**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC  20549**

**FORM N-CSR**

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANANGEMENT INVESTMENT COMPANY

 

**Investment Company Act file number 811-02679**

**DAVIS SERIES, INC.**

(Exact name of registrant as specified in charter)

2949 East Elvira Road, Suite 101

Tucson, AZ  85706

(Address of principal executive offices)

 

Thomas D. Tays

Davis Selected Advisers, L.P.

2949 East Elvira Road, Suite 101

Tucson, AZ  85706

(Name and address of agent for service)

 

Registrant’s telephone number, including area code: 520-806-7600

**Date of fiscal year end: December 31, 2007**

**Date of reporting period: December 31, 2007**

 

____________________

 

 

 

 

**ITEM 1.  REPORT TO STOCKHOLDERS**

 

 

 

 

**Table of Contents**

 

Shareholder Letter

2

 

 

Management's Discussion and Analysis:

 

Davis Opportunity Fund

3

Davis Government Bond Fund

4

Davis Financial Fund

5

Davis Appreciation & Income Fund

6

Davis Real Estate Fund

7

 

 

Fund Performance and Supplementary Information:

 

Davis Opportunity Fund

11

Davis Government Bond Fund

18

Davis Government Money Market Fund

23

Davis Financial Fund

24

Davis Appreciation & Income Fund

30

Davis Real Estate Fund

37

 

 

Schedule of Investments:

 

Davis Opportunity Fund

45

Davis Government Bond Fund

49

Davis Government Money Market Fund

52

Davis Financial Fund

56

Davis Appreciation & Income Fund

58

Davis Real Estate Fund

64

 

 

Statements of Assets and Liabilities

67

 

 

Statements of Operations

69

 

 

Statements of Changes in Net Assets

70

 

 

Notes to Financial Statements

72

 

 

Financial Highlights

87

 

 

Report of Independent Registered Public Accounting Firm

95

 

 

Federal Income Tax Information

96

 

 

Fund Information

98

 

 

Directors and Officers

99

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

Dear Fellow Shareholder,

 

As stewards of our customers’ savings, the management team and Directors of the Davis Funds recognize the importance of candid, thorough, and regular communication with our shareholders.  In our Annual and Semi-Annual Reports we include all of the required quantitative information such as audited financial statements, detailed footnotes, performance reports, fund holdings, and performance attribution. Also included is a list of positions opened and closed.

 

In addition, we produce a Research Report for certain funds, which is published semi-annually.  In this report, we give a more qualitative perspective on fund performance, discuss our thoughts on individual holdings, and share our investment outlook. You may obtain a copy of the current Research Report either on our website, www.davisfunds.com, or by calling 1-800-279-0279.

 

We thank you for your continued trust. We will do our best to earn it in the years ahead.

 

Sincerely,

 

 

 

Christopher C. Davis

President

 

February 2, 2008

 

 

 

 

 

 

 

 

2

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis**

**Davis Opportunity Fund**

**Notice of Change in Research Team Managing Davis Opportunity Fund**

 

As of January 31, 2008 Chip Tucker resigned from Davis Selected Advisers, L.P. Accordingly, Mr. Tucker no longer serves as a portfolio manager of Davis Opportunity Fund. As a team managed fund, Mr. Tucker's duties will be absorbed by the nine remaining members of the research team. 

 

**Davis Opportunity Fund**

 

Davis Opportunity Fund’s Class A shares delivered a negative return on net asset value of 1.42% for the year ended December 31, 20071.  Over the same time period, the Russell 3000 Index2 (“Index”) returned 5.14%. Eight of the ten economic sectors3 of the Index had positive returns, with financials and consumer discretionary turning in negative returns. The economic sectors that achieved the strongest returns were energy, materials, and utilities. 

 

**Key Contributors to Performance**

The Fund’s largest investments were in consumer discretionary companies and these companies were also the most important contributors4 to the Fund’s relative performance over the year. The Fund’s consumer discretionary companies out-performed the corresponding sector within the Index (up 8% versus down 12% for the Index). Garmin5, Netflix, Apollo Group, and Expedia were among the top contributors to performance. Comcast, Harley-Davidson, CarMax, and Virgin Media were among the top detractors from performance.  The Fund no longer owns Apollo Group and Expedia.

 

**Key Detractors from Performance**

The most important detractors from performance relative to the Index over the year were the Fund’s holdings in the energy and financial sectors. 

Energy companies were the strongest performing sector of the Index. While the Fund’s energy companies out-performed the corresponding sector within the Index (up 41% versus up 32% for the Index), the Fund’s relative performance was harmed by a lower weighting in this strongly performing sector (3% versus 10% for the Index). Transocean was among the top contributors to performance. 

The financial sector was the worst performing sector of the Index. The Fund’s financial companies under-performed the corresponding sector within the Index (down 24% versus down 18% for the Index), and the Fund had a higher average weighting in this sector (24% versus 20% for the Index). While Power Corp. of Canada was among the top contributors to performance, E*TRADE Financial, Ambac Financial, MBIA, Discover Financial Services, and Wachovia were among the top detractors from performance.

The Fund managers have identified a number of investment opportunities in foreign companies. The Fund ended the year with approximately 17% of its assets invested in foreign companies. As a group, the foreign companies owned by the Fund under-performed the Index. 

 

3

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis– (Continued)**

**Davis Government Bond Fund**

**Performance Overview**

Davis Government Bond Fund’s Class A shares earned 5.45% on net asset value for the year ended December 31, 20071, compared with its benchmark the Citigroup U.S. Treasury/Agency 1-3 Year Index2 (“Index”) which returned 7.17%. The Fund’s investment strategy, under normal circumstances, is to invest exclusively in U.S. Government securities and repurchase agreements, collateralized by U.S. Government securities, with a weighted average maturity of three years or less. Interest rates generally declined over the course of the year with short-term rates declining more than long term rates. As investors sought ultra safe securities in a turbulent market, treasury securities out-performed agency securities and mortgaged-backed securities.

**Key Contributors to Performance**

The most important contributor to the Fund’s performance relative to the Index was that the Fund maintained a longer weighted average maturity than the Index and thus appreciated more as interest rates declined during the year. The second most important contributor to the Fund’s performance was the yield advantage that the Fund enjoyed over the Index. 

**Key Detractors from Performance**

The most important detractor from performance relative to the Index was that the Fund favored mortgaged-backed securities over treasury securities, and treasury securities turned in a stronger performance. The second most important detractor from performance relative to the Index was that long term interest rates did not decline as much as short-term interest rates and the resulting steepening of the yield curve favored the Index with its shorter weighted average maturity. 

 

4

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis – (Continued)**

**Davis Financial Fund**

Davis Financial Fund’s Class A shares delivered a negative return on net asset value of 5.31% for the year ended December 31, 20071. Over the same time period, the Standard & Poor’s 500® Index2 (“Index”) returned 5.49%. Financial companies as a whole turned in the weakest performance of any economic sector3 within the Index. The banking, diversified financial, and insurance industry groups all turned in negative performance. 

**Key Contributors to Performance**

Insurance companies represented the Fund’s largest holdings and were the most important contributors4 to the Fund’s performance, out-performing the corresponding industry group within the S&P 500 Index (up 9% versus down 6% for the Index). China Life5**,**Transatlantic Holdings, Loews, and FPIC Insurance Group were among the most important contributors to performance. American International Group, Progressive, and MBIA were among the most important detractors from performance.  

Banking companies were the second most important contributors to performance, out-performing the corresponding industry group within the Index (up 35% versus down 30% for the Index). State Bank of India, Commerce Bancorp, and ICICI Bank were among the most important contributors to performance. 

The Fund managers have identified a number of investment opportunities in foreign companies. The Fund ended the year with approximately 15% of its assets invested in foreign companies. As a group, the foreign companies owned by the Fund out-performed the Index.

**Key Detractors from Performance**

Diversified financial companies were the most important detractors from performance. The Fund’s diversified financial companies under-performed the corresponding industry group within the Index (down 25% versus down 19% for the Index). Bank of New York Mellon and Ameriprise Financial were among the most important contributors to performance. First Marblehead, Moody’s, American Express, and JPMorgan Chase were among the most important detractors from performance. 

The Fund’s non-financial holdings overall detracted from performance. D&B was among the most important contributors to performance. Sealed Air, Covidien, and H&R Block were among the most important detractors from performance.  The Fund no longer owns Covidien.

 

 

5

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

**Management’s Discussion and Analysis – (Continued)**

**Davis Appreciation & Income Fund**

Davis Appreciation & Income Fund’s Class A shares returned 1.30% on net asset value for the year ended December 31, 20071, compared with its benchmark, the Standard & Poor’s 500® Index2 (“Index”), which returned 5.49%. Eight of the ten economic sectors3 of the Index had positive returns, with financials and consumer discretionary turning in negative returns. The economic sectors that achieved the strongest returns were energy, materials, and utilities. 

The Fund’s investment strategy is to attempt to use stocks, bonds, convertible securities, and cash to structure a portfolio which will participate in at least 80% of the increase in the Index during market increases and not decline by more than 50% of the decrease in the Index during market declines. There can be no assurance that the Fund will actually perform in line with our strategy because there can be no assurance that the securities the Fund purchases will increase in value when the Index increases in value, or that the investments will provide downside protection when the Index declines in value. 

**Key Contributors to Performance**

The Fund’s holdings in convertible bonds were the most important contributors4 to the Fund’s performance, performing in-line with the Index (up 6% versus up 5% for the Index). Convertible bond holdings in Lehman Brothers**5** (which is convertible into Devon Energy), Quanta Services, Intel, and Amazon.com were among the most important contributors to performance. Convertible bond holdings in Reckson (which is convertible into SL Green Realty) and General Growth Properties were among the most important detractors from performance. 

 

**Key Detractors from Performance**

The Fund’s common stock holdings under-performed the Index (down 1% versus up 5% for the Index) and were the primary detractors from performance. Common stock holdings in Amazon.com, Coca–Cola, Avon, and General Growth Properties were among the most important contributors to performance. Common stock holdings in Kohl’s, J. C. Penney, Masco, Citigroup, American International Group, Sealed Air, and Whole Foods Market were among the most important detractors from performance.  

 

 

6

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis – (Continued)**

**Davis Real Estate Fund**

Davis Real Estate Fund’s Class A shares delivered a negative return on net asset value of 14.87% for the year ended December 31, 20071. Over the same time period, the Dow Jones Wilshire Real Estate Securities Index2 (“Index”) declined 17.66%. Seven of the eight sub-industries3 within the Index delivered negative returns, including diversified REITs, residential REITs, real estate management & development, and office REITs, all down 20% or more.

**Key Contributors to Performance**

Transportation companies were the most important contributors4 to the Fund’s performance. Florida East Coast Industries5, Alexander & Baldwin, and Burlington Northern Santa Fe were among the most important contributors to performance.  The Fund no longer owns Florida East Coast Industries.

The Fund maintained a cash position over the year, and this aided relative performance during the weak market for real estate companies. 

Other companies contributing to the Fund’s performance included Ventas, ProLogis, and Macerich. The Fund no longer owns Macerich.

**Key Detractors from Performance**

Office REITs represented the Fund’s largest holdings and were the most important detractors from performance. The Fund’s office REITs performed in line with the corresponding sub-industry within the Index (both down 20%). Alexandria Real Estate was among the most important contributors to performance. Corporate Office Properties, Duke Realty, Derwent London, and SL Green Realty were among the most important detractors from performance. The Fund no longer owns Duke Realty.

Real estate management & development companies were the second most important detractor from performance. The Fund’s real estate management & development companies under-performed the corresponding sub-industry within the Index (down 34% versus down 24% for the Index). Forest City Enterprises and Minerva were among the most important detractors from performance.

The Fund managers have identified a number of investment opportunities in foreign companies. The Fund ended the year with approximately 6% of its assets invested in foreign companies. As a group, the foreign companies owned by the Fund under-performed the Index.

Other individual companies detracting from performance included Cousins Properties, Brixton, and Kimco Realty. 

 

7

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis – (Continued)**

This Annual Report is authorized for use by existing shareholders. Prospective shareholders must receive a current Davis Series prospectus, which contains more information about investment strategies, risks, charges, and expenses. Please read the prospectus carefully before investing or sending money.

Davis Opportunity Fund’s investment objective is long-term growth of capital. There can be no assurance that the Fund will achieve its objective. The primary risks of an investment in Davis Opportunity Fund are: (1) market risk, (2) company risk, (3) small and medium capitalization risk, (4) foreign country risk, (5) headline risk, and (6) selection risk.  See the prospectus for a full description of each risk.

Davis Government Bond Fund’s investment objective is current income. There can be no assurance that the Fund will achieve its objective. The primary risk of an investment in Davis Government Bond Fund is interest rate risk, consisting of: (1) price volatility risk, (2) extension and prepayment risk, and (3) credit risk. See the prospectus for a full description of each risk.

Davis Financial Fund’s investment objective is long-term growth of capital. There can be no assurance that the Fund will achieve its objective. The primary risks of an investment in Davis Financial Fund are: (1) market risk, (2) company risk, (3) concentrated financial services portfolio risk, (4) foreign country risk, (5) headline risk, and (6) selection risk. See the prospectus for a full description of each risk.

Davis Financial Fund concentrates its investments in the financial sector, and it may be subject to greater risks than a fund that does not concentrate its investments in a particular sector. The Fund’s investment performance, both good and bad, is expected to reflect the economic performance of the financial sector more than a fund that does not concentrate its portfolio.

Davis Appreciation & Income Fund’s investment objective is total return through a combination of growth and income. There can be no assurance that the Fund will achieve its objective. The primary risks of an investment in Davis Appreciation & Income Fund are: equity risks, including (1) market risk, (2) company risk, (3) small and medium capitalization risk, (4) foreign country risk, (5) headline risk, and (6) selection risk; and debt risks, including (1) interest rate sensitivity, (2) changes in debt rating, and (3) credit risk, including debt rated less than investment grade. See the prospectus for a full description of each risk. 

Davis Real Estate Fund’s investment objective is total return through a combination of growth and income. There can be no assurance that the Fund will achieve its objective. The primary risks of an investment in Davis Real Estate Fund are: (1) market risk, (2) company risk, (3) concentrated real estate portfolio risk, (4) focused portfolio risk, (5) small and medium capitalization risk, (6) foreign country risk, (7) headline risk, and (8) selection risk. See the prospectus for a full description of each risk.

Davis Real Estate Fund concentrates its investments in the real estate sector, and it may be subject to greater risks than a fund that does not concentrate its investments in a particular sector. The Fund’s investment performance, both good and bad, is expected to reflect the economic performance of the real estate sector much more than a fund that does not concentrate its portfolio.

Davis Real Estate Fund is allowed to focus its investments in fewer companies, and it may be subject to greater risks than a more diversified fund that is not allowed to focus its investments in a few companies. Should the portfolio manager determine that it is prudent to focus the Fund’s portfolio in a few companies, the Fund’s investment performance, both good and bad, is expected to reflect the economic performance of its more focused portfolio.

 

8

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis – (Continued)**

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. The following tables list the average annual total returns for the periods ended December 31, 2007 and the annual operating gross expense ratios for the year ended December 31, 2007:

* *

*(without a 4.75% sales charge taken into consideration)*

 

 

 

 

 

**EXPENSE**

**FUNDNAME**

**1-YEAR**

**5-YEAR**

**10-YEAR**

**INCEPTION**

**RATIO**

Davis Opportunity – A*

(1.42)%

14.93%

9.10%

13.37% - 12/01/94

1.06%

Davis Government Bond – A

5.45%

2.07%

3.72%

4.60% - 12/01/94

1.03%

Davis Financial – A 

(5.31)%

13.26%

7.46%

15.17% - 05/01/91

0.97%

Davis Appreciation & Income – A 

1.30%

12.23%

5.97%

10.32% - 05/01/92

1.01%

Davis Real Estate – A 

(14.87)%

18.80%

10.03%

13.21% - 01/03/94

1.08%

 

* *

*(with a 4.75% sales charge taken into consideration)*

**FUNDNAME**

**1-YEAR**

**5-YEAR**

**10-YEAR**

**INCEPTION**

Davis Opportunity – A*

(6.10)%

13.82%

8.57%

12.95% - 12/01/94

Davis Government Bond – A 

0.36%

1.06%

3.22%

4.21% - 12/01/94

Davis Financial – A 

(9.81)%

12.17%

6.93%

14.83% - 05/01/91

Davis Appreciation & Income – A 

(3.50)%

11.14%

5.46%

9.98% - 05/01/92

Davis Real Estate – A 

(18.90)%

17.65%

9.49%

12.82% - 01/03/94

 

 

 

 

 

**FUND**

**BENCHMARKINDEX**

**1-YEAR**

**5-YEAR**

**10-YEAR**

**INCEPTION**

Russell 3000® Index

5.14%

13.63%

6.22%

11.43% - 12/01/94

Citigroup U.S. Treasury/Agency 

 

 

 

 

1-3 Year Index

7.17%

3.19%

4.85%

5.43% - 12/01/94

Standard & Poor’s 500® Index

5.49%

12.82%

5.91%

10.64% - 05/01/91

 

 

 

 

10.52% - 05/01/92

Dow Jones Wilshire Real Estate

 

 

 

 

Securities Index

(17.66)%

18.63%

10.78%

12.61% - 01/03/94

Fund performance changes over time and current performance may be higher or lower than stated.  Returns and expense ratios for other classes of shares will vary from the above returns and expense ratios. The annual operating expense ratios may vary in future years. For more current information please call Davis Funds Investor Services at 1-800-279-0279.

*   In 1999 and 2000 the Davis Opportunity Fund made favorable investments in initial public offerings (IPOs), which improved short-term performance. These markets were unusual and such performance may not continue in the future.

 

9

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis – (Continued)**

 
 
2

The definitions of indices quoted in this report appear below. Investments cannot be made directly in the indices.

I.   The Standard & Poor’s 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.

II.  The Russell 3000® Index measures the performance of the 3,000 largest companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

III. The Citigroup U.S. Treasury/Agency 1-3 Year Index is a recognized unmanaged index of short-term U.S. Government Securities’ performance. 

IV. The Dow Jones Wilshire Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities, such as Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs). The Index is capitalization-weighted. The beginning date was January 1, 1978, and the Index is rebalanced monthly and returns are calculated on a buy and hold basis.

3    The companies included in the Standard and Poor’s 500® Index and the Russell 3000® Index are divided into ten sectors.  One or more industry groups make up a sector.  The Companies included in the Dow Jones Wilshire Real Estate Securities Index are divided into eight sub-industries.

 

4    A company’s or sector’s contribution to the Fund’s performance is a product both of its appreciation or depreciation and its weighting within the Fund. For example, a 5% holding that rises 20% has twice as much impact as a 1% holding that rises 50%.

 

5    This Management Discussion and Analysis discusses a number of individual companies. The information provided in this report does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. The Schedule of Investments lists each Fund’s holdings of each company discussed.  

 

Shares of the Davis Funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested.

 

10

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS OPPORTUNITY FUND**

At December 31, 2007**

 

**Portfolio Composition**

 

**Sector Weightings**

**(% of Fund’s Net Assets)**

 

**(% of Long Term Portfolio)**

 

 

 

 

**Fund**

**Russell 3000®**

Common Stock (U.S.)

82.38%

 

Technology

17.10%

16.59%

Common Stock (Foreign)

17.06%

 

Insurance

12.09%

4.16%

Convertible Bonds

0.58%

 

Media

11.37%

2.98%

Other Assets & Liabilities

(0.02)%

 

Consumer Durables & Apparel

9.72%

1.21%

 

100.00%

 

Retailing

8.59%

2.82%

 

 

 

Health Care

8.33%

12.02%

 

 

 

Capital Goods

6.91%

9.40%

 

 

 

Diversified Financials

6.03%

7.59%

 

 

 

Other

3.80%

19.51%

 

 

 

Materials

3.54%

3.88%

 

 

 

Energy

3.53%

11.97%

 

 

 

Telecommunication Services

2.98%

3.29%

 

 

 

Consumer Services

2.06%

2.05%

 

 

 

Automobiles & Components

1.99%

0.59%

 

 

 

Real Estate

1.96%

1.94%

 

 

 

 

100.00%

100.00%

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

Garmin Ltd.

Consumer Durables & Apparel

6.96%

Netflix Inc.

Retailing

4.44%

Google Inc., Class A

Software & Services

3.93%

Markel Corp.

Property & Casualty Insurance

3.49%

Microsoft Corp.

Software & Services

3.34%

Comcast Corp., Special Class A

Media

2.80%

Grupo Televisa S.A., ADR 

Media

2.79%

Hunter Douglas NV

Consumer Durables & Apparel

2.77%

Texas Instruments Inc.

Semiconductors & Semiconductor Equipment

2.67%

Trane, Inc.

Capital Goods

2.63%

 

 

11

 

**DAVIS SERIES, INC.**

PORTFOLIO ACTIVITY

**DAVIS OPPORTUNITY FUND**

January 1, 2007 through December 31, 2007

 

 

**New Positions Added (01/01/07 - 12/31/07)**

(Highlighted positions are those greater than 1.50% of 12/31/07 total net assets)

 

 

 

 

**% of 12/31/07**

 

 

**Date of 1st**

**Fund**

**Security**

**Industry**

**Purchase**

**Net Assets**

Comcast Corp., Special Class A

Media

07/11/07

2.80%

Dell Inc.

Technology Hardware & Equipment

03/29/07

1.94%

Discover Financial Services

Consumer Finance

07/02/07

1.00%

Google Inc., Class A

Software & Services

06/13/07

3.93%

Grupo Televisa S.A., ADR

Media

08/15/07

2.79%

H&R Block, Inc.

Consumer Services

07/10/07

0.64%

Home Depot, Inc.

Retailing

11/12/07

0.48%

Johnson & Johnson

Pharmaceuticals, Biotechnology & 

 

 

 

Life Sciences

06/15/07

2.39%

Lincare Holdings Inc.

Health Care Equipment & Services

07/05/07

0.95%

News Corp., Class A

Media

10/19/07

1.40%

Oaktree Capital Group LLC, Class A

Diversified Financial Services

05/21/07

0.58%

Pfizer Inc.

Pharmaceuticals, Biotechnology & 

 

 

 

Life Sciences

02/15/07

–

Redwood Trust, Inc.

Real Estate

11/26/07

1.96%

Shaw Group Inc.

Capital Goods

07/13/07

1.14%

Sino-Forest Corp.

Materials

10/19/07

1.34%

Walt Disney Co.

Media

07/11/07

0.88%

Whole Foods Market, Inc.

