a subsidiary
of Fiduciary Trust Company International, as the sub-adviser for the Davis
International Total Return Fund. We believe that Fund shareholders will benefit
from the vast global resources that this first-class organization can bring to
bear and we are reassured by the solid relationship we have enjoyed with the
company over the years.
Effective March 1, 2000, the portfolio manager of the Fund has been Sheila
Hartnett-Devlin (formerly Sheila Coco), who serves as Chairman of Fiduciary
Trust Company International's Global Investment Committee and as a member of the
Investment Policy Committee. Ms. Hartnett-Devlin has been a research analyst and
portfolio manager with Fiduciary Trust Company International since 1980. In the
future, she will be corresponding directly with you about the Fund's portfolio
and investment results. We hope that you will share our enthusiasm for the
professionalism, experience and global capabilities of Fiduciary Trust Company
International.
Sincerely,
/s/ Christopher C. Davis
---------------------------------------------
Christopher C. Davis,
Member of the Davis Portfolio Management Team
May 9, 2000
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
================================================================================
This Semi-Annual Report is authorized for distribution only when accompanied or
preceded by a current prospectus of Davis International Total Return Fund, which
contains more information about risks, fees and expenses. Please read the
prospectus carefully before investing or sending money.
(1) Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results. Investment
return and principal value will vary so that, when redeemed, an investor's
shares may be worth more or less than when purchased. Below are the average
annual total returns for Davis International Total Return Fund's Class A shares
for the periods ended March 31, 2000. Returns for other classes of shares will
vary from the following figures:
<TABLE>
<CAPTION>
* (Without a 4.75% sales charge taken into consideration )
------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 5 YEAR 10 YEAR INCEPTION
--------- ------ ------ ------- ---------
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davis International Total Return A 20.56% 7.22% N/A 8.11% - 02/01/95
------------------------------------------------------------------------------------------
<CAPTION>
** (With a 4.75% sales charge taken into consideration)
------------------------------------------------------------------------------------------
FUND NAME 1 YEAR 5 YEAR 10 YEAR INCEPTION
--------- ------ ------ ------- ---------
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davis International Total Return A 14.79% 6.18% N/A 7.09% - 02/01/95
------------------------------------------------------------------------------------------
</TABLE>
(2) The Morgan Stanley Capital International EAFE Index is a recognized
international index that includes approximately 1,000 companies representing the
stock markets of 18 countries in Europe, Australia, New Zealand, and the Far
East. The average company has a market capitalization of over $3 billion. This
is a total return index calculated in U.S. dollars, with gross dividends
reinvested. It would be difficult to invest directly in the index.
An investment in the Fund is not a deposit of any bank and is not insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
At March 31, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
COMMON STOCKS - (90.98%)
FINLAND - (2.67%)
5,000 Nokia Oyj................................. $ 1,057,818
---------------
FRANCE - (7.51%)
5,000 Alcatel................................... 1,098,552
3,800 Cap Gemini SA............................. 1,029,749
6,610 Carrefour SA.............................. 847,507
---------------
2,975,808
GERMANY - (3.91%)
15,000 Direkt Anlage Bank AG*.................... 713,853
1,650 Intershop Communications AG*.............. 832,638
---------------
1,546,491
HONG KONG - (5.56%)
74,000 Cheung Kong Holdings Ltd.................. 1,107,166
125,000 Sun Hung Kai Properties Ltd............... 1,095,639
---------------
2,202,805
---------------
ITALY - (1.48%)
22,900 Arnoldo Mondadori Editore SpA............. 584,378
---------------
JAPAN - (20.76%)
90,000 The Bank of Tokyo - Mitsubishi, Ltd....... 1,277,053
30,000 Canon Inc................................. 1,300,346
45,000 The Nomura Securities Co., Ltd............ 1,454,391
3,000 Rohm Co., Ltd............................. 1,042,972
31,000 Sharp Corp................................ 662,600
5,400 Sony Corp................................. 762,475
5,400 Sony Corp. - New*......................... 767,935
25,000 Tokyo Broadcasting System, Inc............ 955,331
---------------
8,223,103
---------------
LUXEMBOURG - (0.66%)
1,500 Societe Europeene des Satellites......... 261,875
---------------
NETHERLANDS - (12.77%)
8,500 Equant NV*............................... 705,666
30,000 Heineken NV............................... 1,604,375
12,198 ING Groep NV.............................. 661,099
12,400 Koninklijke Philips Electronics NV........ 2,085,007
---------------
5,056,147
---------------
SPAIN - (1.79%)
28,000 Telefonica SA............................. 707,821
---------------
</TABLE>
3
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
COMMON STOCKS - CONTINUED
SWEDEN - (2.77%)
70,000 Investor AB................................................................ $ 1,095,137
---------------
SWITZERLAND - (7.87%)
7,800 ABB Ltd.................................................................... 895,955
1,050 Adecco SA, Registered...................................................... 726,381
265 Julius Baer Holding Ltd.................................................... 997,925
1,500 The Selecta Group, Registered.............................................. 497,800
---------------
3,118,061
---------------
TAIWAN - (4.53%)
31,500 Taiwan Semiconductor Manufacturing Co., Ltd. ADR*.......................... 1,795,500
---------------
UNITED KINGDOM - (17.26%)
12,000 COLT Telecom Group PLC*.................................................... 573,156
83,200 Compass Group PLC.......................................................... 1,080,658
84,000 EMI Group PLC.............................................................. 908,449
24,359 Glaxo Wellcome PLC......................................................... 693,955
38,045 Misys PLC.................................................................. 534,608
150,000 Old Mutual PLC*............................................................ 353,446
150,000 Saatchi & Saatchi PLC...................................................... 878,840
100,000 Telewest Communications PLC*............................................... 770,574
60,000 WPP Group PLC.............................................................. 1,041,234
---------------
6,834,920
---------------
UNITED STATES OF AMERICA - (1.44%)
19,000 StarMedia Network, Inc.*................................................... 570,594
---------------
TOTAL COMMON STOCKS (identified cost $29,708,553)................... 36,030,458
---------------
PREFERRED STOCKS - (3.60%)
GERMANY - (3.60%)
2,000 SAP AG - (identified cost $627,539)........................................ 1,424,834
---------------
</TABLE>
4
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS - CONTINUED
At March 31, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VALUE
PRINCIPAL (NOTE 1)
--------- --------
<S> <C> <C>
SHORT TERM - (10.76%)
$ 4,262,000 State Street Corporation Repurchase Agreement,
6.05%, 04/03/00, dated 03/31/00, repurchase value of
$4,264,149 (collateralized by $4,280,000 par value
Federal Home Loan Bank, 6.125%, 10/27/00,
market value $4,392,350) - (identified cost $4,262,000)........... $ 4,262,000
--------------
TOTAL INVESTMENTS (identified cost $34,598,092) -
(105.34%) (a)................................................. 41,717,292
LIABILITIES LESS OTHER ASSETS - (5.34%)......................... (2,112,989)
--------------
NET ASSETS - (100%)............................................. $ 39,604,303
==============
(a)Aggregate cost for Federal income tax purposes is $34,598,092.
* Non income-producing security.
At March 31, 2000, unrealized appreciation (depreciation) of securities for
Federal Income Tax purposes was as follows:
Unrealized appreciation.............................................. $ 7,930,744
Unrealized depreciation.............................................. (811,544)
--------------
Net unrealized appreciation........................................ $ 7,119,200
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES - At March 31, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value (identified cost - $34,598,092) (See accompanying
Schedule of Investments)......................................................... $ 41,717,292
Cash................................................................................. 11,530
Receivables:
Dividends and interest........................................................... 98,006
Capital stock sold............................................................... 32,745
From adviser..................................................................... 53,754
Prepaid expenses..................................................................... 6,600
Other assets......................................................................... 40,874
-----------------
Total assets................................................................ 41,960,801
-----------------
LIABILITIES:
Payable for capital stock redeemed................................................... 15,138
Investment securities purchased...................................................... 2,249,294
Accrued expenses..................................................................... 79,611
Other liabilities.................................................................... 12,455
-----------------
Total liabilities........................................................... 2,356,498
-----------------
NET ASSETS ............................................................................... $ 39,604,303
=================
CLASS A SHARES
Net assets....................................................................... $ 33,753,280
Shares outstanding............................................................... 2,605,117
Net asset value and redemption price per share................................... $ 12.96
========
Maximum offering price per share (100/95.25 of $12.96)*.......................... $ 13.61
========
CLASS B SHARES
Net assets....................................................................... $ 5,416,611
Shares outstanding............................................................... 437,708
Net asset value and redemption price per share................................... $ 12.37
========
CLASS C SHARES
Net assets....................................................................... $ 434,412
Shares outstanding............................................................... 34,160
Net asset value and redemption price per share................................... $ 12.72
========
NET ASSETS CONSIST OF:
Par value of shares of capital stock................................................. $ 3,077
Additional paid-in capital........................................................... 33,745,888
Accumulated net investment loss...................................................... (1,291,464)
Net unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies............................................................... 7,119,200
Accumulated net realized gains from investments and foreign currency transactions.... 27,602
-----------------
Net assets.................................................................. $ 39,604,303
=================
</TABLE>
* On purchases of $100,000 or more, the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
STATEMENT OF OPERATIONS - For the six months ended March 31, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME (LOSS):
<S> <C> <C>
Income:
Dividends (Net of foreign withholding taxes of $19,316).......................... $ 62,244
Interest......................................................................... 94,164