Food & Staples Retailing

05/21/07

0.59%

 

12

 

**DAVIS SERIES, INC.**

PORTFOLIO ACTIVITY - (Continued)

**DAVIS OPPORTUNITY FUND**

January 1, 2007 through December 31, 2007

 

 

**Positions Closed (01/01/07 - 12/31/07)**

(Gains and losses greater than $3,000,000 are highlighted)

 

 

 

**Date of**

**Realized**

**Security**

**Industry**

**Final Sale**

**Gain (Loss)**

Advance Auto Parts, Inc.

Retailing

05/17/07

$

528,692

 

Anglo Irish Bank Corp. PLC

Commercial Banks

08/07/07

 

2,333,654

 

Apollo Group, Inc., Class A

Consumer Services

07/30/07

 

2,704,862

 

Commerce Bancorp, Inc.

Commercial Banks

11/28/07

 

4,099,345

 

Covad Communications Group, Inc.

Telecommunication Services

12/07/07

 

(4,014,296

)

Expedia, Inc.

Retailing

08/17/07

 

11,198,445

 

First Data Corp.

Software & Services

09/25/07

 

1,312,312

 

Lotte Chilsung Beverage Co., Ltd.

Food, Beverage & Tobacco

10/25/07

 

3,200,803

 

Lotte Confectionery Co., Ltd.

Food, Beverage & Tobacco

10/22/07

 

6,209,057

 

Marsh & McLennan Cos, Inc.

Insurance Brokers

06/15/07

 

407,180

 

Mohawk Industries, Inc.

Consumer Durables & Apparel

07/20/07

 

3,443,367

 

Office Depot, Inc.

Retailing

02/20/07

 

3,627,886

 

Pacific Corp.

Household & Personal Products

10/31/07

 

7,926,394

 

Pfizer Inc.

Pharmaceuticals, Biotechnology &

 

 

 

 

 

Life Sciences

07/12/07

 

(375,659

)

RadioShack Corp.

Retailing 

03/14/07

 

386,453

 

Sears Holdings Corp.

Retailing

08/17/07

 

2,507,086

 

Taeyoung Engineering & Construction

Capital Goods

10/22/07

 

1,437,199

 

Thermo Fisher Scientific, Inc.

Pharmaceuticals, Biotechnology & 

 

 

 

 

 

Life Sciences

10/23/07

 

9,605,291

 

Toll Brothers, Inc.

Homebuilding

04/03/07

 

79,283

 

Verigy Ltd.

Semiconductors & Semiconductor

 

 

 

 

 

Equipment

02/02/07

 

577,044

 

Zimmer Holdings, Inc.

Health Care Equipment & Services

02/16/07

 

3,588,908

 

 

 

 

 

 

 

 

 

13

 

**DAVIS SERIES, INC.**

**DAVIS OPPORTUNITY FUND**

CLASS A FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes an initial 

 

 

**Account Value**

**Account Value**

**During Period***

sales charge of 4.75%.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(6.10)%

Actual

$1,000.00

$930.34

$5.16

Five-Year

13.82%

Hypothetical (5% return

 

 

 

Ten-Year

8.57%

before expenses)

$1,000.00

$1,019.86

$5.40

 

*Expenses are equal to the Class’s annualized expense ratio (1.06%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.  See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class A shares of Davis Opportunity Fund (“DOF-A”) on December 31, 1997 and paid a 4.75% sales charge. As the chart shows, by December 31, 2007, the value of your investment would have grown to $22,758 - a 127.58% increase on your initial investment. For comparison, the Russell 3000® Stock Index is also presented on the chart below.

 

 

 

 

The Russell 3000® Stock Index measures the performance of the 3,000 largest companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

 

The performance data for Davis Opportunity Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

In 1999 and 2000 the Davis Opportunity Fund made favorable investments in initial public offerings (IPOs), which improved short-term performance. These markets were unusual and such performance may not continue in the future.

 

14

 

**DAVIS SERIES, INC.**

**DAVIS OPPORTUNITY FUND**

CLASS B FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

deferred contingent sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(5.78)%

Actual

$1,000.00

$926.71

$8.98

Five-Year

13.80%

Hypothetical (5% return

 

 

 

Ten-Year

8.49%

before expenses)

$1,000.00

$1,015.88

$9.40

 

*Expenses are equal to the Class’s annualized expense ratio (1.85%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.   See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class B shares of Davis Opportunity Fund (“DOF-B”) on December 31, 1997 and converted to Class A shares on December 31, 2004.  As the chart shows, by December 31, 2007, the value of your investment would have grown to $22,597- a 125.97% increase on your initial investment. For comparison, the Russell 3000® Stock Index is also presented on the chart below.

The Russell 3000® Stock Index measures the performance of the 3,000 largest companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

 

Because Class B shares automatically convert to Class A shares after 7 years, the above graph and the “Ten-Year” return for Class B reflect Class A performance for the period after conversion.

 

The performance data for Davis Opportunity Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

In 1999 and 2000 the Davis Opportunity Fund made favorable investments in initial public offerings (IPOs), which improved short-term performance. These markets were unusual and such performance may not continue in the future.

 

15

 

**DAVIS SERIES, INC.**

**DAVIS OPPORTUNITY FUND**

CLASS C FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(3.04)%

Actual

$1,000.00

$926.91

$8.79

Five-Year

14.06%

Hypothetical (5% return

 

 

 

Ten-Year

8.21%

before expenses)

$1,000.00

$1,016.08

$9.20

 

*Expenses are equal to the Class’s annualized expense ratio (1.81%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class C shares of Davis Opportunity Fund (“DOF-C”) on December 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $22,014- a 120.14% increase on your initial investment. For comparison, the Russell 3000® Stock Index is also presented on the chart below.

 

The Russell 3000® Stock Index measures the performance of the 3,000 largest companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

 

The performance data for Davis Opportunity Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

In 1999 and 2000 the Davis Opportunity Fund made favorable investments in initial public offerings (IPOs), which improved short-term performance. These markets were unusual and such performance may not continue in the future.

 

16

 

**DAVIS SERIES, INC.**

**DAVIS OPPORTUNITY FUND**

CLASS Y FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(There is no sales charge applicable

 

 

**Account Value**

**Account Value**

**During Period***

to this calculation.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(1.13)%

Actual

$1,000.00

$931.66

$3.80

Five-Year

15.31%

Hypothetical (5% return

 

 

 

Ten-Year

9.42%

before expenses)

$1,000.00

$1,021.27

$3.97

 

*Expenses are equal to the Class’s annualized expense ratio (0.78%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class Y shares of Davis Opportunity Fund (“DOF-Y”) on December 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $24,607 - a 146.07% increase on your initial investment. For comparison, the Russell 3000® Stock Index is also presented on the chart below.

The Russell 3000® Stock Index measures the performance of the 3,000 largest companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

 

The performance data for Davis Opportunity Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

In 1999 and 2000 the Davis Opportunity Fund made favorable investments in initial public offerings (IPOs), which improved short-term performance. These markets were unusual and such performance may not continue in the future.

 

17

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS GOVERNMENT BOND FUND**

At December 31, 2007**

 

**Portfolio Composition**

 

**Sector Weightings**

 

**(% of Fund’s Net Assets)**

 

**(% of Fixed Income)**

 

 

 

 

 

 

 

Fixed Income

89.20%

 

Fannie Mae Mortgage Pools

33.55%

 

Short Term Investments

9.46%

 

Government Agency Notes

30.45%

 

Other Assets & Liabilities

1.34%

 

Freddie Mac Mortgage Pools

20.04%

 

 

100.00%

 

Collateralized Mortgage 

 

 

 

 

 

Obligations 

14.50%

 

 

 

 

Ginnie Mae Mortgage Pools

1.46%

 

 

 

 

 

100.00%

 

 

 

 

**Top 10 Fixed Income Holdings**

 

 

**% of Fund’s**

**Security**

**Sector**

**Net Assets**

Federal Home Loan Bank, 0.28562%, 07/17/08

Government Agency Notes

9.29%

Fannie Mae, 6.00%, 09/01/17 Pool No. 665776

Fannie Mae Mortgage Pools

8.01%

Fannie Mae, 4.00%, 11/25/16

Collateralized Mortgage Obligations

5.50%

Fannie Mae, 4.50%, 10/01/18 Pool No. 740825

Fannie Mae Mortgage Pools

4.87%

Fannie Mae, 4.50%, 06/01/18 Pool No. 727579

Fannie Mae Mortgage Pools

4.85%

Freddie Mac, 5.00%, 08/01/20 Pool No. B19690

Freddie Mac Mortgage Pools

4.43%

Fannie Mae, 6.00%, 05/15/08

Government Agency Notes

3.81%

Freddie Mac, 4.732%, 04/01/35 Pool No. 782528

Freddie Mac Mortgage Pools

3.42%

Freddie Mac, 5.00%, 08/15/14

Collateralized Mortgage Obligations

2.99%

Fannie Mae, 5.624%, 04/01/36 Pool No. 851605

Fannie Mae Mortgage Pools

2.96%

 

 

18

 

**DAVIS SERIES, INC.**

**DAVIS GOVERNMENT BOND FUND**

CLASS A FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes an initial 

 

 

**Account Value**

**Account Value**

**During Period***

sales charge of 4.75%.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

0.36%

Actual

$1,000.00

$1,039.88

$5.19

Five-Year

1.06%

Hypothetical (5% return

 

 

 

Ten-Year

3.22%

before expenses)

$1,000.00

$1,020.11

$5.14

 

*Expenses are equal to the Class’s annualized expense ratio (1.01%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class A shares of Davis Government Bond Fund (“DGBF-A”) on December 31, 1997 and paid a 4.75% sales charge. As the chart shows, by December 31, 2007, the value of your investment would have grown to $13,735 - a 37.35% increase on your initial investment. For comparison, the Citigroup U.S. Treasury/Agency 1-3 Year Index is also presented on the chart below.

 

The Citigroup U.S. Treasury/Agency 1-3 Year Index is a recognized unmanaged index of short-term U.S. Government securities’ performance. 

 

The performance data for Davis Government Bond Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

19

 

**DAVIS SERIES, INC.**

**DAVIS GOVERNMENT BOND FUND**

CLASS B FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

0.49%

Actual

$1,000.00

$1,034.26

$9.02

Five-Year

0.96%

Hypothetical (5% return

 

 

 

Ten-Year

3.18%

before expenses)

$1,000.00

$1,016.33

$8.94

 

*Expenses are equal to the Class’s annualized expense ratio (1.76%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class B shares of Davis Government Bond Fund (“DGBF-B”) on December 31, 1997 and converted to Class A shares on December 31, 2004. As the chart shows, by December 31, 2007, the value of your investment would have grown to $13,682 - a 36.82% increase on your initial investment. For comparison, the Citigroup U.S. Treasury/Agency 1-3 Year Index is also presented on the chart below.

 

The Citigroup U.S. Treasury/Agency 1-3 Year Index is a recognized unmanaged index of short-term U.S. Government securities’ performance.

 

Because Class B shares automatically convert to Class A shares after 7 years, the above graph and the “Ten-Year” return for Class B reflect Class A performance for the period after conversion.

 

The performance data for Davis Government Bond Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

20

 

 

**DAVIS SERIES, INC.**

**DAVIS GOVERNMENT BOND FUND**

CLASS C FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

3.66%

Actual

$1,000.00

$1,036.12

$8.88

Five-Year

1.30%

Hypothetical (5% return

 

 

 

Ten-Year

2.93%

before expenses)

$1,000.00

$1,016.48

$8.79

 

*Expenses are equal to the Class’s annualized expense ratio (1.73%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class C shares of Davis Government Bond Fund (“DGBF-C”) on December 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $13,349 - a 33.49% increase on your initial investment. For comparison, the Citigroup U.S. Treasury/Agency 1-3 Year Index is also presented on the chart below.

 

The Citigroup U.S. Treasury/Agency 1-3 Year Index is a recognized unmanaged index of short-term U.S. Government securities’ performance. 

 

The performance data for Davis Government Bond Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

21

 

**DAVIS SERIES, INC.**

**DAVIS GOVERNMENT BOND FUND**

CLASS Y FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(There is no sales charge applicable

 

 

**Account Value**

**Account Value**

**During Period***

to this calculation.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

5.32%

Actual

$1,000.00

$1,038.18

$5.50

Five-Year

2.22%

Hypothetical (5% return

 

 

 

Life of Class (September 1, 1998

through December 31, 2007)

3.75%

before expenses)

$1,000.00

$1,019.81

$5.45

 

*Expenses are equal to the Class’s annualized expense ratio (1.07%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested at inception**. Let’s say you invested $10,000 in Davis Series, Inc., Class Y shares of Davis Government Bond Fund (“DGBF-Y”) on September 1, 1998 (inception of class). As the chart shows, by December 31, 2007, the value of your investment would have been $14,102 - a 41.02% increase on your initial investment. For comparison, the Citigroup U.S. Treasury/Agency 1-3 Year Index is also presented on the chart below.

 

 

The Citigroup U.S. Treasury/Agency 1-3 Year Index is a recognized unmanaged index of short-term U.S. Government securities’ performance. 

 

The performance data for Davis Government Bond Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

22

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS GOVERNMENT MONEY MARKET FUND**

At December 31, 2007**

 

 

**Portfolio Composition**

 

**Maturity Diversification**

 

**(% of Fund’s Net Assets)**

 

**(% of Portfolio Holdings)**

 

 

 

 

 

 

 

Repurchase Agreements

35.79%

 

0-30 Days

50.40%

 

Federal Home Loan Bank

31.64%

 

31-90 Days

17.13%

 

Fannie Mae

16.40%

 

91-180 Days

13.81%

 

Freddie Mac

5.47%

 

181-391 Days

18.66%

 

Freddie Mac Mortgage Pool

2.90%

 

 

100.00%

 

Federal Farm Credit Bank

0.40%

 

 

 

 

Private Export Funding

0.13%

 

 

 

 

Other Assets & Liabilities

7.27%

 

 

 

 

 

100.00%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The maturity dates of floating rate securities used in the Maturity Diversification chart are considered to be the effective maturities, based on the reset dates of the securities’ variable rates.  See the Fund’s Schedule of Investments for a listing of the floating rate securities.

 

 

 

 

**Expense Example**

 

 

 

**Classes A, B, C, & Y**

**Beginning**

**Ending**

**Expenses Paid**

 

**Account Value**

**Account Value**

**During Period***

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

Actual

$1,000.00

$1,022.61

$2.80

Hypothetical (5% return

 

 

 

before expenses)

$1,000.00

$1,022.43

$2.80

 

*Expenses are equal to the Classes’ annualized expense ratio (0.55%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

 

23

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS FINANCIAL FUND**

At December 31, 2007**

 

**Portfolio Composition**

 

**Sector Weightings**

**(% of Fund’s Net Assets)**

 

**(% of Stock Holdings)**

 

 

 

 

**Fund**

**S&P 500**®

Common Stock (U.S.)

84.74%

 

Insurance

41.03%

4.31%

Common Stock (Foreign)

14.81%

 

Diversified Financials

35.94%

8.55%

Other Assets & Liabilities

0.45%

 

Commercial Services & Supplies

7.14%

0.46%

 

100.00%

 

Banks

6.69%

3.69%

 

 

 

Energy

5.13%

12.86%

 

 

 

Materials

2.41%

3.33%

 

 

 

Consumer Services

1.66%

1.55%

 

 

 

Technology

–

16.78%

 

 

 

Health Care

–

11.97%

 

 

 

Capital Goods

–

9.28%

 

 

 

Food, Beverage & Tobacco

–

5.31%

 

 

 

Other

–

21.91%

 

 

 

 

100.00%

100.00%

 

 

 

 

 

 

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

American Express Co.  

Consumer Finance 

11.44%

Transatlantic Holdings, Inc.  

Reinsurance

11.43%

Loews Corp.  

Multi-Line Insurance

8.35%

D&B Corp.  

Commercial Services & Supplies 

7.10%

Bank of New York Mellon Corp.  

Capital Markets

5.61%

State Bank of India, GDR 

Commercial Banks

5.54%

American International Group, Inc.  

Multi-Line Insurance

5.44%

Canadian Natural Resources Ltd. 

Energy

5.10%

JPMorgan Chase & Co.  

Diversified Financial Services

5.02%

Markel Corp.

Property & Casualty Insurance 

4.89%

 

 

24

 

**DAVIS SERIES, INC.**

PORTFOLIO ACTIVITY

**DAVIS FINANCIAL FUND**

January 1, 2007 through December 31, 2007

 

 

**New Positions Added (01/01/07 - 12/31/07)**

(Highlighted positions are those greater than 3.00% of 12/31/07 total net assets)

 

 

 

 

**% of 12/31/07**

 

 

**Date of 1st**

**Fund**

**Security**

**Industry**

**Purchase**

**Net Assets**

Ambac Financial Group, Inc.

Property & Casualty Insurance

11/06/07

0.49%

Canadian Natural Resources Ltd.

Energy

11/20/07

5.10%

MBIA Inc.

Property & Casualty Insurance

11/06/07

0.49%

Merrill Lynch & Co., Inc., Private

 

 

 

Placement

Capital Markets

12/24/07

4.39%

Oaktree Capital Group LLC, Class A

Diversified Financial Services

05/21/07

0.28%

RHJ International

Capital Markets

05/30/07

0.03%

RHJ International, 144A

Capital Markets

06/04/07

0.73%

 

 

 

**Positions Closed (01/01/07 - 12/31/07)**

(Gains greater than $10,000,000 are highlighted)

 

 

 

**Date of**

**Realized**

**Security**

**Industry**

**Final Sale**

**Gain (Loss)**

Altria Group, Inc.

Food, Beverage & Tobacco

03/06/07

$

16,893,432

 

Covidien Ltd.

Health Care Equipment & Services

11/26/07

 

10,300,386

 

Tyco Electronics Ltd.

Technology Hardware & Equipment

12/24/07

 

9,192,961

 

Tyco International Ltd.

Capital Goods

11/28/07

 

7,582,930

 

Wachovia Corp.

Commercial Banks

06/01/07

 

27,685,743

 

 

 

25

 

**DAVIS SERIES, INC.**

**DAVIS FINANCIAL FUND**

CLASS A FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes an 

 

 

**Account Value**

**Account Value**

**During Period***

initial sales charge of 4.75%.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(9.81)%

Actual

$1,000.00

$902.22

$4.60

Five-Year

12.17%

Hypothetical (5% return

 

 

 

Ten-Year

6.93%

before expenses)

$1,000.00

$1,020.37

$4.89

 

*Expenses are equal to the Class’s annualized expense ratio (0.96%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class A shares of Davis Financial Fund (“DFF-A”) on December 31, 1997 and paid a 4.75% sales charge. As the chart shows, by December 31, 2007, the value of your investment would have grown to $19,550-a 95.50% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The performance data for Davis Financial Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

26

 

**DAVIS SERIES, INC.**

**DAVIS FINANCIAL FUND**

CLASS B FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(9.54)%

Actual

$1,000.00

898.01

$8.95

Five-Year

12.01%

Hypothetical (5% return

 

 

 

Ten-Year

6.80%

before expenses)

$1,000.00

$1,015.78

$9.50

 

*Expenses are equal to the Class’s annualized expense ratio (1.87%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class B shares of Davis Financial Fund (“DFF-B”) on December 31, 1997 and converted to Class A shares on December 31, 2004. As the chart shows, by December 31, 2007, the value of your investment would have grown to $19,322 - a 93.22% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

Because Class B shares automatically convert to Class A shares after 7 years, the above graph and the “Ten-Year” return for Class B reflect Class A performance for the period after conversion.

 

The performance data for Davis Financial Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

27

 

**DAVIS SERIES, INC.**

**DAVIS FINANCIAL FUND**

CLASS C FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(6.95)%

Actual

$1,000.00

$898.36

$8.71

Five-Year

12.28%

Hypothetical (5% return

 

 

 

Ten-Year

6.54%

before expenses)

$1,000.00

$1,016.03

$9.25

 

*Expenses are equal to the Class’s annualized expense ratio (1.82%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class C shares of Davis Financial Fund (“DFF-C”) on December 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $18,838- a 88.38% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

 

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The performance data for Davis Financial Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

28

 

**DAVIS SERIES, INC.**

**DAVIS FINANCIAL FUND**

CLASS Y FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(There is no sales charge applicable

 

 

**Account Value**

**Account Value**

**During Period***

to this calculation.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(5.15)%

Actual

$1,000.00

$903.11

$4.13

Five-Year

13.45%

Hypothetical (5% return

 

 

 

Ten-Year

7.66%

before expenses)

$1,000.00

$1,020.87

$4.38

 

*Expenses are equal to the Class’s annualized expense ratio (0.86%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class Y shares of Davis Financial Fund (“DFF-Y”) on December 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $20,921- a 109.21% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

 

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The performance data for Davis Financial Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

29

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS APPRECIATION & INCOME FUND**

At December 31, 2007 

 

**Portfolio Composition**

 

**Sector Weightings**

**(% of Fund’s Net Assets)**

 

**(% of Long Term Portfolio)**

 

 

 

 

 

**Fund**

 

**S&P 500**®

Common Stock (U.S.)

43.06%

 

Real Estate

17.51%

1.04%

Common Stock (Foreign)

1.06%

 

Technology

10.47%

16.78%

Convertible Bonds

41.55%

 

Retailing

9.46%

2.63%

Corporate Bonds

7.25%

 

Capital Goods

8.99%

9.28%

Convertible Preferred Stocks

2.54%

 

Energy

8.53%

12.86%

Short Term Investments

4.16%

 

Food, Beverage & Tobacco

7.13%

5.31%

Other Assets & Liabilities

0.38%

 

Commercial Services & Supplies

6.81%

0.46%

 

100.00%

 

Diversified Financial Services

5.87%

8.55%

 

 

 

Food & Staples Retailing

4.67%

2.37%

 

 

 

Insurance

4.19%

4.31%

 

 

 

Health Care 

3.84%

11.97%

 

 

 

Household & Personal Products

3.30%

2.55%

 

 

 

Utilities 

2.96%

3.62%

 

 

 

Materials

2.96%

3.33%

 

 

 

Media

2.69%

2.81%

 

 

 

Transportation

0.62%

1.77%

 

 

 

Other

–

10.36%

 

 

 

 

100.00%

100.00%

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

Nabors Industries, Inc., Conv. Sr. Notes, 0.94%, 05/15/11 

Energy

4.16%

Intel Corp., Conv. Sub. Deb., 2.95%, 12/15/35

Semiconductors & Semiconductor  

 

 

Equipment

3.91%

Whole Foods Market, Inc.  

Food & Staples Retailing

3.45%

Lehman Brothers Holdings Inc., Conv. Notes (Convertible into

 

 

Devon Energy Corp.), 0.25%, 08/23/11

Energy

3.21%

Vornado Realty L.P., Conv. Sr. Deb., 3.875%, 4/15/25 

Real Estate

3.06%

Kohl’s Corp.