-----------------
Total income................................................................ 156,408
-----------------
Expenses:
Management fees (Note 3)...................................... $ 188,369
Custodian fees................................................ 28,101
Transfer agent fees
Class A..................................................... 7,785
Class B..................................................... 3,307
Class C..................................................... 253
Audit fees.................................................... 7,475
Legal fees.................................................... 5,874
Accounting fees (Note 3)...................................... 4,002
Reports to shareholders....................................... 29,517
Directors' fees and expenses.................................. 22,761
Registration and filing fees ................................. 36,172
Miscellaneous................................................. 1,920
Payments under distribution plan (Note 4)
Class A..................................................... 9,781
Class B..................................................... 24,957
Class C..................................................... 1,931
---------------
Total expenses.............................................................. 372,205
Reimbursement of expenses by adviser (Note 3).................................... (67,435)
Expenses paid indirectly (Note 7)................................................ (297)
-----------------
Net expenses................................................................ 304,473
-----------------
Net investment loss..................................................... (148,065)
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions.......................................................... 3,607,404
Foreign currency transactions.................................................... (887,547)
Net increase in unrealized appreciation of investments............................... 4,568,043
-----------------
Net realized and unrealized gain on investments and foreign currency........ 7,287,900
-----------------
Net increase in net assets resulting from operations.................... $ 7,139,835
=================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
SIX
MONTHS ENDED
MARCH 31, YEAR ENDED
2000 SEPTEMBER 30,
(UNAUDITED) 1999
----------- ----
<S> <C> <C>
OPERATIONS:
Net investment income (loss)................................... $ (148,065) $ 22,959
Net realized gain from investments and foreign currency
transactions............................................... 2,719,857 5,939,314
Increase (decrease) in unrealized appreciation on investments and
translation of assets and liabilities in foreign currencies 4,568,043 (1,007,482)
-------------- -------------
Net increase in net assets resulting from
operations............................................ 7,139,835 4,954,791
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets resulting from capital share
transactions (Note 5)
Class A ................................................... 370,459 (3,797,361)
Class B ................................................... (109,302) (1,654,561)
Class C ................................................... 63,360 10,020
-------------- -------------
Total increase (decrease) in net assets................... 7,464,352 (487,111)
NET ASSETS:
Beginning of period............................................ 32,139,951 32,627,062
------------- -------------
End of period (including net investment loss of $1,291,464 and
$1,143,399, respectively)............................. $ 39,604,303 $ 32,139,951
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
At March 31, 2000 (Unaudited)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Davis International Series, Inc. (the "Company") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Company currently offers one fund, Davis
International Total Return Fund (the "Fund") whose primary objective is to
achieve total return through capital growth or income or both. The Fund invests
principally in the common stock of foreign companies and in common stock issued
by U.S. companies doing substantial business in foreign markets. 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, 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'
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 or
broker. 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 at current exchange
rates computed by State Street Bank & Trust Company ("State Street Bank"), 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.
9
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 2000 (Unaudited)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
FOREIGN 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 the
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 counter-party 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 or excise tax is required. At March 31, 2000,
the Fund had approximately $2,692,000 of capital loss carryovers available to
offset future capital gains, if any, which expire in 2007.
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.
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.
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) during the six months ended March 31, 2000, were $26,609,522 and
$27,328,303, respectively.
10
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 2000 (Unaudited)
================================================================================
NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Advisory fees are paid monthly to Davis Selected Advisers, L.P. (the
"Adviser"), 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 annual net assets, and 0.80%
of average annual 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 March 31, 2000, amounted to $6,000. 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 paid to the Adviser
for the six months ended March 31, 2000, amounted to $2,504. State Street Bank
is the Fund's primary accounting provider. Fees for such services are included
in the custodian fee. The Adviser is also paid for certain accounting services.
Such fee amounted to $4,002 for the six months ended March 31, 2000. The Adviser
has agreed to reimburse the Fund for certain expenses incurred in the current
fiscal year which amounted to $67,435. 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. The Fund pays no fees directly to
DSA-NY.
Effective March 1, 2000 Fiduciary Trust Company International (the
"Sub-Adviser") also 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.
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 (without a contingent deferred sales
charge).
During the six months ended March 31, 2000, Davis Distributors, LLC, the
Fund's Underwriter (the "Underwriter" or "Distributor") received $6,987 from
commissions earned on sales of Class A shares of the Fund, of which $1,226 was
retained by the underwriter and the remaining $5,761 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.
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 reimbursed at the annual rate up to 1/4 of 1% of
the average net assets maintained by the responsible dealers. The Underwriter is
not reimbursed for accounts 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 March 31, 2000, was $9,781.
11
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 2000 (Unaudited)
================================================================================
NOTE 4 - DISTRIBUTION AND UNDERWRITING FEES - (CONTINUED)
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-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, 2000, Class B shares of the Fund made
distribution plan payments which included distribution fees of $18,743 and
service fees of $6,214.
Commission advances by the Distributor during the six months ended March
31, 2000, on the sale of Class B shares of the Fund amounted to $11,011, of
which $9,327 was re-allowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the Fund in
the amount of $231,961, 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
March 31, 2000, the Distributor received contingent deferred sales charges of
$10,306 from redemptions of Class B shares of the Fund.
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 March 31, 2000, Class C shares of the Fund
made distribution payments of $1,931. During the six months ended March 31,
2000, the Distributor received $43 in contingent deferred sales charges from
Class C shares of the Fund.
12
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 2000 (Unaudited)
================================================================================
NOTE 5 - CAPITAL STOCK
At March 31, 2000, there were 5 billion shares of capital stock ($0.001 par
value per share) authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
CLASS A SIX MONTHS ENDED
MARCH 31, 2000
(UNAUDITED)
-----------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed........................... 1,683,403 $ 20,338,030
Shares redeemed............................. (1,623,318) (19,967,571)
------------- --------------
Net increase........................... 60,085 $ 370,459
============= ==============
YEAR ENDED
SEPTEMBER 30, 1999
----------------------
SHARES AMOUNT
------ ------
Shares subscribed........................... 964,536 $ 11,010,239
Shares redeemed............................. (1,327,782) (14,807,600)
------------- --------------
Net decrease........................... (363,246) $ (3,797,361)
============= ==============
CLASS B
SIX MONTHS ENDED
MARCH 31, 2000
(UNAUDITED)
-----------
SHARES AMOUNT
------ ------
Shares subscribed........................... 90,687 $ 1,098,243
Shares redeemed............................. (104,776) (1,207,545)
------------- --------------
Net decrease........................... (14,089) $ (109,302)
============= ==============
YEAR ENDED
SEPTEMBER 30, 1999
----------------------
SHARES AMOUNT
------ ------
Shares subscribed........................... 72,968 $ 730,704
Shares redeemed............................. (228,278) (2,385,265)
------------- --------------
Net decrease........................... (155,310) $ (1,654,561)
============= ==============
</TABLE>
13
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
At March 31, 2000 (Unaudited)
================================================================================
NOTE 5 - CAPITAL STOCK - (CONTINUED)
<TABLE>
<CAPTION>
CLASS C
SIX MONTHS ENDED
MARCH 31, 2000
(UNAUDITED)
-----------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares subscribed........................... 18,703 $ 226,024
Shares redeemed............................. (13,242) (162,664)
------------- --------------
Net increase........................... 5,461 $ 63,360
============= ==============
YEAR ENDED
SEPTEMBER 30, 1999
----------------------
SHARES AMOUNT
------ ------
Shares subscribed........................... 9,748 $ 106,601
Shares redeemed............................. (8,962) (96,581)
------------- --------------
Net increase........................... 786 $ 10,020
============= ==============
</TABLE>
NOTE 6 - MATTERS SUBMITTED TO A VOTE OF SHAREHOLDERS
A special meeting of shareholders was held on February 29, 2000. The only
matter submitted for approval was consideration of a Sub-Advisory Agreement
between Davis Selected Advisers, L.P., the Investment Adviser of the Fund, and
Fiduciary International, Inc., a Sub-Adviser for the Fund. Proxies were not
solicited but a Notice of Special Meeting was mailed to all shareholders of
record. Of the eligible voting power, 1,533,591,191 votes or 50.75% voted to
approve the Sub-Advisory Agreement. No votes were received either against
approving the Sub-Advisory Agreement or abstaining.