Retailing

2.99%

Merrill Lynch & Co., Inc., Private Placement 

Capital Markets

2.63%

Avon Products, Inc.  

Household & Personal Products 

2.53%

School Specialty, Inc., Conv. Sub. Notes, 3.75%/Zero Cpn.,   

 

 

08/01/23

Commercial Services & Supplies

2.51%

Forest City Enterprises, Inc., Class A, Conv. Sr. Notes,

 

 

3.625%, 10/15/11 

Real Estate

2.44%

 

30

 

**DAVIS SERIES, INC.**

PORTFOLIO ACTIVITY

**DAVIS APPRECIATION & INCOME FUND**

January 1, 2007 through December 31, 2007

 

 

**New Positions Added (01/01/07 - 12/31/07)**

(Highlighted positions are those greater than 2.00% of 12/31/07 total net assets)

 

 

 

 

**% of 12/31/07**

 

 

**Date of 1st**

**Fund**

**Security**

**Industry**

**Purchase**

**Net Assets**

Ambac Financial Group, Inc.

Property & Casualty Insurance

11/01/07

1.78%

American Express Co.

Consumer Finance

02/02/07

1.67%

Amgen Inc., Conv. Sr. Notes, Zero Cpn.,

Pharmaceuticals, Biotechnology &

 

 

1.20%, 03/01/32

Life Sciences

01/03/07

–

Amgen Inc., Conv. Sr. Notes, 0.125%,

Pharmaceuticals, Biotechnology &

 

 

02/01/11

Life Sciences

02/28/07

0.83%

Coca-Cola Co., Sr. Notes, 5.35%, 11/15/17

Food, Beverage & Tobacco

10/30/07

1.16%

Forest City Enterprises, Inc., Class A

Real Estate

07/12/07

0.83%

Forest City Enterprises, Inc., Class A Conv.

 

 

 

Sr. Notes, 3.625%, 10/15/11

Real Estate

07/24/07

2.44%

General Electric Co.

Capital Goods

05/29/07

1.81%

General Growth Properties, Inc., Ser. 144A

 

 

 

Conv. Sr. Notes, 3.98%, 04/15/27

Real Estate

04/11/07

1.92%

Host Hotels & Resorts Inc., Ser. 144A Conv.

 

 

 

Sr. Notes, 2.625%, 04/15/27

Real Estate

03/19/07

2.08%

JDS Uniphase Corp., Conv. Sr. Notes, Zero

 

 

 

Cpn., 2.32%, 11/15/10

Technology Hardware & Equipment

05/03/07

1.99%

Kohl’s Corp., Sr. Notes, 6.25%, 12/15/17

Retailing

09/26/07

1.14%

Masco Corp., 6.125%, 10/03/16

Capital Goods

01/24/07

1.34%

Merrill Lynch & Co., Inc., Private Placement

Capital Markets

12/24/07

2.63%

Nabors Industries Ltd.

Energy

10/24/07

0.37%

Nabors Industries, Inc., Conv. Sr. Notes,

 

 

 

0.94%, 05/15/11

Energy

02/28/07

4.16%

News Corp., Class A

Media

03/02/07

1.21%

ProLogis, Conv. Sr. Notes, 1.875%, 11/15/37

Real Estate

11/01/07

0.21%

ProLogis, Ser. 144A Conv. Sr. Notes,

 

 

 

2.25%, 04/01/37

Real Estate

03/20/07

1.94%

Reckson Operating Partnership, L.P., Conv.

 

 

 

Sr. Notes (Convertible into SL Green

 

 

 

Realty Corp.), 4.00%, 06/15/25

Real Estate

03/13/07

1.93%

S&P 500 Index Futures Contract,

 

 

 

expiring 03/15/07

Futures Contract

02/01/07

–

S&P 500 Index Futures Contract,

 

 

 

expiring 06/14/07

Futures Contract

02/27/07

–

    

 

31

 

**DAVIS SERIES, INC.**

PORTFOLIO ACTIVITY – (Continued)

**DAVIS APPRECIATION & INCOME FUND**

January 1, 2007 through December 31, 2007

 

 

**New Positions Added (01/01/07 - 12/31/07)**

**– (Continued)**

 

 

 

 

**% of 12/31/07**

 

 

**Date of 1st**

**Fund**

**Security**

**Industry**

**Purchase**

**Net Assets**

S&P 500 Index Futures Contract,

 

 

 

expiring 09/20/07

Futures Contract

06/01/07

–

S&P 500 Index Futures Contract,

 

 

 

expiring 12/20/07

Futures Contract

09/19/07

–

School Specialty, Inc.

Commercial Services & Supplies 

03/08/07

0.47%

Thornburg Mortgage, Inc., Sr. Notes, 8.00%, 

 

 

 

05/15/13

Real Estate

10/22/07

1.34%

Vornado Realty L.P., Conv. Sr. Deb., 3.875%, 

 

 

 

4/15/25

Real Estate

08/16/07

3.06%

Whole Foods Market, Inc.

Food & Staples Retailing

05/04/07

3.45%

 

**Positions Closed (01/01/07 - 12/31/07)**

(Gains and losses greater than $1,000,000 are highlighted)

 

 

 

**Date of**

**Realized**

**Security**

**Industry**

**Final Sale**

**Gain (Loss)**

Amazon.com, Inc.

Retailing

09/13/07

$

12,185,379

 

American International Group, Inc., Conv. Sr.

 

 

 

 

 

Notes, 0.50%, 05/15/07

Multi-Line Insurance

05/15/07

 

(270,488

)

Amgen Inc., Conv. Sr. Notes, Zero 

Pharmaceuticals, Biotechnology &

 

 

 

 

Cpn., 1.20%, 03/01/32

Life Sciences

03/01/07

 

91,493

 

Host Hotels & Resorts Inc.

Real Estate

11/27/07

 

593,497

 

Masco Corp., Series B Conv. Sr. Notes, Zero 

 

 

 

 

 

Cpn., 2.98%, 07/20/31

Capital Goods

01/22/07

 

(297,497

) 

S&P 500 Index Futures Contract,

 

 

 

 

 

expiring 03/15/07

Futures Contract

03/15/07

 

(735,650

)

S&P 500 Index Futures Contract,

 

 

 

 

 

expiring 06/14/07

Futures Contract

06/05/07

 

2,750,925

 

S&P 500 Index Futures Contract,

 

 

 

 

 

expiring 09/20/07

Futures Contract

09/19/07

 

(184,467

)

S&P 500 Index Futures Contract,

 

 

 

 

 

expiring 12/20/07

Futures Contract

12/07/07

 

(1,468,876

)

SL Green Realty Corp. 

RealEstate

03/15/07

 

9,537,356

 

Travelers Property Casualty

 

 

 

 

 

Corp., 4.50%, 04/15/32, Conv. Pfd.

Property & Casualty Insurance

04/18/07

 

262,796

 

Vornado Realty Trust, Conv. Sr. Deb.,

 

 

 

 

 

3.625%, 11/15/26

Real Estate

08/16/07

 

(1,260,431

)

WCI Communities, Inc., Conv. Sr. Sub. Notes,

 

 

 

 

 

4.00%, 08/05/23

Homebuilding

01/16/07

 

74,321

 

 

32

 

**DAVIS SERIES, INC.**

**DAVIS APPRECIATION & INCOME FUND**

CLASS A FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes an initial 

 

 

**Account Value**

**Account Value**

**During Period***

sales charge of 4.75%.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(3.50)%

Actual

$1,000.00

$954.43

$4.93

Five-Year

11.14%

Hypothetical (5% return

 

 

 

Ten-Year

5.46%

before expenses)

$1,000.00

1,020.16

$5.09

 

*Expenses are equal to the Class’s annualized expense ratio (1.00%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class A shares of Davis Appreciation & Income Fund (“DAIF-A”) on December 31, 1997 and paid a 4.75% sales charge. As the chart shows, by December 31, 2007, the value of your investment would have grown to $17,014 -a 70.14% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

 

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The performance data for Davis Appreciation & Income 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. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

33

 

**DAVIS SERIES, INC.**

**DAVIS APPRECIATION & INCOME FUND**

CLASS B FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(3.33)%

Actual

$1,000.00

$950.39

$8.95

Five-Year

10.96%

Hypothetical (5% return

 

 

 

Ten-Year

5.31%

before expenses)

$1,000.00

$1,016.03

$9.25

 

*Expenses are equal to the Class’s annualized expense ratio (1.82%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class B shares of Davis Appreciation & Income Fund (“DAIF-B”) on December 31, 1997 and converted to Class A shares on December 31, 2004. As the chart shows, by December 31, 2007, the value of your investment would have grown to $16,776 -a 67.76% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

Because Class B shares automatically convert to Class A shares after 7 years, the above graph and the “Ten-Year” return for Class B reflect Class A performance for the period after conversion.

 

The performance data for Davis Appreciation & Income 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. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

34

 

**DAVIS SERIES, INC.**

**DAVIS APPRECIATION & INCOME FUND**

CLASS C FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(0.45)%

Actual

$1,000.00

$950.75

$8.80

Five-Year

11.24%

Hypothetical (5% return

 

 

 

Ten-Year

5.05%

before expenses)

$1,000.00

$1,016.18

$9.10

 

*Expenses are equal to the Class’s annualized expense ratio (1.79%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class C shares of Davis Appreciation & Income Fund (“DAIF-C”) onDecember 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $16,359-a 63.59% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

 

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The performance data for Davis Appreciation & Income 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. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

35

 

**DAVIS SERIES, INC.**

**DAVIS APPRECIATION & INCOME FUND**

CLASS Y FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(There is no sales charge applicable

 

 

**Account Value**

**Account Value**

**During Period***

to this calculation.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

1.55%

Actual

$1,000.00

$955.71

$3.65

Five-Year

12.48%

Hypothetical (5% return

 

 

 

Ten-Year

6.23%

before expenses)

$1,000.00

$1,021.48

$3.77

 

*Expenses are equal to the Class’s annualized expense ratio (0.74%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class Y shares of Davis Appreciation & Income Fund (“DAIF-Y”) onDecember 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $18,296- an 82.96% increase on your initial investment. For comparison, the Standard and Poor's 500® Stock Index is also presented on the chart below.

 

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The performance data for Davis Appreciation & Income 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. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

36

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS REAL ESTATE FUND**

At December 31, 2007 

 

**Portfolio Composition**

 

**Sector Weightings**

 
**(% of Fund’s Net Assets)**

 

**(% of Long Term Portfolio)**

 
 

 

 

 

 

 

 

 

 

 

 

 

**Dow Jones Wilshire**

 

Common Stock (U.S.)

84.32%

 

 

 

**Real Estate**

 

Common Stock (Foreign)

6.30%

 

 

**Fund**

**Securities Index**

 

Convertible Bonds

5.92%

 

Office REITS

27.22%

16.71%

 

Preferred Stocks

0.29%

 

Retail REITS

16.29%

27.54%

 

Short Term Investments

2.59%

 

Industrial REITS

10.14%

10.59%

 

Other Assets & Liabilities

0.58%

 

Real Estate Management & Development

9.73%

1.55%

 

 

100.00%

 

Residential REITS

8.72%

14.64%

 

 

 

 

Specialized REITS

8.08%

21.39%

 

 

 

 

Transportation

7.94%

–

 

 

 

 

Diversified REITS

6.22%

7.58%

 

 

 

 

Capital Goods

2.84%

–

 

 

 

 

Insurance

2.45%

–

 

 

 

 

Mortgage REITS

0.33%

–

 

 

 

 

Homebuilding

0.04%

–

 

 

 

 

 

100.00%

100.00%

 

 

 

 

 

 

 

 

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

Forest City Enterprises, Inc., Class A 

Real Estate Management & Development

7.92%

Ventas, Inc.  

Specialized REITS

7.82%

Alexandria Real Estate Equities, Inc.  

Office REITS

7.62%

Kimco Realty Corp.  

Retail REITS

4.63%

Boston Properties, Inc.  

Office REITS

4.56%

Digital Realty Trust, Inc.  

Office REITS

4.47%

Regency Centers Corp.  

Retail REITS

4.05%

Cousins Properties, Inc.

Diversified REITS

4.04%

Burlington Northern Santa Fe Corp.

Transportation

3.88%

Derwent London PLC

Office REITS

3.87%

 

 

37

 

**DAVIS SERIES, INC.**

PORTFOLIO ACTIVITY

**DAVIS REAL ESTATE FUND**

January 1, 2007 through December 31, 2007

 

 

**New Positions Added (01/01/07 - 12/31/07)**

(Highlighted positions are those greater than 2.50% of 12/31/07 total net assets)

 

 

 

**% of 12/31/07**

 

 

**Date of 1st**

**Fund**

**Security**

**Industry**

**Purchase**

**Net Assets**

Ambac Financial Group, Inc.  

Property & Casualty Insurance

11/01/07

2.37%

Archstone-Smith Trust

Residential REITS

08/21/07

–

AvalonBay Communities, Inc.

Residential REITS

06/12/07

2.39%

Burlington Northern Santa Fe Corp.

Transportation

02/08/07

3.88%

Digital Realty Trust, Inc.

Office REITS

10/12/07

4.47%

Essex Property Trust, Inc.

Residential REITS

06/20/07

3.13%

General Electric Co.

Capital Goods

05/29/07

2.75%

General Growth Properties, Inc., 

 

 

 

Ser. 144A Conv. Sr. Notes, 

 

 

 

3.98%, 4/15/27

Retail REITS

04/11/07

2.43%

Minerva PLC

Real Estate Management & Development

06/21/07

0.49%

Mitsui Fudosan Co., Ltd.

Real Estate Management & Development

12/17/07

1.02%

ProLogis, Ser. 144A Conv. Sr. Notes,

 

 

 

2.25%, 4/1/37

Industrial REITS

03/20/07

3.32%

Public Storage, Inc.

Specialized REITS

01/05/07

–

SL Green Realty Corp., Ser. 144A

 

 

 

Conv. Sr. Notes, 3.00%, 3/30/27

Office REITS

03/21/07

0.17%

Toll Brothers, Inc.

Homebuilding

11/21/07

0.04%

Vornado Realty Trust

Diversified REITS

08/16/07

1.99%

 

 

38

 

**DAVIS SERIES, INC.**

PORTFOLIO ACTIVITY – (Continued)

**DAVIS REAL ESTATE FUND**

January 1, 2007 through December 31, 2007

 

 

**Positions Closed (01/01/07 - 12/31/07)**

(Gains and losses greater than $2,500,000 are highlighted)

 

 

**Date of**

**Realized**

**Security**

**Industry**

**Final Sale**

**Gain (Loss)**

Archstone-Smith Trust

Residential REITS

10/05/07

$

204,652

 

Capital & Regional PLC

Real Estate Management & Development

03/06/07

 

3,250,159

 

Columbia Equity Trust, Inc.

Office REITS

01/23/07

 

1,886,755

 

Developers Diversified Realty Corp.

Retail REITS

06/27/07

 

16,880,469

 

Duke Realty Corp.

Office REITS

12/17/07

 

2,759,995

 

Equity Residential, 8.60%, Series D,

 

 

 

 

 

Cum. Pfd.

Residential REITS

07/16/07

 

400

 

Florida East Coast Industries, Inc.

Transportation

07/27/07

 

7,000,919

 

Hammerson PLC

Retail REITS

10/09/07

 

2,598,560

 

Host Hotels & Resorts Inc.

Specialized REITS

11/29/07

 

(1,469,886

)

Macerich Co.

Retail REITS

03/20/07

 

4,303,457

 

ProLogis

Industrial REITS

03/21/07

 

12,816,060

 

Public Storage, Inc.

Specialized REITS

06/14/07

 

(2,765,334

)

Slough Estates PLC

Industrial REITS

01/30/07

 

1,804,246

 

Spirit Finance Corp.

Diversified REITS

01/09/07

 

559,374

 

St. Joe Co.

Real Estate Management & Development

12/24/07

 

(6,312,659

)

U-Store-It Trust

Specialized REITS

03/28/07

 

908,293

 

UDR, Inc.

Residential REITS

08/08/07

 

9,679,721

 

Vornado Realty Trust, Conv. Sr. Deb.,

 

 

 

 

 

3.625%, 11/15/26

Diversified REITS

08/16/07

 

(1,891,299

)

 

39

 

**DAVIS SERIES, INC.**

**DAVIS REAL ESTATE FUND**

CLASS A FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes an initial 

 

 

**Account Value**

**Account Value**

**During Period***

sales charge of 4.75%.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(18.90)%

Actual

$1,000.00

$894.99

$5.16

Five-Year

17.65%

Hypothetical (5% return

 

 

 

Ten-Year

9.49%

before expenses)

$1,000.00

$1,019.76

$5.50

 

*Expenses are equal to the Class’s annualized expense ratio(1.08%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class A shares of Davis Real Estate Fund (“DREF-A”) on December 31, 1997 and paid a 4.75% sales charge. As the chart shows, by December 31, 2007, the value of your investment would have grown to $24,761 - a 147.61% increase on your initial investment. For comparison, the Standard & Poor’s 500® Stock Index and the Dow Jones Wilshire Real Estate Securities Index are also presented on the chart below.

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

The Dow Jones Wilshire Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities, such as Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs).  Investments cannot be made directly in the Index.  The index used includes net dividends reinvested.

The performance data for Davis Real Estate Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

40

 

 

**DAVIS SERIES, INC.**

**DAVIS REAL ESTATE FUND**

CLASS B FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(18.14)%

Actual

$1,000.00

$891.77

$8.92

Five-Year

17.72%

Hypothetical (5% return

 

 

 

Ten-Year

9.42%

before expenses)

$1,000.00

$1,015.78

$9.50

 

*Expenses are equal to the Class’s annualized expense ratio (1.87%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class B shares of Davis Real Estate Fund (“DREF-B”) on December 31, 1997 and converted to Class A shares on December 31, 2004. As the chart shows, by December 31, 2007, the value of your investment would have grown to $24,609 - a 146.09% increase on your initial investment. For comparison, the Standard & Poor’s 500® Stock Index and the Dow Jones Wilshire Real Estate Securities Index are also presented on the chart below.

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The Dow Jones Wilshire Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities, such as Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs).  Investments cannot be made directly in the Index.  The index used includes net dividends reinvested.

 

Because Class B shares automatically convert to Class A shares after 7 years, the above graph and the “Ten-Year” return for Class B reflect Class A performance for the period after conversion.

 

The performance data for Davis Real Estate Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

41

 

**DAVIS SERIES, INC.**

**DAVIS REAL ESTATE FUND**

CLASS C FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(This calculation includes any applicable

 

 

**Account Value**

**Account Value**

**During Period***

contingent deferred sales charge.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(16.14)%

Actual

$1,000.00

$891.82

$8.77

Five-Year

17.95%

Hypothetical (5% return

 

 

 

Ten-Year

9.19%

before expenses)

$1,000.00

$1,015.93

$9.35

 

*Expenses are equal to the Class’s annualized expense ratio (1.84%), multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested at inception**. Let’s say you invested $10,000 in Davis Series, Inc., Class C shares of Davis Real Estate Fund (“DREF-C”) on December 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $24,079 - a 140.79% increase on your initial investment. For comparison, the Standard & Poor’s 500® Stock Index and the Dow Jones Wilshire Real Estate Securities Index are also presented on the chart below.

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The Dow Jones Wilshire Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities, such as Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs).  Investments cannot be made directly in the Index.  The index used includes net dividends reinvested.

 

The performance data for Davis Real Estate Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

42

 

**DAVIS SERIES, INC.**

**DAVIS REAL ESTATE FUND**

CLASS Y FUND PERFORMANCE

 

**Average Annual Total Return**

 

**Expense Example**

 

 

 

**for the periods ended December 31, 2007**

 

**Beginning**

**Ending**

**Expenses Paid**

(There is no sales charge applicable

 

 

**Account Value**

**Account Value**

**During Period***

to this calculation.)

 

 

**(07/01/07)**

**(12/31/07)**

**(07/01/07-12/31/07)**

One-Year

(14.58)%

Actual

$1,000.00

$896.40

$3.63

Five-Year

19.26%

Hypothetical (5% return

 

 

 

Ten-Year

10.44%

before expenses)

$1,000.00

$1,021.37

$3.87

 

*Expenses are equal to the Class’s annualized expense ratio (0.76%),multiplied by the average account value****over the period, multiplied by 184/365 (to reflect the one-half year period). The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser. See Notes to Performance on page 44 for a description of the “Expense Example”.

 

**$10,000 invested over ten years**. Let’s say you invested $10,000 in Davis Series, Inc., Class Y shares of Davis Real Estate Fund (“DREF-Y”) on December 31, 1997. As the chart shows, by December 31, 2007, the value of your investment would have grown to $26,994 - a 169.94% increase on your initial investment. For comparison, the Standard & Poor’s 500® Stock Index and the Dow Jones Wilshire Real Estate Securities Index are also presented on the chart below.

 

The Standard & Poor’s 500® Stock Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

The Dow Jones Wilshire Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities, such as Real Estate Investment Trusts (REITs) and Real Estate Operating Companies (REOCs).  Investments cannot be made directly in the Index.  The index used includes net dividends reinvested.

 

The performance data for Davis Real Estate Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

 

43

 

**DAVIS SERIES, INC.**

NOTES TO PERFORMANCE

 

 

**The following disclosure provides important information regarding each Fund’s Expense Example, which appears in each Class’s Fund Performance section in this Annual Report.  Please refer to this information when reviewing the Expense Example for each Class.**

 

**Example**

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including advisory and administrative fees, distribution and/or service (12b-1) fees, and other Fund expenses.  The Expense Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  The Expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for each class is from 07/01/07 to 12/31/07. Please note that the Expense Example is general and does not reflect certain transaction or account specific costs, which may increase your total costs of investing in the Fund. If these transaction or account specific costs were included in the Expense Example, theexpenses would have been higher.

 

**Actual Expenses**

 

The information represented in the row entitled “Actual” provides information about actual account values and actual expenses.  You may use the information in this row, together with the amount you invested, to estimate the expenses that you paid over the period.  Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. 

 

**Hypothetical Example for Comparison Purposes**

 

The information represented in the row entitled “Hypothetical” provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.  The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.  You may use this information to compare the ongoing costs of investing in the Fund and other funds.  To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads).  Therefore, the information in the row entitled “Hypothetical” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.  In addition, if these transactional costs were included, your costs would have been higher.

 

 

44

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS OPPORTUNITY FUND**

 

 

 

**Value**

 

**Shares**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (99.44%)**

 
 

**AUTOMOBILES & COMPONENTS – (1.99%)**

 

 

 

 

318,080

 

Harley-Davidson, Inc. 

$

14,857,517

 

 

141,886

 

WABCO Holdings Inc. 

 

7,107,070

 

 

 

 

 

21,964,587

**CAPITAL GOODS – (6.91%)**

 

 

 

 

1,476,510

 

Blount International, Inc.*

 

18,175,838

 

 

284,390

 

Franklin Electric Co., Inc. 

 

10,899,247

 

 

207,700

 

Shaw Group Inc.* 

 

12,553,388

 

619,860

 

Trane, Inc. 

 

28,953,661

 

 

143,057

 

Tyco International Ltd. 

 

5,672,210

 

 

 

 

 

 

76,254,344

 

**CAPITAL MARKETS – (2.10%)**

 

 

 

 

1,152,395

 

E*TRADE Financial Corp.*

 

4,050,668

 

 

85,452

 

Julius Baer Holding, Ltd. AG (Switzerland)

 

7,064,706

 

 

164,210

 

Legg Mason, Inc. 

 

12,011,961

 

 

 

 

 

 

23,127,335

 

**COMMERCIAL BANKS – (1.12%)**

 

 

 

 

324,234

 

Wachovia Corp. 

 

12,330,619

 

**COMMERCIAL SERVICES & SUPPLIES – (0.38%)**

 

 

 

 

47,500

 

D&B Corp. 

 

4,209,925

 

**CONSUMER DURABLES & APPAREL – (9.73%)**

 

 

 

 

790,110

 

Garmin Ltd. 

 

76,723,632

 

 

412,254

 

Hunter Douglas NV (Netherlands)

 

30,546,665

 

 

 

 

 

 

107,270,297

 

**CONSUMER FINANCE – (1.00%)**

 

 

 

 

731,900

 

Discover Financial Services

 

11,037,052

 

**CONSUMER SERVICES – (2.06%)**

 

 

 

 

379,000

 

H&R Block, Inc. 

 

7,038,030

 

 

409,440

 

Yum! Brands, Inc. 

 

15,669,269

 

 

 

 

 

 

22,707,299

 

**DIVERSIFIED FINANCIAL SERVICES – (2.94%)**

 

 

 

 

10,600

 

Nymex Holdings Inc. 

 

1,416,266

 

 

194,000

 

Oaktree Capital Group LLC, Class A (b)

 

6,353,500

 

 

220,471

 

Pargesa Holding S.A., Bearer Shares (Switzerland)

 

24,634,175

 

 

 

 

 

 

32,403,941

 

**ENERGY – (3.53%)**

 

 

 

 

231,040

 

Tenaris S.A., ADR (Argentina)

 

10,334,419

 

 

200,169

 

Transocean Inc.*

 

28,654,192

 

 

 

 

 

 

38,988,611

 

 

45

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS OPPORTUNITY FUND – (Continued)**

 

 

 

**Value**

 

**Shares**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**FOOD & STAPLES RETAILING – (1.32%)**

 

 

 

 

115,000

 

Costco Wholesale Corp. 

$

8,028,150

 

 

159,420

 

Whole Foods Market, Inc. 

 

6,494,771

 

 

 

 

 

 

14,522,921

 

**FOOD, BEVERAGE & TOBACCO – (0.98%)**

 

 

 

 

179,855

 

Heineken Holding NV (Netherlands)

 

10,184,327

 

 

7,835

 

Nong Shim Holdings Co., Ltd. (South Korea)

 

644,512

 

 

 

 

 

 

10,828,839

 

**HEALTH CARE EQUIPMENT & SERVICES – (5.94%)**

 

 

 

 

103,345

 

Cardinal Health, Inc. 

 

5,968,174

 

 

143,057

 

Covidien Ltd. 

 

6,335,995

 

248,160

 

IDEXX Laboratories, Inc.*

 

14,570,714

 

 

297,800

 

Lincare Holdings Inc.* 

 

10,479,582

 

303,780

 

Omnicare, Inc. 

 

6,929,222

 

 

365,220

 

UnitedHealth Group Inc. 

 

21,255,804

 

 

 

 

 

 

65,539,491

 

**INSURANCE BROKERS – (1.55%)**

 

 

 

 

725,570

 

Brown & Brown, Inc. 

 

17,050,895

 

**LIFE & HEALTH INSURANCE – (2.97%)**

 

 

 

 

111,690

 

AFLAC Inc. 

 

6,995,145

 

 

633,330

 

Power Corp. of Canada (Canada)

 

25,751,591

 

 

 

 

 

 

32,746,736

 

**MATERIALS – (3.53%)**

 

 

 

 

257,050

 

Sealed Air Corp. 

 

5,948,137

 

 

334,570

 

Sigma-Aldrich Corp. 

 

18,277,559

 

 

679,600

 

Sino-Forest Corp.* (Canada)

 

14,763,285

 

 

 

 

 

 

38,988,981

 

**MEDIA – (11.37%)**

 

 

 

 

1,700,500

 

Comcast Corp., Special Class A* 

 

30,864,075

 

 

1,292,700

 

Grupo Televisa S.A., ADR (Mexico) 

 

30,727,479

 

 

72,816

 

Lagardere S.C.A. (France)

 

5,460,367

 

 

754,100

 

News Corp., Class A

 

15,451,509

 

 

726,570

 

Virgin Media Inc. 

 

12,427,980

 

 

301,800

 

Walt Disney Co. 

 

9,742,104

 

 

1,607,150

 

WPP Group PLC (United Kingdom)

 

20,698,781

 

 

 

 

 

 

125,372,295

 

 

 

46

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS OPPORTUNITY FUND – (Continued)**

 

 

 

**Value**

 

**Shares**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 

 

**PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES – (2.39%)**

 

 

 

 

395,160

 

Johnson & Johnson 

$

26,357,172

 

**PROPERTY & CASUALTY INSURANCE – (5.06%)**

 

 

 

 

471,260

 

Ambac Financial Group, Inc. 

 

12,144,370

 

 

51,000

 

FPIC Insurance Group, Inc.*

 

2,190,195

 

 

78,455

 

Markel Corp.*

 

38,529,250

 

 

155,350

 

MBIA Inc. 

 

2,894,171

 

 

 

 

 

 

55,757,986

 

**REAL ESTATE – (1.96%)**

 

 

 

 

631,861

 

Redwood Trust, Inc. 

 

21,634,906

 

**REINSURANCE – (2.53%)**

 

 

 

 

55,690

 

Everest Re Group, Ltd. 

 

5,591,276

 

 

153,110

 

RenaissanceRe Holdings Ltd. 

 

9,223,346

 

 

179,545

 

Transatlantic Holdings, Inc. 

 

13,047,535

 

 

 

 

 

 

27,862,157

 

**RETAILING – (8.59%)**

 

 

 

 

206,050

 

Bed Bath & Beyond Inc.*

 

6,056,840

 

 

1,123,800

 

CarMax, Inc.*

 

22,195,050

 

 

196,000

 

Home Depot, Inc.

 

5,280,240

 

 

339,670

 

Lowe’s Cos, Inc. 

 

7,683,335

 

 

1,840,830

 

Netflix Inc.*

 

49,021,303

 

 

89,970

 

Target Corp. 

 

4,498,500

 

 

 

 

 

 

94,735,268

 

**SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT – (2.67%)**

 

 

 

 

882,980

 

Texas Instruments Inc. 

 

29,491,532

 

**SOFTWARE & SERVICES – (9.45%)**

 

 

 

 

1,330,752

 

Convera Corp., Class A*

 

3,619,645

 

 

48,410

 

Fiserv, Inc.*

 

2,687,239

 

 

62,730

 

Google Inc., Class A*

 

43,372,463

 

 

401,800

 

Iron Mountain Inc.*

 

14,874,636

 

 

1,036,000

 

Microsoft Corp. 

 

36,876,420

 

 

116,550

 

Western Union Co. 

 

2,829,834

 

 

 

 

 

 

104,260,237

 

**TECHNOLOGY HARDWARE & EQUIPMENT – (4.97%)**

 

 

 

 

693,000

 

Agilent Technologies, Inc.*

 

25,460,820

 

 

873,730

 

Dell Inc.*

 

21,428,228

 

 

101,210

 

Molex Inc., Class A

 

2,654,738

 

 

143,057

 

Tyco Electronics Ltd. 

 

5,311,706

 

 

 

 

 

 

54,855,492

 

 

47

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS OPPORTUNITY FUND – (Continued)**

 

 

 

**Value**

 

**Shares/Principal**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**TELECOMMUNICATION SERVICES – (2.40%)**

 

 

 

 

190,110

 

American Tower Corp., Class A*

$

8,098,686

 

 

247,170

 

SK Telecom Co., Ltd., ADR (South Korea)

 

7,375,553

 

 

840,720

 

Sprint Nextel Corp. 

 

11,038,654

 

 

 

 

 

 

26,512,893

 

 

 

 

 

Total Common Stock – (identified cost $921,945,289)

 

1,096,811,811

 

 

**CONVERTIBLE BONDS – (0.58%)**

 

**TELECOMMUNICATION SERVICES – (0.58%)**

 

 

 

$

5,600,000

 

Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11

 

 

 

 

 

 

(identified cost $5,600,000)

 

6,377,000

 

 

 

 

 

Total Investments – (100.02%) – (identified cost $927,545,289) – (a)

 

1,103,188,811

 

 

 

 

Liabilities Less Other Assets – (0.02%)

 

(216,736

)

 

 

 

Net Assets – (100.00%)

$

1,102,972,075

 

 

*Non-Income Producing Security.

 

ADR:  American Depositary Receipt

 

(a)     Aggregate cost for Federal Income Tax purposes is $938,090,050. At December 31, 2007, unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

 

Unrealized appreciation

$

259,249,209

 

 

 

 

Unrealized depreciation

 

(94,150,448

)

 

 

 

Net unrealized appreciation

$

165,098,761

 

 

(b)

Illiquid security – See Note 9 of the Notes to Financial Statements.

 

 

 

***See Notes to Financial Statements***

 

48

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS GOVERNMENT BOND FUND**

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**MORTGAGES – (62.04%)**

 
 

 

 

 

**COLLATERALIZED MORTGAGE OBLIGATIONS – (12.93%)**

 

 

 

$

1,105,743

 

Fannie Mae, 4.10%, 01/25/10

$

1,092,637

 

 

2,938,669

 

Fannie Mae, 4.00%, 11/25/16

 

2,905,142

 

 

1,577,054

 

Freddie Mac, 5.00%, 08/15/14

 

1,579,486

 

 

1,243,410

 

Freddie Mac, 5.00%, 08/15/16

 

1,250,929

 

 

 

 

 

 

6,828,194

 

**FANNIE MAE POOLS – (29.93%)**

 

 

 

 

394,095

 

6.12%, 10/01/08 Pool No. 380999

 

394,664

 

 

4,094,259

 

6.00%, 09/01/17 Pool No. 665776

 

4,231,033

 

 

2,567,514

 

4.50%, 06/01/18 Pool No. 727579

 

2,559,464

 

 

2,586,703

 

4.50%, 10/01/18 Pool No. 740825

 

2,570,024

 

 

824,099

 

4.50%, 04/01/19 Pool No. 773538

 

818,786

 

 

200,720

 

6.50%, 07/01/32 Pool No. 635069

 

207,500

 

 

256,837

 

5.064%, 01/01/33 Pool No. 681153 (b)

 

259,182

 

 

1,343,149

 

4.696%, 05/01/35 Pool No. 826242 (b)

 

1,331,671

 

 

1,455,634

 

5.065%, 01/01/36 Pool No. 848973 (b)

 

1,457,341

 

 

405,145

 

5.584%, 03/01/36 Pool No. 843396 (b)

 

403,731

 

 

1,539,901

 

5.624%, 04/01/36 Pool No. 851605 (b)

 

1,564,225

 

 

 

 

 

 

15,797,621

 

**FREDDIE MAC POOLS – (17.87%)**

 

 

 

 

126,438

 

4.00%, 07/01/08 Pool No. M90826

 

126,137

 

 

1,028,085

 

3.50%, 08/01/08 Pool No. M90830

 

1,019,411

 

 

718,595

 

3.00%, 10/01/10 Pool No. M91001

 

685,807

 

 

1,233,893

 

3.50%, 02/01/11 Pool No. M80909

 

1,191,475

 

 

880,979

 

3.50%, 04/01/12 Pool No. M80974

 

857,055

 

 

1,435,414

 

4.00%, 12/01/12 Pool No. M81008

 

1,412,134

 

 

2,328,211

 

5.00%, 08/01/20 Pool No. B19690

 

2,339,925

 

 

1,824,548

 

4.732%, 04/01/35 Pool No. 782528 (b)

 

1,803,214

 

 

 

 

 

 

9,435,158

 

**GINNIE MAE POOLS – (1.31%)**

 

 

 

 

714,598

 

4.00%, 08/20/20 Pool No. 003811

 

688,775

 

 

 

 

 

 

 

 

 

 

 

Total Mortgages – (identified cost $32,413,593)

 

32,749,748

 

 

**GOVERNMENT AGENCY NOTES – (27.16%)**

 

 

 

 

250,000

 

Fannie Mae, 4.00%, 04/01/08

 

249,626

 

 

2,000,000

 

Fannie Mae, 6.00%, 05/15/08

 

2,012,258

 

 

200,000

 

Fannie Mae, 4.50%, 12/02/11

 

200,012

 

 

515,000

 

Federal Farm Credit Bank, 3.41%, 06/24/10

 

508,523

 

 

49

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS GOVERNMENT BOND FUND – (Continued)**

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**GOVERNMENT AGENCY NOTES – (Continued)**

 

 

 

$

1,000,000

 

Federal Home Loan Bank, 4.00%, 06/13/08

$

998,660

 

 

5,000,000

 

Federal Home Loan Bank, 0.28562%, 07/17/08 (b)

 

4,906,271

 

 

1,000,000

 

Federal Home Loan Bank, 4.00%, 08/28/08

 

999,111

 

 

500,000

 

Federal Home Loan Bank, 3.75%, 10/21/08

 

498,364

 

 

600,000

 

Federal Home Loan Bank, 3.785%, 11/21/08

 

598,076

 

 

200,000

 

Federal Home Loan Bank, 3.35%, 12/26/08

 

198,557

 

 

500,000

 

Federal Home Loan Bank, 4.30%, 08/10/09

 

500,011

 

 

1,000,000

 

Federal Home Loan Bank, 4.875%, 03/12/10

 

1,025,963

 

 

300,000

 

Federal Home Loan Bank, 4.00%, 12/30/10

 

298,406

 

 

300,000

 

Federal Home Loan Bank, 5.37%, 07/12/11

 

300,056

 

 

230,000

 

Freddie Mac, 3.00%, 06/30/09

 

226,860

 

 

320,000

 

Freddie Mac, 4.50%, 09/17/09 (c)

 

320,021

 

 

500,000

 

Freddie Mac, 4.00%, 09/17/12 (c)

 

499,988

 

 

 

 

 

 

 

 

 

 

 

Total Government Agency Notes – (identified cost $14,211,027)

 

14,340,763

 

 

**SHORT TERM INVESTMENTS – (9.46%)**

 

 

 

 

 

 

 

 

1,829,000

 

ABN AMRO Inc. Joint Repurchase Agreement, 4.70%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $1,829,478

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages and obligations

 

 

 

 

 

 

in a pooled cash account, 4.125%-7.00%, 02/15/08-05/01/37,

 

 

 

 

 

 

total market value $1,865,580)

 

1,829,000

 

 

1,585,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 4.50%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $1,585,396

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgage in a pooled

 

 

 

 

 

 

cash account, 5.00%, 08/01/33, total market value $1,616,700)

 

1,585,000

 

 

488,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 4.75%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $488,129

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages in a 

 

 

 

 

 

 

pooled cash account, 4.00%-9.50%, 12/01/14-12/01/37,

 

 

 

 

 

 

total market value $497,760)

 

488,000

 

 

1,091,000

 

UBS Securities LLC Joint Repurchase Agreement, 4.64%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $1,091,281

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages in a

 

 

 

 

 

 

pooled cash account, 5.00%-8.00%, 07/01/08-11/01/47,

 

 

 

 

 

 

total market value $1,112,820)

 

1,091,000

 

 

 

 

 

 

 

 

 

 

 

Total Short Term Investments – (identified cost $4,993,000)

 

4,993,000

 

 

 

 

 

 

 

 

 

50

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS GOVERNMENT BOND FUND – (Continued)**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments – (98.66%) – (identified cost $51,617,620) – (a)

$

52,083,511

 

 

 

 

Other Assets Less Liabilities – (1.34%)

 

705,582

 

 

 

 

Net Assets – (100.00%)

$

52,789,093

 

 

(a)  Aggregate cost for Federal Income Tax purposes is $51,617,620. At December 31, 2007 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

 

Unrealized appreciation

$

533,755

 

 

 

 

Unrealized depreciation

 

(67,864

)

 

 

 

Net unrealized appreciation

$

465,891

 

 

(b)  The interest rates on adjustable rate securities, shown as of December 31, 2007, may change daily or less frequently and are based on indices of market interest rates.

(c)  Represents a step-up bond: a bond that pays one coupon rate for an initial period followed by a higher coupon rate. Step-up bonds reflect the current effective yield on the security.

 

 

 

 

 

 

 

 

 

 

 

***See Notes to Financial Statements***

 

51

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 

**DAVIS GOVERNMENT MONEY MARKET FUND**

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**FANNIE MAE – (16.40%)**

 
$

20,000,000

 

4.625%, 01/15/08

$

19,995,484

 

 

2,100,000

 

3.80%, 01/18/08

 

2,099,286

 

 

1,450,000

 

4.00%, 01/28/08

 

1,449,478

 

 

3,000,000

 

4.30%, 01/28/08

 

2,997,764

 

 

10,000,000

 

5.75%, 02/15/08

 

10,015,992

 

 

3,000,000

 

3.86%, 02/22/08

 

2,994,823

 

 

4,000,000

 

4.00%, 02/22/08

 

3,994,389

 

 

750,000

 

5.10%, 02/22/08

 

749,726

 

 

175,000

 

4.50%, 02/27/08

 

174,800

 

 

724,000

 

5.00%, 02/27/08

 

723,636

 

 

2,000,000

 

4.00%, 03/03/08

 

1,998,970

 

 

2,825,000

 

4.00%, 03/25/08

 

2,821,529

 

 

2,257,000

 

4.00%, 04/15/08

 

2,253,454

 

 

1,448,000

 

4.50%, 04/22/08

 

1,447,946

 

 

2,000,000

 

2.875%, 05/19/08

 

1,987,672

 

 

12,500,000

 

4.00%, 05/20/08

 

12,444,402

 

 

4,100,000

 

3.25%, 06/04/08

 

4,064,488

 

 

2,000,000

 

3.01%, 06/09/08

 

1,985,970

 

 

2,000,000

 

3.80%, 06/30/08

 

1,995,274

 

 

14,000,000

 

5.00%, 07/25/08

 

14,059,303

 

 

2,000,000

 

4.00%, 07/28/08

 

1,996,168

 

 

3,000,000

 

4.00%, 08/08/08

 

2,995,267

 

 

880,000

 

3.25%, 08/15/08

 

873,564

 

 

1,675,000

 

5.00%, 09/15/08

 

1,683,242

 

 

 

 

Total Fannie Mae – (identified cost $97,802,627)

 

97,802,627

 

 

**FEDERAL FARM CREDIT BANK – (0.40%)**

 

 

 

 

 

 

 

1,000,000

 

4.03%, 06/30/08

 

994,903

 

 

1,415,000

 

3.92%, 10/27/08

 

1,402,614

 

 

 

 

Total Federal Farm Credit Bank – (identified cost $2,397,517)

 

2,397,517

 

 

 

 

 

 

 

 

**FEDERAL HOME LOAN BANK – (31.64%)**

 
 

1,325,000

 

3.07%, 01/15/08

 

1,323,905

 

 

6,000,000

 

3.50%, 01/22/08

 

5,994,110

 

 

1,700,000

 

4.50%, 01/23/08

 

1,699,949

 

 

21,000,000

 

3.583%, 01/24/08 (c)

 

21,000,000

 

 

500,000

 

3.42%, 01/28/08

 

499,505

 

 

500,000

 

3.10%, 01/29/08

 

499,189

 

 

500,000

 

2.86%, 01/30/08

 

499,044

 

 

9,000,000

 

5.25%, 02/01/08

 

8,999,984

 

 

19,600,000

 

4.26%, 02/06/08 (b)

 

19,516,504

 

 

2,000,000

 

4.75%, 02/08/08

 

2,000,301

 

 

 

52

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007

**DAVIS GOVERNMENT MONEY MARKET FUND – (Continued)**

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**FEDERAL HOME LOAN BANK – (Continued)**

 
$

500,000

 

5.25%, 02/13/08

$

499,944

 

 

7,000,000

 

4.47%, 02/15/08

 

6,993,827

 

 

880,000

 

5.10%, 03/06/08

 

879,700

 

 

5,730,000

 

4.00%, 03/10/08

 

5,722,920

 

 

455,000

 

6.02%, 03/17/08

 

455,717

 

 

500,000

 

3.53%, 03/20/08

 

498,090

 

 

2,395,000

 

4.25%, 03/24/08

 

2,392,411

 

 

1,000,000

 

4.23%, 03/28/08

 

999,698

 

 

2,000,000

 

3.00%, 04/01/08

 

1,991,859

 

 

8,000,000

 

3.40%, 04/08/08

 

7,961,792

 

 

1,000,000

 

4.27%, 04/11/08

 

997,139

 

 

2,000,000

 

4.00%, 04/18/08

 

1,998,124

 

 

670,000

 

4.125%, 04/18/08

 

667,879

 

 

1,500,000

 

4.44%, 04/21/08

 

1,500,458

 

 

13,000,000

 

4.32%, 04/23/08

 

12,995,071

 

 

1,000,000

 

4.10%, 05/19/08

 

995,390

 

 

1,130,000

 

4.30%, 05/21/08

 

1,129,888

 

 

2,000,000

 

5.00%, 06/10/08

 

2,005,906

 

 

1,000,000

 

3.75%, 06/16/08

 

993,183

 

 

870,000

 

4.00%, 06/16/08

 

866,831

 

 

490,000

 

5.125%, 06/18/08

 

490,890

 

 

1,000,000

 

4.04%, 07/14/08

 

994,613

 

 

5,025,000

 

2.625%, 07/15/08

 

4,981,911

 

 

810,000

 

4.25%, 07/16/08

 

806,445

 

 

8,515,000

 

5.125%, 07/16/08

 

8,553,641

 

 

500,000

 

3.10%, 07/22/08

 

494,680

 

 

1,000,000

 

3.32%, 07/28/08

 

990,085

 