NOTE 7 - CUSTODIAN FEES
Under an agreement with the custodian bank, custody fees are reduced for
earnings on cash balances maintained at the custodian by the Fund. Such
reductions amounted to $297 during the six months ended March 31, 2000.
14
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
================================================================================
The following represents financial highlights for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
CLASS A SIX
MONTHS ENDED EIGHT
MARCH 31, YEAR ENDED SEPTEMBER 30, MONTHS ENDED
2000 ------------------------------------------------------- SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .......... $ 10.69 $ 9.26 $ 11.38 $ 12.12 $ 11.85 $ 10.00
-------- -------- -------- -------- -------- --------
Income (Loss) From
Investment Operations
Net Investment Income (Loss) (0.03) --(5) -- -- 0.03 0.05
Net Realized and Unrealized
Gains (Losses) ............. 2.30 1.43 (2.12) 0.25 0.85 1.80
-------- -------- -------- -------- -------- --------
Total From Investment
Operations ................ 2.27 1.43 (2.12) 0.25 0.88 1.85
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Net Investment Income ....... -- -- -- -- (0.03) --
Distributions from Realized
Gains .................... -- -- -- (0.99) (0.58) --
-------- -------- -------- -------- -------- --------
Total Dividends and
Distributions ............ -- -- -- (0.99) (0.61) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period .. $ 12.96 $ 10.69 $ 9.26 $ 11.38 $ 12.12 $ 11.85
======== ======== ======== ======== ======== ========
Total Return (1).................. 21.23% 15.44% (18.63)% 2.71% 7.87% 18.50%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted) ....... $ 33,753 $ 27,202 $ 26,921 $ 39,740 $ 41,545 $ 13,427
Ratio of Expenses
to Average Net Assets .... 1.47%(2)* 1.47%(2) 1.45%(2) 1.67%(2,3) 1.70%(2,3) 1.72%(2)*
Ratio of Net Investment Income
to Average Net Assets ..... (0.64)%* 0.24% 0.13% 0.03% 0.23% 0.95%*
Portfolio Turnover Rate(4)... 76% 154% 63% 97% 78% 85%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less
than one full year.
(2) Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets for the six months ended March 31, 2000, the years ended
September 30, 1999, September 30, 1998, September 30, 1997, September 30,
1996 and the eight months ended September 30, 1995 would have been 1.83%,
1.95%, 1.86%, 1.93%, 2.24% and 2.88%, respectively.
(3) The ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement were 1.66% and 1.69% for the
years ended September 30, 1997 and September 30, 1996, respectively. Prior
to 1996, such reductions were reflected in the expense ratios.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(5) Less than $0.005 per share.
* Annualized
15
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
================================================================================
The following represents financial highlights for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
CLASS B SIX
MONTHS ENDED EIGHT
MARCH 31, YEAR ENDED SEPTEMBER 30, MONTHS ENDED
2000 ------------------------------------------------------ SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ............... $ 10.26 $ 8.98 $ 11.15 $ 12.00 $ 11.79 $ 10.00
-------- -------- -------- -------- -------- --------
Income (Loss) From
Investment Operations
Net Investment Income (Loss) ...... (0.11) --(5) -- (0.10) (0.03) (0.01)
Net Realized and Unrealized
Gains (Losses) .................. 2.22 1.28 (2.17) 0.24 0.82 1.80
-------- -------- -------- -------- -------- --------
Total From Investment
Operations .................... 2.11 1.28 (2.17) 0.14 0.79 1.79
-------- -------- -------- -------- -------- --------
Dividends and Distributions
Distributions from Realized Gains . -- -- -- (0.99) (0.58) --
-------- -------- -------- -------- -------- --------
Total Dividends and
Distributions ................ -- -- -- (0.99) (0.58) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ....... $ 12.37 $ 10.26 $ 8.98 $ 11.15 $ 12.00 $ 11.79
======== ======== ======== ======== ======== ========
Total Return (1)....................... 20.57% 14.25% (19.46)% 1.77% 7.10% 17.90%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted) ............ $ 5,417 $ 4,636 $ 5,450 $ 8,230 $ 8,283 $ 2,002
Ratio of Expenses
to Average Net Assets ......... 2.50%(2)* 2.51%(2,3) 2.60%(2) 2.51%(2,3) 2.47%(2,3) 2.46%(2)*
Ratio of Net Investment Income
(Loss) to Average Net Assets ... (1.67)%* (0.79)% (1.02)% (0.80)% (0.54)% (0.09)%*
Portfolio Turnover Rate(4)......... 76% 154% 63% 97% 78% 85%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less
than one full year.