 

1,200,000

 

5.00%, 07/30/08

 

1,198,163

 

 

5,000,000

 

5.125%, 07/30/08

 

5,010,514

 

 

5,000,000

 

3.70%, 08/14/08

 

4,958,937

 

 

13,000,000

 

5.25%, 08/14/08

 

13,079,829

 

 

13,000,000

 

4.08%, 08/18/08

 

12,921,346

 

 

500,000

 

4.00%, 09/29/08

 

496,692

 

 

571,429

 

4.57%, 10/17/08

 

570,555

 

 

4,600,000

 

4.125%, 11/17/08

 

4,591,972

 

 

1,000,000

 

3.83%, 11/28/08

 

993,552

 

 

5,000,000

 

4.83188%, 12/01/08 (c)

 

5,000,000

 

 

1,000,000

 

4.00%, 12/03/08

 

998,404

 

 

6,000,000

 

4.50%, 12/26/08 (d)

 

6,000,000

 

 

1,000,000

 

3.125%, 12/30/08

 

989,976

 

 

 

 

 

 

 

 

 

 

 

Total Federal Home Loan Bank – (identified cost $188,700,523)

 

188,700,523

 

 

 

53

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007

**DAVIS GOVERNMENT MONEY MARKET FUND – (Continued)**

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**FREDDIE MAC – (5.47%)**

 
 

$

5,000,000

 

2.85%, 01/09/08

$

4,997,432

 

 

2,220,000

 

3.00%, 01/23/08

 

2,217,988

 

 

800,000

 

3.875%, 02/12/08

 

798,639

 

 

1,200,000

 

3.50%, 02/13/08

 

1,197,520

 

 

500,000

 

4.50%, 02/15/08

 

499,495

 

 

905,000

 

4.625%, 02/21/08

 

904,129

 

 

1,000,000

 

4.875%, 02/22/08

 

1,000,017

 

 

1,000,000

 

3.25%, 02/25/08

 

997,055

 

 

4,250,000

 

3.40%, 02/25/08

 

4,239,403

 

 

2,000,000

 

2.75%, 03/15/08

 

1,991,727

 

 

480,000

 

4.00%, 03/28/08

 

478,520

 

 

1,000,000

 

3.125%, 04/04/08

 

995,859

 

 

625,000

 

5.75%, 04/15/08

 

625,895

 

 

2,000,000

 

3.50%, 04/28/08

 

1,993,972

 

 

3,750,000

 

3.75%, 05/12/08

 

3,730,980

 

 

500,000

 

3.25%, 05/14/08

 

496,309

 

 

700,000

 

3.00%, 05/15/08

 

694,565

 

 

500,000

 

2.70%, 06/25/08

 

495,330

 

 

700,000

 

3.08%, 07/09/08

 

692,119

 

 

3,600,000

 

3.15%, 12/30/08

 

3,564,623

 

 

 

 

 

 

 

 

 

 

 

Total Freddie Mac – (identified cost $32,611,577)

 

32,611,577

 

 

**FREDDIE MAC MORTGAGE POOL – (2.90%)**

 
 

319,389

 

3.50%, 03/01/08 Pool No. M90813

 

318,437

 

 

2,481,650

 

4.00%, 03/01/08 Pool No. M90802

 

2,476,582

 

 

1,590,738

 

4.50%, 03/01/08 Pool No. M90803

 

1,588,728

 

 

2,266,492

 

3.50%, 04/01/08 Pool No. M90820

 

2,257,842

 

 

2,114,818

 

4.00%, 04/01/08 Pool No. M90808

 

2,108,963

 

 

474,035

 

4.00%, 05/01/08 Pool No. M90814

 

471,919

 

 

463,041

 

4.50%, 05/01/08 Pool No. M90815

 

462,177

 

 

1,265,207

 

3.50%, 06/01/08 Pool No. M90825

 

1,255,673

 

 

2,027,574

 

4.00%, 06/01/08 Pool No. M90818

 

2,019,525

 

 

4,349,464

 

4.00%, 07/01/08 Pool No. M90826

 

4,328,767

 

 

 

 

 

 

 

 

 

 

 

Total Freddie Mac Mortgage Pools –  

 

 

 

 

 

 

(identified cost $17,288,613)

 

17,288,613

 

 

**PRIVATE EXPORT FUNDING – (0.13%)**

 

800,000

 

3.40%, 02/15/08 –  (identified cost $798,134)

 

798,134

 

 

 

 

 

 

 

 

 

 

54

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007

**DAVIS GOVERNMENT MONEY MARKET FUND – (Continued)**

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**REPURCHASE AGREEMENTS – (35.79%)**

 
 

$

78,191,000

 

ABN AMRO Inc. Joint Repurchase Agreement, 4.70%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $78,211,417

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages and obligations 

 

 

 

 

 

 

in a pooled cash account, 4.125%-7.00%, 02/15/08-05/01/37,

 

 

 

 

 

 

total market value $79,754,820)

$

78,191,000

 

 

67,766,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 4.50%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $67,782,942

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgage in a 

 

 

 

 

 

 

pooled cash account, 5.00%, 08/01/33, total market value $69,121,320)

 

67,766,000

 

 

20,851,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 4.75%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $20,856,502

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages in a

 

 

 

 

 

 

pooled cash account, 4.00%-9.50%, 12/01/14-12/01/37,

 

 

 

 

 

 

total market value $21,268,020)

 

20,851,000

 

 

46,701,000

 

UBS Securities LLC Joint Repurchase Agreement, 4.64%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $46,713,038

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages in a

 

 

 

 

 

 

pooled cash account, 5.00%-8.00%, 07/01/08-11/01/47, 

 

 

 

 

 

 

total market value $47,635,020)

 

46,701,000

 

 

 

 

 

 

 

 

 

 

 

Total Repurchase Agreements – (identified cost $213,509,000)

 

213,509,000

 

 

 

 

 

Total Investments – (92.73 %) – (identified cost $553,107,991) – (a)

 

553,107,991

 

 

 

 

Other Assets Less Liabilities – (7.27%)

 

43,338,016

 

 

 

 

Net Assets – (100.00%)

$

596,446,007

 

(a)

Aggregate cost for Federal Income Tax Purposes is $553,107,991.

(b)

Zero coupon bonds reflect effective yield on the date of purchase.  

(c)  The interest rates on floating rate securities, shown as of December 31, 2007, may change daily or less frequently and are based on indices of market interest rates. For purposes of amortized cost valuation, the maturity dates of these securities are considered to be the effective maturities, based on the reset dates of the securities’ variable rates.

(d)  Represents a step-up bond: a bond that pays one coupon rate for an initial period followed by a higher coupon rate.  Step-up bonds reflect the current effective yield on the security.

 

***See Notes to Financial Statements***

 

55

 

**DAVIS SERIES, INC.**  

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007

**DAVIS FINANCIAL FUND**

 

 

 

**Value**

 

**Shares**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (99.55%)**

 
 

**CAPITAL MARKETS – (13.20%)**

 

 

 

 

393,500

 

Ameriprise Financial, Inc. 

$

21,685,785

 

 

1,020,000

 

Bank of New York Mellon Corp. 

 

49,735,200

 

 

833,400

 

Merrill Lynch & Co., Inc., Private Placement (c)(d)

 

38,921,113

 

 

13,900

 

RHJ International* (Belgium) 

 

227,612

 

 

396,550

 

RHJ International, 144A* (Belgium) (b)(d)

 

6,493,506

 

 

 

 

 

 

117,063,216

 

**COMMERCIAL BANKS – (6.66%)**

 

 

 

 

140,100

 

Commerce Bancorp, Inc. 

 

5,343,414

 

 

75,700

 

ICICI Bank Ltd., ADR (India)

 

4,655,550

 

 

402,350

 

State Bank of India, GDR (India)

 

49,086,700

 

 

 

 

 

 

59,085,664

 

**COMMERCIAL SERVICES & SUPPLIES – (7.10%)**

 

 

 

 

710,650

 

D&B Corp. 

 

62,984,909

 

**CONSUMER FINANCE – (13.77%)**

 

 

 

 

1,949,000

 

American Express Co. 

 

101,386,980

 

 

1,351,000

 

First Marblehead Corp. 

 

20,670,300

 

 

 

 

 

 

122,057,280

 

**CONSUMER SERVICES – (1.66%)**

 

 

 

 

791,000

 

H&R Block, Inc. 

 

14,688,870

 

**DIVERSIFIED FINANCIAL SERVICES – (8.81%)**

 

 

 

 

1,019,560

 

JPMorgan Chase & Co. 

 

44,503,794

 

 

872,600

 

Moody’s Corp. 

 

31,151,820

 

 

76,000

 

Oaktree Capital Group LLC, Class A (c)

 

2,489,000

 

 

 

78,144,614

 

**ENERGY – (5.10%)**

 

 

 

 

618,700

 

Canadian Natural Resources Ltd. (Canada)

 

45,251,718

 

**LIFE & HEALTH INSURANCE – (2.89%)**

 

 

 

 

334,733

 

China Life Insurance Co., Ltd., ADR (China)

 

25,607,074

 

**MATERIALS – (2.40%)**

 

 

 

 

918,000

 

Sealed Air Corp. 

 

21,242,520

 

**MULTI-LINE INSURANCE – (13.79%)**

 

 

 

 

826,796

 

American International Group, Inc. 

 

48,202,207

 

 

1,470,600

 

Loews Corp. 

 

74,030,004

 

 

 

 

 

 

122,232,211

 

 

56

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 

**DAVIS FINANCIAL FUND – (Continued)**

 

 

 

**Value**

 

**Shares**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**PROPERTY & CASUALTY INSURANCE – (10.19%)**

 

 

 

 

169,800

 

Ambac Financial Group, Inc. 

$

4,375,746

 

 

337,300

 

FPIC Insurance Group, Inc.*

 

14,485,349

 

 

88,200

 

Markel Corp.*

 

43,315,020

 

 

234,000

 

MBIA Inc. 

 

4,359,420

 

 

1,244,000

 

Progressive Corp. (Ohio)

 

23,835,040

 

 

 

 

 

 

90,370,575

 

**REINSURANCE – (13.98%)**

 

 

 

 

225,000

 

Everest Re Group, Ltd. 

 

22,590,000

 

 

1,394,187

 

Transatlantic Holdings, Inc. 

 

101,315,570

 

 

 

 

 

 

123,905,570

 

 

 

 

 

 

 

 

 

 

 

Total Common Stock – (identified cost $503,233,207)

 

882,634,221

 

 

 

 

 

 

Total Investments – (99.55%) – (identified cost $503,233,207) – (a)

 

882,634,221

 

 

 

 

Other Assets Less Liabilities – (0.45%)

 

4,002,743

 

 

 

 

Net Assets – (100.00%)

$

886,636,964

 

*Non-Income Producing Security.

ADR: American Depositary Receipt

GDR: Global Depositary Receipt

(a)  Aggregate cost for Federal Income Tax purposes is $503,233,207.  At December 31, 2007 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

Unrealized appreciation

$

394,820,202

 

 

 

 

Unrealized depreciation

 

(15,419,188

)

 

 

 

Net unrealized appreciation

$

379,401,014

 

 

(b)  These securities are subject to Rule 144A.  The Board of Directors of the Fund has determined that there is sufficient liquidity in these securities to realize current valuations.  These securities amounted to $6,493,506 or 0.73% of the Fund’s net assets, as of December 31, 2007.

 

(c)  Illiquid Security – See Note 9 of the Notes to Financial Statements.

 

(d)  Restricted Security – See Note 9 of the Notes to Financial Statements.

 

***See Notes to Financial Statements***

 

57

 

**DAVIS SERIES, INC.**  

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007

**DAVIS APPRECIATION & INCOME FUND**

 

 

**Value**

 

**Shares/Principal**

**Security**

**(Note 1**

**)**

**CONVERTIBLE PREFERRED STOCK – (2.54%)**

 
 

**CAPITAL GOODS – (0.52%)**

 

 

 

 

109,741

 

United Rentals Trust I, 6.50%, 08/01/28, Conv. Pfd. 

$

4,636,557

 

**TRANSPORTATION – (0.59%)**

 

 

 

 

161,300

 

Continental Airlines Finance Trust II, 6.00%, 11/15/30, Cum. Conv. Pfd. 

 

5,222,087

 

**UTILITIES – (1.43%)**

 

 

 

 

271,310

 

AES Trust III, 6.75%, 10/15/29, Conv. Pfd. 

 

12,629,481

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Preferred Stock –

 

 

 

 

 

 

(identified cost $18,314,926)

 

22,488,125

 

 

**CONVERTIBLE BONDS – (41.55%)**

 

**CAPITAL GOODS – (2.72%)**

 

 

 

$

8,500,000

 

Quanta Services, Inc., Conv. Sub. Deb., 4.50%, 10/01/23

 

20,336,250

 

 

3,720,000

 

United Rentals North America Inc., Conv. Sr. Sub., 1.875%, 10/15/23

 

3,747,900

 

 

 

 

 

 

24,084,150

 

**COMMERCIAL SERVICES & SUPPLIES – (4.70%)**

 

 

 

 

22,101,000

 

School Specialty, Inc., Conv. Sub. Notes, 3.75%/Zero Cpn., 08/01/23 (e)

 

22,266,758

 

 

8,500,000

 

School Specialty, Inc., Conv. Sub. Deb., 3.75%, 11/30/26

 

8,234,375

 

 

10,000,000

 

Waste Connections, Inc., Conv. Sr. Notes, 3.75%, 04/01/26

 

11,162,500

 

 

 

 

 

 

41,663,633

 

**ENERGY – (7.36%)**

 

 

 

 

12,400,000

 

Lehman Brothers Holdings Inc., Conv. Notes (Convertible into

 

 

 

 

 

 

Devon Energy Corp.), 0.25%, 08/23/11 (f)

 

28,430,720

 

 

39,000,000

 

Nabors Industries, Inc., Conv. Sr. Notes, 0.94%, 05/15/11

 

36,855,000

 

 

 

 

 

 

65,285,720

 

**MATERIALS – (1.46%)**

 

 

 

 

13,500,000

 

Sealed Air Corp., Ser. 144A, Conv. Sr. Notes, 3.00%, 06/30/33 (b)

 

12,993,750

 

**MEDIA – (1.08%)**

 

 

 

 

16,050,000

 

News America Inc., Conv. Notes, Zero Cpn., 3.38%, 02/28/21 (c) (d)(f)

 

9,549,750

 

**PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES – (1.24%)**

 

 

 

 

8,000,000

 

Amgen Inc., Conv. Sr. Notes, 0.125%, 02/01/11

 

7,330,000

 

 

4,400,000

 

Valeant Pharmaceuticals International, Conv. Sub. Notes,

 

 

 

 

 

 

4.00%, 11/15/13

 

3,718,000

 

 

 

 

 

 

11,048,000

 

**REAL ESTATE – (13.59%)**

 

 

 

 

23,000,000

 

Forest City Enterprises, Inc., Class A, Conv. Sr. Notes, 3.625%, 10/15/11

 

21,624,600

 

 

21,000,000

 

General Growth Properties, Inc., Ser. 144A Conv. Sr. Notes, 

 

 

 

 

 

 

3.98%, 04/15/27 (b)

 

17,062,500

 

 

21,500,000

 

Host Hotels & Resorts Inc., Ser. 144A Conv. Sr. Notes, 

 

 

 

 

 

 

2.625%, 04/15/27 (b)

 

18,463,125

 

 

58

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 

**DAVIS APPRECIATION & INCOME FUND – (Continued)**

 

 

**Value**

 

**Principal**

**Security**

**(Note 1**

**)**

**CONVERTIBLE BONDS – (Continued)**

 
 

**REAL ESTATE – (Continued)**

 

 

 

$

2,000,000

 

ProLogis, Conv. Sr. Notes, 1.875%, 11/15/37

$

1,870,000

 

 

17,400,000

 

ProLogis, Ser. 144A Conv. Sr. Notes, 2.25%, 04/01/37 (b)

 

17,226,000

 

 

18,000,000

 

Reckson Operating Partnership, L.P., Conv. Sr. Notes

 

 

 

 

 

 

(Convertible into SL Green Realty Corp.), 4.00%, 06/15/25

 

17,145,000

 

 

24,000,000

 

Vornado Realty L.P., Conv. Sr. Deb., 3.875%, 4/15/25

 

27,090,000

 

 

 

 

 

 

120,481,225

 

**RETAILING – (2.34%)**

 

 

 

 

17,000,000

 

Amazon.com, Inc., Conv. Sub. Notes, 4.75%, 02/01/09

 

20,718,750

 

**SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT – (5.07%)**

 

 

 

 

5,000,000

 

Agere Systems Inc., Conv. Sub. Notes, 6.50%, 12/15/09

 

5,068,750

 

 

5,260,000

 

Fairchild Semiconductor Corp., Conv. Sr. Sub., 5.00%, 11/01/08

 

5,200,825

 

 

32,000,000

 

Intel Corp., Conv. Sub. Deb., 2.95%, 12/15/35

 

34,680,000

 

 

 

 

 

 

44,949,575

 

**TECHNOLOGY HARDWARE & EQUIPMENT – (1.99%)**

 

 

 

 

18,500,000

 

JDS Uniphase Corp., Conv. Sr. Notes, Zero Cpn., 

 

 

 

 

 

 

2.32%, 11/15/10 (c)(d)

 

17,667,500

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Bonds – (identified cost $346,288,124)

 

368,442,053

 

 

**CORPORATE BONDS – (7.25%)**

 

**CAPITAL GOODS – (1.34%)**

 

 

 

 

12,000,000

 

Masco Corp., 6.125%, 10/03/16

 

11,855,304

 

**ENERGY – (0.16%)**

 

 

 

 

1,300,000

 

Occidental Petroleum Corp., Sr. Notes, 6.75%, 01/15/12

 

1,407,529

 

**FOOD, BEVERAGE & TOBACCO – (2.44%)**

 

 

 

 

10,000,000

 

Coca-Cola Co., Sr. Notes, 5.35%, 11/15/17

 

10,264,990

 

 

11,000,000

 

Tyson Foods, Inc., Sr. Notes, 6.85%, 04/01/16

 

11,342,705

 

 

 

 

 

 

21,607,695

 

**HOUSEHOLD & PERSONAL PRODUCTS – (0.62%)**

 

 

 

 

6,000,000

 

Avon Products, Inc., Sr. Notes, 4.20%, 07/15/18

 

5,538,732

 

**REAL ESTATE – (1.34%)**

 

 

 

 

14,000,000

 

Thornburg Mortgage, Inc., Sr. Notes, 8.00%, 05/15/13

 

11,900,000

 

**RETAILING – (1.35%)**

 

 

 

 

1,900,000

 

AutoZone, Inc., Sr. Notes, 5.50%, 11/15/15

 

1,876,518

 

 

10,000,000

 

Kohl’s Corp., Sr. Notes, 6.25%, 12/15/17

 

10,065,870

 

 

 

 

 

 

11,942,388

 

 

 

 

 

 

 

 

 

 

 

Total Corporate Bonds  – (identified cost $63,627,823)

 

64,251,648

 

 

 

59

 

**DAVIS SERIES, INC.**  

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 

**DAVIS APPRECIATION & INCOME FUND – (Continued)**

 

 

**Value**

 

**Shares**

**Security**

**(Note 1**

**)**

 

 
**COMMON STOCK – (44.12%)**

 
 

**CAPITAL GOODS – (4.00%)**

 

 

 

 

432,000

 

General Electric Co. 

$

16,014,240

 

 

673,400

 

Masco Corp. 

 

14,552,174

 

 

47,700

 

Quanta Services, Inc.*

 

1,251,648

 

 

200,000

 

United Rentals, Inc.*

 

3,672,000

 

 

 

 

 

 

35,490,062

 

**CAPITAL MARKETS – (2.63%)**

 

 

 

 

500,000

 

Merrill Lynch & Co., Inc., Private Placement (f)(g)

 

23,350,800

 

**COMMERCIAL SERVICES & SUPPLIES – (1.80%)**

 

 

 

 

120,000

 

School Specialty, Inc.*

 

4,147,200

 

 

382,000

 

Waste Connections, Inc.*

 

11,803,800

 

 

 

 

 

 

15,951,000

 

**CONSUMER FINANCE – (1.67%)**

 

 

 

 

285,000

 

American Express Co. 

 

14,825,700

 

**DIVERSIFIED FINANCIAL SERVICES – (1.30%)**

 

 

 

 

391,500

 

Citigroup Inc. 

 

11,525,760

 

**ENERGY – (0.62%)**

 

 

 

 

120,000

 

Nabors Industries Ltd.*

 

3,286,800

 

 

29,000

 

Occidental Petroleum Corp. 

 

2,232,710

 

 

 

 

 

 

5,519,510

 

**FOOD & STAPLES RETAILING – (4.46%)**

 

 

 

 

128,485

 

Costco Wholesale Corp. 

 

8,969,538

 

 

750,000

 

Whole Foods Market, Inc. 

 

30,555,000

 

 

 

 

 

 

39,524,538

 

**FOOD, BEVERAGE & TOBACCO – (4.37%)**

 

 

 

 

340,000

 

Coca-Cola Co. 

 

20,865,800

 

 

1,167,300

 

Tyson Foods, Inc., Class A

 

17,894,709

 

 

 

 

 

 

38,760,509

 

**HEALTH CARE EQUIPMENT & SERVICES – (2.42%)**

 

 

 

 

418,600

 

Universal Health Services, Inc., Class B

 

21,432,320

 

**HOUSEHOLD & PERSONAL PRODUCTS – (2.53%)**

 

 

 

 

567,200

 

Avon Products, Inc. 

 

22,421,416

 

**MATERIALS – (1.36%)**

 

 

 

 

520,000

 

Sealed Air Corp

 

12,032,800

 

**MEDIA – (1.49%)**

 

 

 

 

525,000

 

News Corp., Class A

 

10,757,250

 

 

115,000

 

News Corp., Class B

 

2,443,750

 

 

 

 

 

 

13,201,000

 

 

 

60

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 

**DAVIS APPRECIATION & INCOME FUND – (Continued)**

 

 

**Value**

 

**Shares**

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**MULTI-LINE INSURANCE – (2.22%)**

 

 

 

 

337,400

 

American International Group, Inc. 

$

19,670,420

 

**PROPERTY & CASUALTY INSURANCE – (1.78%)**

 

 

 

 

612,300

 

Ambac Financial Group, Inc. 

 

15,778,971

 

**REAL ESTATE – (1.78%)**

 

 

 

 

165,000

 

Forest City Enterprises, Inc., Class A

 

7,332,600

 

 

205,000

 

General Growth Properties, Inc. 

 

8,441,900

 

 

 

 

 

 

15,774,500

 

**RETAILING – (5.35%)**

 

 

 

 

82,900

 

AutoZone, Inc.*

 

9,940,539

 

 

250,450

 

J. C. Penney Co., Inc. 

 

11,017,296

 

 

578,400

 

Kohl’s Corp.*

 

26,490,720

 

 

 

 

 

 

47,448,555

 

**SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT– (1.88%)**

 

 

 

 

457,900

 

Fairchild Semiconductor International, Inc.*

 

6,607,497

 

 

296,700

 

International Rectifier Corp.*

 

10,078,899

 

 

 

 

 

 

16,686,396

 

**SOFTWARE & SERVICES – (1.06%)**

 

 

 

 

183,000

 

SAP AG, ADR (Germany)

 

9,342,150

 

**UTILITIES – (1.40%)**

 

 

 

 

580,700

 

AES Corp.*

 

12,421,173

 

 

 

 

 

 

 

 

 

 

 

Total Common Stock – (identified cost $389,268,781)

 

391,157,580

 

 

61

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 

**DAVIS APPRECIATION & INCOME FUND – (Continued)**

 

 

**Value**

 

**Principal**

**Security**

**(Note 1**

**)**

**SHORT TERM INVESTMENTS – (4.16%)**

 
 

 

 

 

 

 

 

 

$

13,518,000

 

ABN AMRO Inc. Joint Repurchase Agreement, 4.70%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $13,521,530

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages and obligations

 

 

 

 

 

 

in a pooled cash account, 4.125%-7.00%, 02/15/08-05/01/37,

 

 

 

 

 

 

total market value $13,788,360) 

$

13,518,000

 

 

11,716,000

 

Bank of America. Joint Repurchase Agreement, 4.50%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $11,718,929

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgage in a pooled

 

 

 

 

 

 

cash account, 5.00%, 08/01/33, total market value $11,950,320)

 

11,716,000

 

 

3,605,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 4.75%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $3,605,951

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages in a 

 

 

 

 

 

 

pooled cash account, 4.00%-9.50%, 12/01/14-12/01/37,

 

 

 

 

 

 

total market value $3,677,100) 

 

3,605,000

 

 

8,073,000

 

UBS Securities LLC Joint Repurchase Agreement, 4.64%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $8,075,081

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages

 

 

 

 

 

 

in a pooled cash account, 5.00%-8.00%, 07/01/08-11/01/47,

 

 

 

 

 

 

total market value $8,234,460)

 

8,073,000

 

 

 

 

 

 

 

 

 

 

 

 

Total Short Term Investments – (identified cost $36,912,000)

 

36,912,000

 

 

 

 

 

Total Investments – (99.62%) – (identified cost $854,411,654) – (a)

 

883,251,406

 

 

 

 

Other Assets Less Liabilities – (0.38%)

 

3,359,777

 

 

 

 

Net Assets – (100.00%)

$

886,611,183

 

*Non-Income Producing Security.

ADR:  American Depositary Receipt

 

62

 

**DAVIS SERIES, INC.**  

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 

**DAVIS APPRECIATION & INCOME FUND – (Continued)**

 

 

 

 

 

 

 

 

 

 
(a)        Aggregate cost for Federal Income Tax purposes is $854,557,714.  At December 31, 2007 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

Unrealized appreciation

$

70,222,169

 

 

 

 

Unrealized depreciation

 

(41,528,477

)

 

 

 

Net unrealized appreciation

$

28,693,692

 

 

(b)  These securities are subject to Rule 144A.  The Board of Directors of the Fund has determined that there is sufficient liquidity in these securities to realize current valuations.  These securities amounted to $65,745,375 or7.42% of the Fund’s net assets, as of December 31, 2007.

(c)  As of December 31, 2007 zero coupon bonds represented $27,217,250 or 3.07% of the Fund’s net assets. Because zero coupon bonds pay no interest their value is generally more volatile than the value of other debt securities.

(d)  Zero coupon bonds reflect effective yield on the date of purchase.

(e)  Represents a step-down bond: a bond that pays one coupon rate for an initial period followed by a lower coupon rate.

(f)  Illiquid Security – See Note 9 of the Notes to Financial Statements.

(g)  Restricted Security – See Note 9 of the Notes to Financial Statements.

 

***See Notes to Financial Statements***

 

63

 

**DAVIS SERIES, INC.**  

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS REAL ESTATE FUND**

 

 

**Value**

 

**Shares**

**Security**

**(Note 1**

**)**

**COMMON STOCK – (90.62%)**

 
 

**CAPITAL GOODS – (2.75%)**

 

 

 

 

458,000

 

General Electric Co. 

$

16,978,060

 

**DIVERSIFIED REITS – (6.03%)**

 

 

 

 

1,127,800

 

Cousins Properties, Inc. 

 

24,924,380

 

 

139,500

 

Vornado Realty Trust

 

12,269,025

 

 

 

 

 

 

37,193,405

 

**HOMEBUILDING – (0.04%)**

 

 

 

 

12,600

 

Toll Brothers, Inc.*

 

252,756

 

**INDUSTRIAL REITS – (6.50%)**

 

 

 

 

232,000

 

AMB Property Corp. 

 

13,353,920

 

 

967,500

 

Brixton PLC (United Kingdom)

 

5,676,608

 

 

1,291,200

 

DCT Industrial Trust Inc. 

 

12,021,072

 

 

524,500

 

First Potomac Realty Trust

 

9,068,605

 

 

 

 

 

 

40,120,205

 

**MORTGAGE REITS – (0.32%)**

 

 

 

 

80,300

 

Gramercy Capital Corp. 

 

1,952,093

 

**OFFICE REITS – (26.19%)**

 

 

 

 

462,513

 

Alexandria Real Estate Equities, Inc. 

 

47,023,697

 

 

306,242

 

Boston Properties, Inc. 

 

28,116,078

 

 

729,238

 

Corporate Office Properties Trust

 

22,970,997

 

 

849,419

 

Derwent London PLC (United Kingdom)

 

23,908,673

 

 

719,100

 

Digital Realty Trust, Inc. 

 

27,591,867

 

 

128,358

 

SL Green Realty Corp. 

 

11,996,339

 

 

 

 

 

 

161,607,651

 

**PROPERTY & CASUALTY INSURANCE – (2.37%)**

 

 

 

 

567,300

 

Ambac Financial Group, Inc. 

 

14,619,321

 

**REAL ESTATE MANAGEMENT & DEVELOPMENT – (9.42%)**

 

 

 

 

1,099,784

 

Forest City Enterprises, Inc., Class A

 

48,874,401

 

 

1,120,000

 

Minerva PLC* (United Kingdom)

 

2,998,640

 

 

288,000

 

Mitsui Fudosan Co., Ltd. (Japan)

 

6,264,512

 

 

 

 

 

 

58,137,553

 

**RESIDENTIAL REITS – (8.15%)**

 

 

 

 

604,800

 

American Campus Communities, Inc. 

 

16,238,880

 

 

156,400

 

AvalonBay Communities, Inc. 

 

14,723,496

 

 

198,100

 

Essex Property Trust, Inc. 

 

19,312,769

 

 

 

 

 

 

50,275,145

 

 

64

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS REAL ESTATE FUND – (Continued)**

 

 

**Value**

 

**Shares/Principal**

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**RETAIL REITS – (13.34%)**

 

 

 

 

197,257

 

General Growth Properties, Inc. 

$

8,123,043

 

 

784,318

 

Kimco Realty Corp. 

 

28,549,175

 

 

387,978

 

Regency Centers Corp. 

 

25,020,701

 

 

419,600

 

Taubman Centers, Inc. 

 

20,640,124

 

 

 

 

 

 

82,333,043

 

**SPECIALIZED REITS – (7.82%)**

 

 

 

 

1,067,200

 

Ventas, Inc. 

 

48,290,800

 

**TRANSPORTATION – (7.69%)**

 

 

 

 

455,500

 

Alexander & Baldwin, Inc. 

 

23,508,355

 

 

288,000

 

Burlington Northern Santa Fe Corp. 

 

23,970,240

 

 

 

 

 

 

47,478,595

 

 

 

 

 

 

 

 

 

 

 

Total Common Stock – (identified cost $508,959,673)

 

559,238,627

 

 

**PREFERRED STOCK – (0.29%)**

 

**RESIDENTIAL REITS – (0.29%)**

 

 

 

 

43,700

 

Equity Residential, 7.00%, Series E, Cum. Conv. Pfd. 

 

 

 

 

 

 

(identified cost $1,079,517)

 

1,812,348

 

 

**CONVERTIBLE BONDS – (5.92%)**

 

 

 

 

 

 

 

**INDUSTRIAL REITS – (3.32%)**

 

 

 

$

20,690,000

 

ProLogis, Ser. 144A Conv. Sr. Notes, 2.25%, 04/01/37 (b)

 

20,483,100

 

**OFFICE REITS – (0.17%)**

 

 

 

 

1,230,000

 

SL Green Realty Corp., Ser. 144A Conv. Sr. Notes, 3.00%, 03/30/27 (b)

 

1,045,500

 

**RETAIL REITS – (2.43%)**

 

 

 

 

18,456,000

 

General Growth Properties, Inc., Ser. 144A Conv. Sr. Notes, 

 

 

 

 

 

 

3.98%, 04/15/27 (b)

 

14,995,500

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Bonds – (identified cost $39,691,517)

 

36,524,100

 

 

 

65

 

**DAVIS SERIES, INC.**  

SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2007 **

**DAVIS REAL ESTATE FUND – (Continued)**

 

 

**Value**

 

**Principal**

**Security**

**(Note 1**

**)**

**SHORT TERM INVESTMENTS – (2.59%)**

 
 

$

5,845,000

 

ABN AMRO Inc. Joint Repurchase Agreement, 4.70%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $5,846,526

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages and obligations

 

 

 

 

 

 

in a pooled cash account, 4.125%-7.00%, 02/15/08-05/01/37,

 

 

 

 

 

 

total market value $5,961,900)

$

5,845,000

 

 

5,066,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 4.50%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $5,067,267

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgage in a pooled

 

 

 

 

 

 

cash account, 5.00%, 08/01/33, total market value $5,167,320)

 

5,066,000

 

 

1,559,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 4.75%,

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $1,559,411

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages in a 

 

 

 

 

 

 

pooled cash account, 4.00%-9.50%, 12/01/14-12/01/37,

 

 

 

 

 

 

total market value $1,590,180)

 

1,559,000

 

 

3,491,000

 

UBS Securities LLC Joint Repurchase Agreement, 4.64%, 

 

 

 

 

 

 

01/02/08, dated 12/31/07, repurchase value of $3,491,900

 

 

 

 

 

 

(collateralized by: U.S. Government agency mortgages in a 

 

 

 

 

 

 

pooled cash account, 5.00%-8.00%, 07/01/08-11/01/47, 

 

 

 

 

 

 

total market value $3,560,820)

 

3,491,000

 

 

 

 

 

 

 

 

 

 

 

Total Short Term Investments – (identified cost $15,961,000)

 

15,961,000

 

 

 

 

 

 

 

 

 

 

 

Total Investments – (99.42%) – (identified cost $565,691,707) – (a)

 

613,536,075

 

 

 

 

Other Assets Less Liabilities – (0.58%)

 

3,567,841

 

 

 

 

Net Assets – (100.00%)

$

617,103,916

 

*Non-Income Producing Security.

(a)        Aggregate cost for Federal Income Tax purposes is $567,538,894.  At December 31, 2007 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

Unrealized appreciation

$

91,232,064

 

 

 

 

Unrealized depreciation

 

(45,234,883

)

 

 

 

Net unrealized appreciation

$

45,997,181

 

(b)        These securities are subject to Rule 144A. The Board of Directors of the Fund has determined that there is sufficient liquidity in these securities to realize current valuations. These securities amounted to $36,524,100, or 5.92% of the Fund’s net assets, as of December 31, 2007.

 

***See Notes to Financial Statements***

 

66

 

**DAVIS SERIES, INC.**

STATEMENTS OF ASSETS AND LIABILITIES

At December 31, 2007 

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**ASSETS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in securities,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at value* (see accompanying

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedules of Investments) 

$

1,103,188,811

 

$

52,083,511

 

$

553,107,991

 

$

882,634,221

 

$

883,251,406

 

$

613,536,075

 

Cash

 

–

 

 

4,458

 

 

14,414

 

 

15,567

 

 

4,320

 

 

7,503

 

Cash - foreign currencies**

 

131,589

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

Receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and interest

 

978,472

 

 

268,828

 

 

3,958,937

 

 

259,371

 

 

3,018,702

 

 

4,889,651

 

Capital stock sold

 

2,598,513

 

 

1,243,130

 

 

40,409,821

 

 

4,590,390

 

 

10,842,042

 

 

1,689,170

 

Investment securities sold

 

9,502,335

 

 

–

 

 

–

 

 

21,934,179

 

 

–

 

 

392,342

 

Prepaid expenses

 

10,002

 

 

756

 

 

5,053

 

 

8,871

 

 

6,888

 

 

6,889

 

Total assets

 

1,116,409,722

 

 

53,600,683

 

 

597,496,216

 

 

909,442,599

 

 

897,123,358

 

 

620,521,630

 

**LIABILITIES:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash overdraft

 

5,980,107

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

Payables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital stock redeemed

 

5,570,469

 

 

615,846

 

 

582,825

 

 

2,999,678

 

 

7,221,566

 

 

2,396,650

 

Investment securities purchased

 

–

 

 

–

 

 

–

 

 

–

 

 

2,049,353

 

 

–

 

Distributions payable

 

–

 

 

49,788

 

 

15,116

 

 

–

 

 

–

 

 

–

 

Note payable to bank (Note 7)

 

–

 

 

–

 

 

–

 

 

18,521,000

 

 

–

 

 

–

 

Accrued management fees

 

606,193

 

 

13,460

 

 

243,513

 

 

496,319

 

 

500,203

 

 

369,838

 

Accrued transfer agent fees

 

418,949

 

 

23,790

 

 

49,493

 

 

198,882

 

 

176,180

 

 

243,785

 

Other accrued expenses

 

119,420

 

 

71,716

 

 

159,262

 

 

110,404

 

 

78,554

 

 

34,979

 

Distribution and service plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fees (Note 3)

 

742,509

 

 

36,990

 

 

–

 

 

479,352

 

 

486,319

 

 

372,462

 

Total liabilities

 

13,437,647

 

 

811,590

 

 

1,050,209

 

 

22,805,635

 

 

10,512,175

 

 

3,417,714

 

**NET ASSETS**

$

1,102,972,075

 

$

52,789,093

 

$

596,446,007

 

$

886,636,964

 

$

886,611,183

 

$

617,103,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**NET ASSETS CONSISTS OF:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par value of shares of capital stock

$

451,529

 

$

94,295

 

$

5,964,460

 

$

221,632

 

$

314,033

 

$

202,066

 

Additional paid-in capital

 

951,263,801

 

 

57,349,809

 

 

590,481,547

 

 

458,558,937

 

 

859,854,413

 

 

560,452,049

 

Undistributed (overdistributed) net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income

 

(7,161,629

)

 

–

 

 

–

 

 

1,174,639

 

 

(47,692

)

 

(7,519,612

)

Accumulated net realized gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(losses) from investments and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

foreign currency transactions

 

(17,225,262

)

 

(5,120,902

)

 

–

 

 

47,279,673

 

 

(2,349,323

)

 

16,125,085

 

Net unrealized appreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on investments and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

foreign currency transactions

 

175,643,636

 

 

465,891

 

 

–

 

 

379,402,083

 

 

28,839,752

 

 

47,844,328

 

Net Assets

$

1,102,972,075

 

$

52,789,093

 

$

596,446,007

 

$

886,636,964

 

$

886,611,183

 

$

617,103,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Including:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of investments

$

927,545,289

 

$

51,617,620

 

$

553,107,991

 

$

503,233,207

 

$

854,411,654

 

$

565,691,707

 

Market value of repurchase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agreements (if greater than

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10% of Fund’s net assets)

 

–

 

 

–

 

 

213,509,000

 

 

–

 

 

–

 

 

–

 

 

**Cost of cash - foreign currencies

 

132,462

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

67

 

**DAVIS SERIES, INC.**

STATEMENTS OF ASSETS AND LIABILITIES – (Continued)

At December 31, 2007 

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**CLASS A SHARES:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

676,994,810

 

$

27,223,955

 

$

558,883,197

 

$

740,235,456

 

$

567,728,212

 

$

460,643,616

 

Shares outstanding

 

26,872,102

 

 

4,861,274

 

 

558,883,197

 

 

18,181,501

 

 

20,126,132

 

 

15,100,963

 

Net asset value and redemption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets ÷ shares outstanding)

$

25.19

 

$

5.60

 

$

1.00

 

$

40.71

 

$

28.21

 

$

30.50

 

Maximum offering price per

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share (100 ÷ 95.25 of net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

asset value)

$

26.45

 

$

5.88

 

 

N/A

 

$

42.74

 

$

29.62

 

$

32.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS B SHARES:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

60,386,389

 

$

10,401,767

 

$

24,416,350

 

$

50,341,169

 

$

44,099,276

 

$

24,871,731

 

Shares outstanding

 

2,758,306

 

 

1,862,448

 

 

24,416,350

 

 

1,397,100

 

 

1,580,565

 

 

821,251

 

Net asset value, offering, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

redemption price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets ÷ shares outstanding)

$

21.89

 

$

5.58

 

$

1.00

 

$

36.03

 

$

27.90

 

$

30.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS C SHARES:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

287,054,211

 

$

14,753,694

 

$

12,992,255

 

$

87,216,460

 

$

169,456,478

 

$

73,593,656

 

Shares outstanding

 

12,495,400

 

 

2,633,213

 

 

12,992,255

 

 

2,371,840

 

 

5,979,077

 

 

2,402,778

 

Net asset value, offering, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

redemption price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets ÷ shares outstanding)

$

22.97

 

$

5.60

 

$

1.00

 

$

36.77

 

$

28.34

 

$

30.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS Y SHARES:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

78,536,665

 

$

409,677

 

$

154,205

 

$

8,843,879

 

$

105,327,217

 

$

57,994,913

 

Shares outstanding

 

3,027,050

 

 

72,587

 

 

154,205

 

 

212,770

 

 

3,717,534

 

 

1,881,651

 

Net asset value, offering, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

redemption price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets ÷ shares outstanding)

$

25.94

 

$

5.64

 

$

1.00

 

$

41.57

 

$

28.33

 

$

30.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

***See Notes to Financial Statements***

 

68

 

**DAVIS SERIES, INC.**

STATEMENTS OF OPERATIONS

For the year ended December 31, 2007 

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**INVESTMENT INCOME (LOSS):**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends*

$

11,057,562

 

$

–

 

$

–

 

$

13,630,152

 

$

5,664,741

 

$

19,179,079

 

Interest

 

3,470,204

 

 

2,316,690

 

 

28,374,486

 

 

65,359

 

 

19,498,243

 

 

3,744,002

 

Total income

 

14,527,766

 

 

2,316,690

 

 

28,374,486

 

 

13,695,511

 

 

25,162,984

 

 

22,923,081

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees (Note 2)

 

7,284,192

 

 

139,463

 

 

2,579,868

 

 

6,094,317

 

 

5,280,173

 

 

5,072,725

 

Custodian fees

 

218,619

 

 

30,289

 

 

60,878

 

 

110,291

 

 

101,137

 

 

113,690

 

Transfer agent fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

974,038

 

 

54,913

 

 

119,737

 

 

692,416

 

 

434,271

 

 

744,326

 

Class B

 

133,012

 

 

23,404

 

 

5,709

 

 

138,500

 

 

70,313

 

 

70,635

 

Class C

 

402,746

 

 

16,511

 

 

2,137

 

 

127,266

 

 

146,281

 

 

133,958

 

Class Y

 

83,785

 

 

1,761

 

 

21

 

 

14,845

 

 

40,110

 

 

33,715

 

Audit fees

 

20,400

 

 

16,800

 

 

20,400

 

 

32,400

 

 

20,400

 

 

27,600

 

Legal fees

 

21,378

 

 

838

 

 

9,722

 

 

16,771

 

 

15,425

 

 

13,312

 

Accounting fees (Note 2)

 

6,504

 

 

2,496

 

 

37,500

 

 

14,496

 

 

7,500

 

 

9,504

 

Reports to shareholders

 

256,224

 

 

11,064

 

 

72,658

 

 

171,761

 

 

160,436

 

 

224,367

 

Directors’ fees and expenses

 

91,587

 

 

11,407

 

 

44,696

 

 

75,271

 

 

66,763

 

 

61,225

 

Registration and filing fees

 

115,041

 

 

47,327

 

 

80,000

 

 

64,997

 

 

114,197

 

 

32,868

 

Interest expense

 

–

 

 

–

 

 

–

 

 

92,070

 

 

–

 

 

–

 

Miscellaneous

 

20,664

 

 

7,248

 

 

16,780

 

 

9,778

 

 

10,442

 

 

9,643

 

Distribution plan payments (Note 3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

1,799,586

 

 

57,512

 

 

–

 

 

1,529,927

 

 

1,241,573

 

 

1,338,022

 

Class B

 

744,253

 

 

121,070

 

 

–

 

 

743,116

 

 

511,204

 

 

427,893

 

Class C

 

3,011,172

 

 

92,565

 

 

–

 

 

919,594

 

 

1,420,587

 

 

1,046,579

 

Total expenses

 

15,183,201

 

 

634,668

 

 

3,050,106

 

 

10,847,816

 

 

9,640,812

 

 

9,360,062

 

Expenses paid indirectly (Note 6)

 

(3,963

)

 

(69

)

 

(2,562

)

 

(1,663

)

 

(18,493

)

 

(6,296

)

Net expenses

 

15,179,238

 

 

634,599

 

 

3,047,544

 

 

10,846,153

 

 

9,622,319

 

 

9,353,766

 

Net investment income (loss)

 

(651,472

)

 

1,682,091

 

 

25,326,942

 

 

2,849,358

 

 

15,540,665

 

 

13,569,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS:**

Net realized gain (loss) from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment transactions

 

50,781,566

 

 

(133,281

)

 

–

 

 

130,724,556

 

 

32,661,329

 

 

105,256,600

 

Foreign currency transactions

 

(149,878

)

 

–

 

 

–

 

 

(49

)

 

(2,588

)

 

(13,596

)

Futures transactions

 

–

 

 

–

 

 

–

 

 

–

 

 

361,932

 

 

–

 

Net change in unrealized appreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(depreciation) on investments

 

(68,162,642

)

 

779,791

 

 

–

 

 

(184,069,497

)

 

(51,102,387

)

 

(235,838,076

)