(2) Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets for the six months ended March 31, 2000, the years ended
September 30, 1999, September 30, 1998, September 30, 1997, September 30,
1996 and the eight months ended September 30, 1995 would have been 2.86%,
2.98%, 3.01%, 2.98%, 3.01% and 3.62%, respectively.
(3) The ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement were 2.50%, 2.50% and 2.46% for
the years ended September 30, 1999, September 30, 1997 and September 30,
1996, respectively. Prior to 1996, such reductions were reflected in the
expense ratios.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(5) Less than $0.005 per share.
* Annualized
16
<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
================================================================================
The following represents financial highlights for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
CLASS C
AUGUST 19, 1997
SIX (INCEPTION
MONTHS ENDED OF CLASS)
MARCH 31, YEAR ENDED SEPTEMBER 30, THROUGH
2000 ---------------------------- SEPTEMBER 30,
(UNAUDITED) 1999 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ................. $ 10.53 $ 9.17 $ 11.37 $ 11.50
-------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Loss ................. (0.02) --(5) -- (0.02)
Net Realized and Unrealized
Gains (Losses) .................... 2.21 1.36 (2.20) (0.11)
-------- -------- -------- --------
Total From Investment Operations .. 2.19 1.36 (2.20) (0.13)
-------- -------- -------- --------
Net Asset Value, End of Period ......... $ 12.72 $ 10.53 $ 9.17 $ 11.37
======== ======== ======== ========
Total Return(1).......................... 20.80% 14.83% (19.35)% (1.13)%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted) .............. $ 434 $ 302 $ 256 $ 61
Ratio of Expenses
to Average Net Assets ........... 2.50%(2)* 2.52%(2,3) 2.78%(2,3) 2.62%(2)*
Ratio of Net Investment Income (Loss)
to Average Net Assets ............ (1.67)%* (0.80)% (1.19)% (2.27)%*
Portfolio Turnover Rate(4).......... 76% 63% 97%
</TABLE>
(1) Assumes hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less
than one full year.
(2) Had the Adviser not absorbed certain expenses, the ratio of expenses to
average net assets for the six months ended March 31, 2000, the years ended
September 30, 1999, September 30, 1998 and the period ended September 30,
1997 would have been 2.86%, 2.99%, 3.19% and 3.14%, respectively.
(3) The ratio of expenses to average net assets after the reduction of
custodian fees under a custodian agreement were 2.51% and 2.77% for the
years ended September 30, 1999 and September 30, 1998, respectively.
(4) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation.
(5) Less than $0.005 per share.
* Annualized
17
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
DAVIS INTERNATIONAL SERIES, INC.
DAVIS INTERNATIONAL TOTAL RETURN FUND
2949 East Elvira Road, Tucson, Arizona 85706
================================================================================
DIRECTORS OFFICERS
Jeremy H. Biggs Jeremy H. Biggs
Christopher C. Davis Chairman
G. Bernard Hamilton Christopher C. Davis
Keith R. Kroeger President
The Very Reverend Kenneth C. Eich
James R. Leo Vice President
Richard M. Murray Sharra L. Reed
Theodore B. Smith Jr. Vice President, Treasurer
& Assistant Secretary
Thomas D. Tays
Vice President & Secretary
Andrew A. Davis
Vice President
INVESTMENT ADVISER
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
1-800-279-0279
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 INTERNATIONAL SERIES, INC., DAVIS INTERNATIONAL
TOTAL RETURN FUND, INCLUDING MANAGEMENT FEE, CHARGES AND EXPENSES, SEE THE
CURRENT PROSPECTUS WHICH MUST PRECEDE OR ACCOMPANY THIS REPORT.
================================================================================
<PAGE>
Davis Selected Advisers, L.P.
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
1-800-279-0279
DAVIS FUNDS
OVER 25 YEARS OF RELIABLE INVESTING