Net realized and unrealized gain (loss) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on investments and foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

currency

 

(17,530,954

)

 

646,510

 

 

–

 

 

(53,344,990

)

 

(18,081,714

)

 

(130,595,072

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

resulting from operations

$

(18,182,426

)

$

2,328,601

 

$

25,326,942

 

$

(50,495,632

)

$

(2,541,049

)

$

(117,025,757

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Net of foreign taxes withheld

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as follows

$

548,667

 

$

–

 

$

–

 

$

7,804

 

$

17,020

 

$

15,604

 

***See Notes to Financial Statements***

 

69

 

**DAVIS SERIES, INC.**

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended December 31, 2007 

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**OPERATIONS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

$

(651,472

)

$

1,682,091

 

$

25,326,942

 

$

2,849,358

 

$

15,540,665

 

$

13,569,315

 

Net realized gain (loss) from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investments, futures, 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transactions

 

50,631,688

 

 

(133,281

)

 

–

 

 

130,724,507

 

 

33,020,673

 

 

105,243,004

 

Net change in unrealized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

appreciation (depreciation) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on investments

 

(68,162,642

)

 

779,791

 

 

–

 

 

(184,069,497

)

 

(51,102,387

)

 

(235,838,076

)

Net increase (decrease) in net 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets resulting from  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

operations

 

(18,182,426

)

 

2,328,601

 

 

25,326,942

 

 

(50,495,632

)

 

(2,541,049

)

 

(117,025,757

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DIVIDENDS AND**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DISTRIBUTIONS TO**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**SHAREHOLDERS FROM:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

(4,546,451

)

 

(957,413

)

 

(23,769,789

)

 

(1,641,225

)

 

(10,942,478

)

 

(7,476,145

)

Class B

 

–

 

 

(381,001

)

 

(1,132,324

)

 

–

 

 

(564,907

)

 

(223,651

)

Class C

 

–

 

 

(288,855

)

 

(420,630

)

 

–

 

 

(1,704,587

)

 

(586,158

)

Class Y

 

(779,812

)

 

(16,590

)

 

(4,199

)

 

(33,445

)

 

(2,112,918

)

 

(1,215,348

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains from investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

(45,044,252

)

 

–

 

 

–

 

 

(70,754,835

)

 

(25,875,219

)

 

(105,630,236

)

Class B

 

(4,680,294

)

 

–

 

 

–

 

 

(5,752,982

)

 

(2,069,656

)

 

(6,069,168

)

Class C

 

(21,053,016

)

 

–

 

 

–

 

 

(8,956,338

)

 

(7,434,793

)

 

(17,279,219

)

Class Y

 

(5,126,757

)

 

–

 

 

–

 

 

(848,138

)

 

(4,794,076

)

 

(12,925,829

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CAPITAL SHARE**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**TRANSACTIONS**:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets resulting from capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share transactions (Note 5):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

55,965,384

 

 

4,710,947

 

 

31,712,702

 

 

35,957,027

 

 

210,820,392

 

 

86,325,671

 

Class B

 

(15,831,035

)

 

(3,794,231

)

 

73,102

 

 

(36,199,944

)

 

(4,887,770

)

 

(18,486,395

)

Class C

 

54,765,250

 

 

7,109,122

 

 

6,478,508

 

 

5,119,178

 

 

90,360,705

 

 

(11,890,524

)

Class Y

 

16,671,213

 

 

101,857

 

 

74,205

 

 

(399,777

)

 

62,623,396

 

 

(32,084,272

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total increase (decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in net assets

 

12,157,804

 

 

8,812,437

 

 

38,338,517

 

 

(134,006,111

)

 

300,877,040

 

 

(244,567,031

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**NET ASSETS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

1,090,814,271

 

 

43,976,656

 

 

558,107,490

 

 

1,020,643,075

 

 

585,734,143

 

 

861,670,947

 

End of year*

$

1,102,972,075

 

$

52,789,093

 

$

596,446,007

 

$

886,636,964

 

$

886,611,183

 

$

617,103,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Including undistributed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(overdistributed) net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income of

$

(7,161,629

)

$

–

 

$

–

 

$

1,174,639

 

$

(47,692

)

$

(7,519,612

)

***See Notes to Financial Statements***

 

70

 

**DAVIS SERIES, INC.**

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended December 31, 2006

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**OPERATIONS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

$

(2,170,405

)

$

1,358,992

 

$

22,694,750

 

$

(1,177,878

)

$

9,964,994

 

$

9,188,929

 

Net realized gain (loss) from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investments, futures, 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transactions

 

57,214,745

 

 

(249,662

)

 

–

 

 

56,403,064

 

 

30,914,029

 

 

121,702,126

 

Net change in unrealized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

appreciation (depreciation) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on investments

 

90,815,329

 

 

393,928

 

 

–

 

 

103,635,557

 

 

24,744,136

 

 

89,004,237

 

Net increase in net assets 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

resulting from  operations

 

145,859,669

 

 

1,503,258

 

 

22,694,750

 

 

158,860,743

 

 

65,623,159

 

 

219,895,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DIVIDENDS AND**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DISTRIBUTIONS TO**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**SHAREHOLDERS FROM:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

(5,291,977

)

 

(670,775

)

 

(21,023,920

)

 

–

 

 

(6,666,711

)

 

(9,548,734

)

Class B

 

(65,691

)

 

(521,377

)

 

(1,354,193

)

 

–

 

 

(804,288

)

 

(749,869

)

Class C

 

(248,935

)

 

(167,561

)

 

(314,810

)

 

–

 

 

(942,081

)

 

(1,271,259

)

Class Y

 

(712,198

)

 

(4,622

)

 

(1,827

)

 

–

 

 

(1,069,685

)

 

(2,219,568

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains from investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

(18,520,811

)

 

–

 

 

–

 

 

(45,263,249

)

 

(21,707,826

)

 

(73,399,111

)

Class B

 

(2,591,958

)

 

–

 

 

–

 

 

(6,000,315

)

 

(2,959,164

)

 

(7,449,021

)

Class C

 

(7,556,122

)

 

–

 

 

–

 

 

(5,733,696

)

 

(4,856,144

)

 

(15,326,035

)

Class Y

 

(1,813,117

)

 

–

 

 

–

 

 

(577,417

)

 

(2,771,152

)

 

(14,140,327

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CAPITAL SHARE**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**TRANSACTIONS**:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets resulting from capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share transactions (Note 5):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

166,278,232

 

 

2,724,914

 

 

55,109,827

 

 

126,064,693

 

 

155,949,486

 

 

144,758,420

 

Class B

 

(25,868,112

)

 

(11,186,543

)

 

(10,909,401

)

 

(109,337,685

)

 

(28,830,720

)

 

(45,326,053

)

Class C

 

85,776,963

 

 

2,091,811

 

 

606,421

 

 

(7,011,071

)

 

31,850,191

 

 

9,738,136

 

Class Y

 

11,287,605

 

 

186,951

 

 

80,000

 

 

(2,417,921

)

 

10,525,741

 

 

22,714,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total increase (decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in net assets

 

346,533,548

 

 

(6,043,944

)

 

44,886,847

 

 

108,584,082

 

 

193,340,806

 

 

227,676,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**NET ASSETS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

744,280,723

 

 

50,020,600

 

 

513,220,643

 

 

912,058,993

 

 

392,393,337

 

 

633,994,730

 

End of year*

$

1,090,814,271

 

$

43,976,656

 

$

558,107,490

 

$

1,020,643,075

 

$

585,734,143

 

$

861,670,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Including overdistributed net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income of

$

(2,323,805

)

$

–

 

$

–

 

$

–

 

$

(287,823

)

$

(11,574,029

)

***See Notes to Financial Statements***

 

71

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS

December 31, 2007 

 

**NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

Davis Series, Inc. (a Maryland corporation) (“Company”), is registered under the Investment Company Act of 1940 (“40 Act”) as amended, as an open-end management investment company.  Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, and Davis Appreciation & Income Fund are diversified under the 40 Act.  Davis Real Estate Fund is non-diversified under the 40 Act.  The Company operates as a series issuing shares of common stock in the following six funds (collectively “Funds”):

 

**Davis Opportunity Fund** seeks to achieve long-term growth of capital.  It invests primarily in common stocks and other equity securities, and may invest in both domestic and foreign issuers. 

 

**Davis Government Bond Fund**seeks to achieve current income.  It invests in debt securities which are obligations of, or which are guaranteed by, the U.S. Government, its agencies or instrumentalities. 

 

**Davis Government Money Market Fund** seeks to achieve as high a level of current income as is consistent with the principle of preservation of capital and maintenance of liquidity.  It invests in debt securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements involving such securities.  There is no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share.  

 

**Davis Financial Fund**seeks to achieve long-term growth of capital.  It invests primarily in common stocks and other equity securities, and will concentrate investments in companies principally engaged in the banking and financial services industries.

 

**Davis Appreciation & Income Fund**seeks to achieve total return through a combination of growth and income.  Under normal circumstances, the Fund invests in a diversified portfolio of convertible securities, common and preferred stock, and fixed income securities.  It may invest in lower rated bonds commonly known as "junk bonds”.

 

**Davis Real Estate Fund**seeks to achieve total return through a combination of growth and income.  It invests primarily in securities of companies principally engaged in or related to the real estate industry or which own significant real estate assets or which primarily invest in real estate financial instruments.

 

Because of the risk inherent in any investment program, the Company cannot ensure that the investment objective of any of its series will be achieved.

 

The Company accounts separately for the assets, liabilities and operations of each series.  Each series offers shares in four classes, Class A, Class B, Class C, and Class Y.  The Class A shares are sold with a front-end sales charge, except for shares of the Davis Government Money Market Fund, which are sold at net asset value.  Class B and C shares are sold at net asset value and may be subject to a contingent deferred sales charge upon redemption. Class Y shares are sold at net asset value and are not subject to any contingent deferred sales charge.  Class Y shares are only available to certain qualified investors.  Income, expenses (other than those attributable to a specific class), and gains and losses, are allocated daily to each class of shares based upon the relative proportion of net assets represented by each class.  Operating expenses directly attributable to a specific classare charged against the operations of that class.  All classes have identical rights with respect to voting (exclusive of each Class’ distribution arrangement), liquidation, and distributions.  The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. 

 

72

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)**

 

**A. VALUATION OF SECURITIES –********The Funds calculate the net asset value of their shares as of the close of the New York Stock Exchange (“Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities listed on the Exchange (and other national exchanges) are valued at the last reported sales price on the day of valuation. Securities traded in the over-the-counter market (e.g. NASDAQ) and listed securities for which no sale was reported on that date are stated at the average of closing bid and asked prices. Securities traded on foreign exchanges are valued based upon the last sales price on the principal exchange on which the security is traded prior to the time when the Funds’ assets are valued. Securities (including restricted securities) for which market quotations are not readily availableare valued at their fair value. Foreign and domestic securities whose values have been materially affected by what Davis Advisors (“Adviser”), the Funds’ investment adviser, identifies as a significant event occurring before the Funds’ assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Directors. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days, are valued at market value. For Davis Government Money Market Fund, in compliance with Rule 2a-7 of the 40 Act, securities are valued at amortized cost, which approximates market value. These valuation procedures are reviewed and subject to approval by the Board of Directors.

 

**B.** **MASTER REPURCHASE AGREEMENTS****–** The Funds, along with other affiliated funds, may transfer uninvested cash balances into one or more master repurchase agreement accounts.  These balances are invested in one or more repurchase agreements, secured by U.S. Government securities. A custodian bank holds securities pledged as collateral for repurchase agreements until the agreements mature.  Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.

 

**C.** **CURRENCY TRANSLATION –** The market values of all assets and liabilities denominated in foreign currencies are recorded in the financial statements after translation to the U.S. Dollar based upon the mean between the bid and offered quotations of the currencies against U.S. Dollars on the date of valuation.  The cost basis of such assets and liabilities is determined based upon historical exchange rates.  Income and expenses are translated at average exchange rates in effect as accrued or incurred.

 

**D.** **FOREIGN CURRENCY –**The Funds may enter into forward purchases or sales of foreign currencies to hedge certain foreign currency denominated assets and liabilities against declines in market value relative to the U.S. Dollar.  Forward currency contracts are marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss.  When the forward currency contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the forward currency contract at the time it was opened and value at the time it was closed.  Investments in forward currency contracts may expose the Funds to risks resulting from unanticipated movements in foreign currency exchange rates or failure of the counter-party to the agreement to perform in accordance with the terms of the contract.

 

 

73

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)**

 

**D.**

**FOREIGN CURRENCY – (Continued)**

 

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. Dollar equivalent of the amounts actually received or paid.  Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. The Funds include foreign currency gains and losses realized on the sale of investments together with market gains and losses on such investments in the statements of operations.

 

**E. FEDERAL INCOME TAXES –** It is each 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, including any net realized gains on investments not offset by loss carryovers, to shareholders.  Therefore, no provision for Federal Income or Excise Tax is required.  The Adviser has analyzed the Funds’ tax positions taken on federal income tax returns for all open tax years and has concluded that as of December 31, 2007, no provision for income tax would be required in the Funds’ financial statements.  The Funds’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue. AtDecember 31, 2007, Davis Opportunity Fund had approximately $17,228,000 of post October 2007 losses available to offset future capital gains, if any, which expire in 2016. At December 31, 2007, Davis Appreciation & Income Fund had approximately $2,248,000 of post October 2007 losses available to offset future capital gains, if any, which expire in 2016. Additionally, Davis Appreciation & Income Fund had approximately $3,000 of post October 2007 foreign currency losses which were deferred.  At December 31, 2007, Davis Government Bond Fund had approximately $1,973,000 of capital loss carryforward expire unutilized and currently has available for Federal Income Tax purposes unused capital loss carryforwards as follows:

 

 

 

**DAVIS**

 

 

 

 

 

 

 

**GOVERNMENT**

 

 

 

 

 

 

 

**BOND FUND**

 

 

 

 

 

**Expiring**

 

 

 

 

 

 

 

 

 

 

12/31/2008

 

 

906,000

 

 

 

 

 

 

 

12/31/2009

 

 

–

 

 

 

 

 

 

 

12/31/2010

 

 

–

 

 

 

 

 

 

 

12/31/2011

 

 

2,128,000

 

 

 

 

 

 

 

12/31/2012

 

 

1,243,000

 

 

 

 

 

 

 

12/31/2013

 

 

403,000

 

 

 

 

 

 

 

12/31/2014

 

 

304,000

 

 

 

 

 

 

 

12/31/2015

 

 

137,000

 

 

 

 

 

 

 

**Total**

 

$

5,121,000

 

 

 

 

 

 

 

 

 

74

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)**

 

**F.**  **USE OF ESTIMATES IN FINANCIAL STATEMENTS -**In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, 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.

 

**G.** **INDEMNIFICATION –** Under the Funds’ organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Funds.  In addition, some of the Funds’ contracts with its service providers contain general indemnification clauses.  The Funds’ maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Funds cannot be determined and the Funds have no historical basis for predicting the likelihood of any such claims.

 

**H. 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.  Dividend income from REIT securities may include return of capital. Upon notification from the issuer, the amount of the return of capital is reclassified to adjust dividend income, reduce the cost basis, and/or adjust realized gain.  Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.

 

**I.** **DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -** Dividends and distributions to shareholders are recorded on the ex-dividend date. Net investment income (loss), net realized gains (losses), and net unrealized appreciation (depreciation) of investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales, pay downs on fixed income securities, foreign currency transactions, net operating losses, passive foreign investment company shares, and distributions from real estate investment trusts. The character of dividends and distributions made during the fiscal year from net investment income and net realized securities gains may differ from their ultimate characterization for federal income tax purposes.  Also, due to the timing of dividends and distributions, the fiscal year inwhich amounts are distributed may differ from the fiscal year in which income or realized gain was recorded by the Funds.  The Funds adjust the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended December 31, 2007, for Davis Opportunity Fund, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $1,139,911 and a corresponding increase in accumulated net realized loss;for Davis Government Bond Fund, amounts have been reclassified to reflect a decrease in undistributed net investment income of $38,232, a decrease in accumulated realized loss of $2,011,041, and a decrease in additional paid in capital of $1,972,809; for Davis Financial Fund, amounts have been reclassified to reflect a decrease****in undistributed net investment income****of $49 and a corresponding increase in accumulated net realized gain; for Davis Appreciation & Income Fund, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $24,356, a decrease in accumulated net realized loss of $5,891, and a decrease in additional paid in capital of $30,247;for Davis Real Estate Fund, amounts have been reclassified to reflect an increase in overdistributed net investment income of $13,596 and a corresponding increase****in accumulated net realized gain. The Funds’ net assets have not been affected by these reclassifications.

 

75

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)**

 

**I. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS – (Continued)**

 

The tax character of distributions paid during the years ended December 31, 2007 and 2006, was as follows:

 

 

Ordinary Income

Long-Term Capital Gain

 

Total

 

 

 

 

Davis Opportunity Fund

 

 

 

2007

$   12,582,397

$   68,648,185

$   81,230,582

2006

6,867,261

29,933,548

36,800,809

Davis Government Bond Fund

 

 

 

2007

1,643,859

–

1,643,859

2006

1,364,335

–

1,364,335

Davis Government Money Market Fund

 

 

 

2007

25,326,942

–

25,326,942

2006

22,694,750

–

22,694,750

Davis Financial Fund

 

 

 

2007

1,674,670

86,312,293

87,986,963

2006

–

57,574,677

57,574,677

Davis Appreciation & Income Fund

 

 

 

2007

28,017,614

27,481,020

55,498,634

2006

10,104,987

31,672,064

41,777,051

Davis Real Estate Fund

 

 

 

2007

13,503,572

137,902,182

151,405,754

2006

18,308,711

105,795,213

124,103,924

 

As of December 31, 2007 the components of distributable earnings (accumulated losses) on a tax basis were as follows:

 

 

 

**Davis**

**Opportunity**

**Fund**

 

**Davis**

**Government**

**Bond Fund**

 

 

**Davis**

**Financial**

**Fund**

 

**Davis**

**Appreciation**

**& Income**

**Fund**

 

**Davis**

**Real Estate**

**Fund**

Undistributed net investment 

income

 

$

3,028,970

 

$

 

–

 

$

1,174,980

 

$

–

 

$

2,908,014

Accumulated net realized

losses from investments and 

foreign currency transactions

 

 

 

(17,228,476

)

 

(5,120,902

)

 

–

 

 

(2,250,955

)

 

–

Undistributed long term capital 

gain

 

 

357,376

 

 

 

–

 

 

47,279,332

 

 

–

 

 

7,544,646

Net unrealized appreciation

on investments

 

 

165,098,875

 

 

465,891

 

 

379,402,083

 

 

28,693,692

 

 

45,997,141

Total

 

$

151,256,745

 

$

(4,655,011     

)

$

427,856,395

 

$

26,442,737

 

$

56,449,801

 

 

76

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)**

 

**J.**  **NEW ACCOUNTING PROUNCEMENT -**In September 2006, FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, *Fair Value Measurements.*This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands disclosures about fair value measurements.  SFAS No. 157 applies to fair value measurements already required or permitted by existing standards.  SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal periods.  As of December 31, 2007, the Adviser does not believe the adoption of SFAS No. 157 will materially impact the financial statement amounts; however, additionaldisclosures may be required about the inputs used to develop the measurements and the effect of certain measurements on changes in net assets for the period.

 

**NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES**

 

Advisory fees are paid monthly to Davis Advisors, the Funds’ investment adviser (the “Adviser”).  The fee for the Davis Government Money Market Fund is 0.50% of the first $250 million of average net assets, 0.45% of the next $250 million, and 0.40% of average net assets in excess of $500 million.The fee for each of the Davis Opportunity Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund is 0.75% for the first $250 million of average net assets, 0.65% on the next $250 million, and 0.55% of the average net assets in excess of $500 million.  Advisory fees paid during the year ended December 31, 2007, approximated 0.61%, 0.47%,0.63%,0.64%,and 0.65% of average net assets for the Davis Opportunity Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund, respectively. The fee for the Davis Government Bond Fund is 0.30%.

 

Boston Financial Data Services, Inc. (“BFDS”) is the Funds’ primary transfer agent.  The Adviser is also paid for certain transfer agent services. The fee for these services for the year ended December 31, 2007 for the Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund amounted to $78,834, $5,479, $9,640,$69,741,$51,187and $50,751, respectively.  State Street Bank and Trust Company (“State Street Bank”) is the Funds’ primary accounting provider.  Fees for such services are included in the custodian fee as State Street Bank alsoserves as the Funds’ custodian.  The Adviser is also paid for certain accounting services.  The fee for these services for the year ended December 31, 2007 for the Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund amounted to $6,504, $2,496,$37,500,$14,496, $7,500,and $9,504, respectively.  Certain directors and officers of the Funds are also directors and officers of the general partner of the Adviser.

 

Davis Selected Advisers-NY, Inc. (“DSA-NY”), a wholly-owned subsidiary of the Adviser, acts as sub-adviser to the Funds.  DSA-NY performs research and portfolio management services for the Funds under a Sub-Advisory Agreement with the Adviser.  The Funds pay no fees directly to DSA-NY.

 

77

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES**

 

**CLASS A SHARES OF THE DAVIS OPPORTUNITY FUND, DAVIS GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS APPRECIATION & INCOME FUND, AND DAVIS REAL ESTATE FUND**

 

 

Class A shares of the Funds are sold at net asset value plus a sales charge and are redeemed at net asset value.

 

During the year ended December 31, 2007, Davis Distributors, LLC, the Funds’ Underwriter (the “Underwriter” or “Distributor”) received $1,436,224,$21,360, $748,466, $1,707,058,and $996,096 from commissions earned on sales of Class A shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund, respectively, of which $215,608,$3,307, $114,295,$265,341,and $152,464 was retained by the Underwriter and the remaining$1,220,616,$18,053,$634,171, $1,441,717,and $843,632 was re-allowed to investment dealers. The Underwriter paid the costs of prospectuses, in excess of those required to be filed as part of the Funds’ registration statement, sales literature, and other expenses assumed or incurred in connection with such sales.

 

The Underwriter is reimbursed for amounts paid to dealers as a service fee or commissions with respect to Class A shares sold by dealers, which remain outstanding during the period. The service fee is paid at the annual rate up to 1/4 of 1.00% of the average net assets maintained by the responsible dealers. The service fee for Class A shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund for the year ended December 31, 2007 was $1,799,586, $57,512,$1,529,927,$1,241,573,and $1,338,022, respectively.

 

**CLASS B SHARES OF THE DAVIS OPPORTUNITY FUND, DAVIS GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS APPRECIATION & INCOME FUND, AND DAVIS REAL ESTATE FUND**

 

Class B shares of the Funds are sold at net asset value and are redeemed at net asset value.  A contingent deferred sales charge may be assessed on shares redeemed within six years of purchase.

 

Each of the Class B shares of the Funds (other than Davis Government Money Market Fund) pay a distribution fee to reimburse the Distributor for commission advances on the sale of each Fund's Class B shares. Payments under the Class B Distribution Plan are limited to an annual rate of equal to the lesser of 1.25% of the average daily net asset value of the Class B shares or the maximum amount provided by applicable rule or regulation of the National Association of Securities Dealers, Inc., ("NASD"), which currently is 1.00%.  Therefore, the effective rate of the Class B Distribution Plan is currently 1.00%, of which 0.75% may be used to pay distribution expenses and 0.25% may be used to pay shareholder service fees.  The NASD rules also limit the aggregate amount the Funds may pay for distribution to 6.25% of gross Funds sales since inception of the Distribution Plans plus interest at1.00% over the prime rate on unpaid amounts.  The Distributor intends to seek full payment (plus interest at prime rate plus 1.00%) of distribution charges that exceed the 1.00% annual limit in some future period or periods when the plan limits have not been reached.

 

During the year ended December 31, 2007, Class B shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund made distribution plan payments which included distribution fees of $559,234, $90,865,$558,617,$383,741, and$321,559, respectively and service fees of $185,019, $30,205,$184,499, $127,463,and $106,334, respectively.

 

78

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES - (Continued)**

 

**CLASS B SHARES OF THE DAVIS OPPORTUNITY FUND, DAVIS GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS APPRECIATION & INCOME FUND, AND DAVIS REAL ESTATE FUND– (Continued)**

 

Commission advances by the Distributor during the year ended December 31, 2007 on the sale of Class B shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund amounted to $238,507, $9,149,$114,534,$342,667, and $102,101,respectively, all of which was re-allowed to qualified selling dealers.

 

The Distributor intends to seek payment from Class B shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund in the amounts of $2,788,418,$5,568,474,$27,967,923, $8,680,878, and $16,256,710, respectively, representing 6.25% of gross Fund sales of Class B shares, plus interest, reduced by cumulative distribution fees paid by the Funds and cumulative contingent deferred sales charges paid by redeeming shareholders.  The Funds have no contractual obligation to pay any such distribution charges****and the amounts, if any, timing and condition of such payments are solely within the discretion of the Directors who arenot interested persons of the Funds or the Distributor.         

 

A contingent deferred sales charge is imposed upon redemption of certain Class B shares of the Funds within six years of the original purchase. The charge is a declining percentage starting at 4.00% of the lesser of net asset value of the shares redeemed or the total cost of such shares.  During the year ended December 31, 2007, the Distributor received contingent deferred sales charges from Class B shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund of $87,709,$27,698,$80,787, $82,482, and $67,275, respectively.

 

**CLASS C SHARES OF THE DAVIS OPPORTUNITY FUND, DAVIS GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS APPRECIATION & INCOME FUND, AND DAVIS REAL ESTATE FUND**

 

Class C shares of the Funds are sold at net asset value and are redeemed at net asset value. A contingent deferred sales charge may be assessed on shares redeemed within the first year of purchase.

 

Each of the Class C shares of the Funds (other than Davis Government Money Market Fund) pay a distribution fee to reimburse the Distributor for commission advances on the sale of each Fund’s Class C shares. Payments under the Class C Distribution Plan are limited to an annual rate of equal to the lesser of 1.25% of the average daily net asset value of the Class C shares or the maximum amount provided by applicable rule or regulation of the NASD, which currently is 1.00%.  Therefore, the effective rate of the Class C Distribution Plan is currently 1.00%, of which 0.75% may be used to pay distribution expenses and 0.25% may be used to pay shareholder service fees.  Class C shares are subject to the same 6.25% and 1.00% limitations applicable to the Class B Distribution Plan.

 

During the year ended December 31, 2007, Class C shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund made distribution plan payments which included distribution fees of $2,258,379, $69,424, $689,696, $1,065,440, and $784,934, respectively, and service fees of $752,793, $23,141,$229,898, $355,147, and $261,645, respectively.  

 

79

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 3 - DISTRIBUTION AND UNDERWRITING FEES - (Continued)**

 

**CLASS C SHARES OF THE DAVIS OPPORTUNITY FUND, DAVIS GOVERNMENT BOND FUND, DAVIS FINANCIAL FUND, DAVIS APPRECIATION & INCOME FUND, AND DAVIS REAL ESTATE FUND****– (Continued)**

 

Commission advances by the Distributor during the year ended December 31, 2007, on the sale of Class C shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund amounted to $800,348, $20,523, $169,891, $859,184, and $154,337, respectively, all of which was re-allowed to qualified selling dealers.

 

The Distributor intends to seek payment from Class C shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund in the amounts of $17,568,624,$266,528,$19,571,293, $12,440,987, and $10,785,497, respectively, representing 6.25% of gross Fund sales of Class C shares, plus interest, reduced by cumulative distribution fees paid by the Funds and cumulative contingent deferred sales charges paid by redeeming shareholders.  The Funds have no contractual obligation to pay any such distribution charges****and the amounts, if any, timing and condition of such payments are solely within the discretion of the Directors who arenot interested persons of the Funds or the Distributor.         

 

A contingent deferred sales charge of 1.00% is imposed upon redemption of certain Class C shares of the Funds within the first year of the original purchase. During the year ended December 31, 2007, the Distributor received $55,114, $3,315, $13,173, $32,945, and $28,584 in contingent deferred sales charges from Class C shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund, respectively.

 

 

**DAVIS GOVERNMENT MONEY MARKET FUND**

 

All classes of shares of the Davis Government Money Market Fund are sold to investors at net asset value.  The shareholders of the Davis Government Money Market Fund have adopted a Distribution expense plan in accordance with Rule 12b-1, which does not provide for any amounts to be paid directly to the Distributor as either compensation or reimbursement for distributing shares of the Fund, but does authorize the use of the advisory fee to the extent such fee may be considered to be indirectly financing any activity or expense which is primarily intended to result in the sale of Fund shares.

 

**NOTE 4 - PURCHASES AND SALES OF SECURITIES**

 

Purchases and sales of investment securities (excluding short-term securities) during the year ended December 31, 2007 for the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund were as follows:

 

 

 

 

 

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

Cost of purchases

$

522,019,529

 

$

36,463,075

 

$

146,996,252

 

$

571,320,036

 

$

345,727,331

 

Proceeds of sales

$

418,308,343

 

$

26,676,875

 

$

229,149,996

 

$

152,971,259

 

$

407,485,727

 

 

 

80

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 5 – CAPITAL STOCK**

 

At December 31, 2007, there were 10 billion shares of capital stock ($0.01 par value per share) authorized, of which 550 million shares each are designated to the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund, and 4.1 billion shares are designated to the Davis Government Money Market Fund. Transactions in capital stock were as follows: 

 

**CLASS A**

**Year ended December 31, 2007**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

7,079,827

 

 

2,874,814

 

 

781,109,806

 

 

2,703,292

 

 

10,300,765

 

 

3,472,460

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

1,880,169

 

 

146,558

 

 

23,638,063

 

 

1,634,760

 

 

1,067,947

 

 

3,418,959

 

 

 

8,959,996

 

 

3,021,372

 

 

804,747,869

 

 

4,338,052

 

 

11,368,712

 

 

6,891,419

 

Shares redeemed

 

(6,805,796

)

 

(2,169,021

)

 

(773,035,167

)

 

(3,386,734

)

 

(4,499,437

)

 

(4,142,913

)

Net increase

 

2,154,200

 

 

852,351

 

 

31,712,702

 

 

951,318

 

 

6,869,275

 

 

2,748,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

197,873,450

 

$

15,907,865

 

$

781,109,806

 

$

126,903,967

 

$

316,083,656

 

$

156,197,972

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

47,568,272

 

 

810,961

 

 

23,638,063

 

 

69,101,099

 

 

31,153,345

 

 

108,780,954

 

 

 

245,441,722

 

 

16,718,826

 

 

804,747,869

 

 

196,005,066

 

 

347,237,001

 

 

264,978,926

 

Cost of shares redeemed

 

(189,476,338

)

 

(12,007,879

)

 

(773,035,167

)

 

(160,048,039

)

 

(136,416,609

)

 

(178,653,255

)

Netincrease

$

55,965,384

 

$

4,710,947

 

$

31,712,702

 

$

35,957,027

 

$

210,820,392

 

$

86,325,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS A**

**Year ended December 31, 2006**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

8,853,275

 

 

2,067,050

 

 

691,049,352

 

 

4,130,008

 

 

5,876,663

 

 

3,657,514

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

865,959

 

 

100,119

 

 

20,951,367

 

 

932,852

 

 

761,194

 

 

1,680,048

 

 

 

9,719,234

 

 

2,167,169

 

 

712,000,719

 

 

5,062,860

 

 

6,637,857

 

 

5,337,562

 

Shares redeemed

 

(3,395,374

)

 

(1,671,854

)

 

(656,890,892

)

 

(2,306,098

)

 

(1,420,708

)

 

(2,245,293

)

Net increase

 

6,323,860

 

 

495,315

 

 

55,109,827

 

 

2,756,762

 

 

5,217,149

 

 

3,092,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

231,728,249

 

$

11,361,182

 

$

691,049,352

 

$

185,066,438

 

$

175,165,737

 

$

169,368,516

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

23,216,363

 

 

550,532

 

 

20,951,367

 

 

42,780,604

 

 

22,613,964

 

 

79,129,231

 

 

 

254,944,612

 

 

11,911,714

 

 

712,000,719

 

 

227,847,042

 

 

197,779,701

 

 

248,497,747

 

Cost of shares redeemed

 

(88,666,380

)

 

(9,186,800

)

 

(656,890,892

)

 

(101,782,349

)

 

(41,830,215

)

 

(103,739,327

)

Net increase

$

166,278,232

 

$

2,724,914

 

$

55,109,827

 

$

126,064,693

 

$

155,949,486

 

$

144,758,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 5 – CAPITAL STOCK – (Continued)**

 

**CLASS B**

**Year ended December 31, 2007**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

367,264

 

 

1,396,472

 

 

13,379,304

 

 

95,335

 

 

511,225

 

 

86,950

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

192,152

 

 

52,403

 

 

1,017,521

 

 

143,728

 

 

79,685

 

 

183,131

 

 

 

559,416

 

 

1,448,875

 

 

14,396,825

 

 

239,063

 

 

590,910

 

 

270,081

 

Shares redeemed

 

(1,184,261

)

 

(2,139,532

)

 

(14,323,723

)

 

(1,073,080

)

 

(748,380

)

 

(647,917

)

Net increase (decrease)

 

(624,845

)

 

(690,657

)

 

73,102

 

 

(834,017

)

 

(157,470

)

 

(377,836

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

8,994,773

 

$

7,702,716

 

$

13,379,304

 

$

3,973,564

 

$

15,558,534

 

$

4,062,234

 

Proceeds from shares issued in 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

4,227,348

 

 

289,144

 

 

1,017,521

 

 

5,382,613

 

 

2,286,738

 

 

5,738,902

 

 

 

13,222,121

 

 

7,991,860

 

 

14,396,825

 

 

9,356,177

 

 

17,845,272

 

 

9,801,136

 

Cost of shares redeemed

 

(29,053,156

)

 

(11,786,091

)

 

(14,323,723

)

 

(45,556,121

)

 

(22,733,042

)

 

(28,287,531

)

Net increase (decrease)

$

(15,831,035

)

$

(3,794,231

)

$

73,102

 

$

(36,199,944

)

$

(4,887,770

)

$

(18,486,395

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS B**

**Year ended December 31, 2006**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

723,896

 

 

1,202,808

 

 

12,719,857

 

 

88,818

 

 

410,149

 

 

133,037

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

102,403

 

 

70,651

 

 

1,216,032

 

 

133,179

 

 

109,719

 

 

154,883

 

 

 

826,299

 

 

1,273,459

 

 

13,935,889

 

 

221,997

 

 

519,868

 

 

287,920

 

Shares redeemed

 

(1,944,911

)

 

(3,312,167

)

 

(24,845,290

)

 

(2,936,783

)

 

(1,502,981

)

 

(1,262,307

)

Net decrease

 

(1,118,612

)

 

(2,038,708

)

 

(10,909,401

)

 

(2,714,786

)

 

(983,113

)

 

(974,387

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

16,593,785

 

$

6,583,218

 

$

12,719,857

 

$

3,577,984

 

$

11,988,974

 

$

6,095,604

 

Proceeds from shares issued in 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

2,413,613

 

 

387,311

 

 

1,216,032

 

 

5,513,594

 

 

3,221,416

 

 

7,246,300

 

 

 

19,007,398

 

 

6,970,529

 

 

13,935,889

 

 

9,091,578

 

 

15,210,390

 

 

13,341,904

 

Cost of shares redeemed

 

(44,875,510

)

 

(18,157,072

)

 

(24,845,290

)

 

(118,429,263

)

 

(44,041,110

)

 

(58,667,957

)

Net decrease

$

(25,868,112

)

$

(11,186,543

)

$

(10,909,401

)

$

(109,337,685

)

$

(28,830,720

)

$

(45,326,053

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

82

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 5 – CAPITAL STOCK – (Continued)**

 

**CLASS C**

**Year ended December 31, 2007**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

3,370,947

 

 

2,368,781

 

 

17,961,249

 

 

467,502

 

 

3,308,820

 

 

384,634

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

868,460

 

 

45,318

 

 

392,886

 

 

216,265

 

 

284,186

 

 

521,523

 

 

 

4,239,407

 

 

2,414,099

 

 

18,354,135

 

 

683,767

 

 

3,593,006

 

 

906,157

 

Shares redeemed

 

(2,041,815

)

 

(1,135,392

)

 

(11,875,627

)

 

(525,672

)

 

(652,847

)

 

(1,061,065

)

Net increase (decrease)

 

2,197,592

 

 

1,278,707

 

 

6,478,508

 

 

158,095

 

 

2,940,159

 

 

(154,908

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

86,214,919

 

$

13,134,970

 

$

17,961,249

 

$

19,463,025

 

$

101,860,758

 

$

17,666,936

 

Proceeds from shares issued in 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

20,044,045

 

 

251,099

 

 

392,886

 

 

8,261,344

 

 

8,266,370

 

 

16,509,697

 

 

 

106,258,964

 

 

13,386,069

 

 

18,354,135

 

 

27,724,369

 

 

110,127,128

 

 

34,176,633

 

Cost of shares redeemed

 

(51,493,714

)

 

(6,276,947

)

 

(11,875,627

)

 

(22,605,191

)

 

(19,766,423

)

 

(46,067,157

)

Net increase (decrease)

$

54,765,250

 

$

7,109,122

 

$

6,478,508

 

$

5,119,178

 

$

90,360,705

 

$

(11,890,524

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS C**

**Year ended December 31, 2006**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

4,185,495

 

 

1,068,102

 

 

9,265,366

 

 

208,006

 

 

1,231,852

 

 

522,320

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

301,914

 

 

26,182

 

 

291,137

 

 

125,694

 

 

177,052

 

 

324,534

 

 

 

4,487,409

 

 

1,094,284

 

 

9,556,503

 

 

333,700

 

 

1,408,904

 

 

846,854

 

Shares redeemed

 

(931,786

)

 

(712,670

)

 

(8,950,082

)

 

(515,083

)

 

(344,442

)

 

(649,132

)

Net increase (decrease)

 

3,555,623

 

 

381,614

 

 

606,421

 

 

(181,383

)

 

1,064,462

 

 

197,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

100,644,991

 

$

5,868,455

 

$

9,265,366

 

$

8,577,041

 

$

36,794,075

 

$

24,189,121

 

Proceeds from shares issued in 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

7,439,149

 

 

144,042

 

 

291,137

 

 

5,295,503

 

 

5,279,632

 

 

15,321,617

 

 

 

108,084,140

 

 

6,012,497

 

 

9,556,503

 

 

13,872,544

 

 

42,073,707

 

 

39,510,738

 

Cost of shares redeemed

 

(22,307,177

)

 

(3,920,686

)

 

(8,950,082

)

 

(20,883,615

)

 

(10,223,516

)

 

(29,772,602

)

Net increase (decrease)

$

85,776,963

 

$

2,091,811

 

$

606,421

 

$

(7,011,071

)

$

31,850,191

 

$

9,738,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

83

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 5 – CAPITAL STOCK – (Continued)**

 

**CLASS Y**

**Year ended December 31, 2007**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

1,273,415

 

 

130,727

 

 

68,192

 

 

54,383

 

 

2,338,304

 

 

347,674

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

208,234

 

 

2,483

 

 

6,013

 

 

17,972

 

 

217,643

 

 

426,970

 

 

 

1,481,649

 

 

133,210

 

 

74,205

 

 

72,355

 

 

2,555,947

 

 

774,644

 

Shares redeemed

 

(879,310

)

 

(114,869

)

 

–

 

 

(77,992

)

 

(515,892

)

 

(1,325,110

)

Net increase (decrease)

 

602,339

 

 

18,341

 

 

74,205

 

 

(5,637

)

 

2,040,055

 

 

(550,466

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

36,418,592

 

$

728,379

 

$

68,192

 

$

2,592,731

 

$

71,871,573

 

$

16,204,610

 

Proceeds from shares 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

issued in reinvestment 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

5,424,510

 

 

13,857

 

 

6,013

 

 

775,484

 

 

6,378,925

 

 

13,799,742

 

 

 

41,843,102

 

 

742,236

 

 

74,205

 

 

3,368,215

 

 

78,250,498

 

 

30,004,352

 

Cost of shares redeemed

 

(25,171,889

)

 

(640,379

)

 

–

 

 

(3,767,992

)

 

(15,627,102

)

 

(62,088,624

)

Net increase (decrease)

$

16,671,213

 

$

101,857

 

$

74,205

 

$

(399,777

)

$

62,623,396

 

$

(32,084,272

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**July 17, 2006**

 

 

 

 

 

**(Inception**

 

 

 

 

 

**of Class)**

 

 

 

 

**through**

 

 

 

**Year ended**

 

**December 31,**

 

**Year ended**

**CLASS Y**

**December 31, 2006**

 

**2006**

 

**December 31, 2006**

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

844,556

 

 

43,648

 

 

100,000

 

 

47,012

 

 

425,649

 

 

381,684

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

87,228

 

 

709

 

 

–

 

 

11,404

 

 

119,315

 

 

335,852

 

 

 

931,784

 

 

44,357

 

 

100,000

 

 

58,416

 

 

544,964

 

 

717,536

 

Shares redeemed

 

(517,113

)

 

(10,764

)

 

(20,000

)

 

(114,136

)

 

(190,583

)

 

(238,511

)

Net increase (decrease)

 

414,671

 

 

33,593

 

 

80,000

 

 

(55,720

)

 

354,381

 

 

479,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

22,664,351

 

$

242,650

 

$

100,000

 

$

2,088,509

 

$

12,661,386

 

$

18,300,390

 

Proceeds from shares 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

issued in reinvestment 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

2,403,144

 

 

3,934

 

 

–

 

 

532,886

 

 

3,558,924

 

 

15,953,777

 

 

 

25,067,495

 

 

246,584

 

 

100,000

 

 

2,621,395

 

 

16,220,310

 

 

34,254,167

 

Cost of shares redeemed

 

(13,779,890

)

 

(59,633

)

 

(20,000

)

 

(5,039,316

)

 

(5,694,569

)

 

(11,539,821

)

Net increase (decrease)

$

11,287,605

 

$

186,951

 

$

80,000

 

$

(2,417,921

)

$

10,525,741

 

$

22,714,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

84

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 6 - EXPENSES PAID INDIRECTLY**

 

Under an agreement with State Street Bank, custody fees are reduced for earnings on cash balances maintained at the custodian by the Funds. Such reductions amounted to $3,963, $69,$2,562,$1,663, $18,493,and $6,296 for Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund, respectively, during the year ended December 31, 2007.

 

**NOTE 7 - BANK BORROWINGS**

 

Each Fund may borrow up to 5% of its assets from a bank to purchase portfolio securities, or for temporary and emergency purposes. The purchase of securities with borrowed funds creates leverage in the Fund. Each Fund has entered into an agreement, which enables it to participate with certain other funds managed by the Adviser in an unsecured line of credit with a bank, which permits borrowings up to $50 million, collectively.  Interest is charged based on its borrowings, at a rate equal to the overnight Federal Funds Rate plus 0.75%.  At December 31, 2007, Davis Financial Fund had borrowings outstanding of $18,521,000; the interest rate was 4.25%.  For the year ended December 31, 2007, the average daily loan balance was $1,616,318 at an average interest rate of 5.88%.  Davis Financial Fund had gross borrowings $135,453,000 and gross repayments of $116,932,000 during the year endedDecember 31, 2007.  The maximum amount of borrowings outstanding at any month end was $18,521,000. Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund had no borrowings outstanding for the year ended December 31, 2007.

 

**NOTE 8 - FINANCIAL FUTURES CONTRACT ACTIVITY**

 

Each Fund may purchase or sell financial futures contracts to pursue its investment objective or for hedging purposes. A financial futures contract is a commitment to buy or sell a specific amount of a financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. A fund can use financial futures to establish a position in the securities market as a temporary substitute for purchasing particular securities. A fund might also use financial futures contracts to attempt to protect against the possibility that its portfolio securities would not be fully included in a rise in value of the market. For example, a fund may purchase a futures contract on the S&P 500® Index without owning the underlying securities as an efficient or cost effective means to gain broad exposure to the equity market.

 

Upon entering into a futures contract a fund is required to deposit cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the contract is closed or expires. 

 

Securities held in margin accounts to cover initial margin requirements on open futures contacts would be noted in the Schedule of Investments. The Statements of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statements of Operations. 

 

 

The risks of investing in futures contacts are described in the Statement of Additional Information.

 

 

As of December 31, 2007, none of the Funds had any open futures contracts.

 

85

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2007 

 

**NOTE 9 - ILLIQUID AND RESTRICTED SECURITIES**

 

Securities may be considered illiquid if they lack a readily available market or if valuation has not changed for a certain period of time.Restricted securities are not registered under the Securities Act of 1933 and may have contractual restrictions on resale. They are valued under methods approved by the Board of Directors as reflecting fair value. The aggregate value of illiquid securities in Davis Opportunity Fund amounted to $6,353,500 or 0.58% of the Fund’s net assets as of December 31, 2007. The aggregate value of illiquid securities in Davis Financial Fund amounted to $41,410,113 or 4.67% of the Fund’s net assets as of December 31, 2007. The aggregate value of restricted securities in Davis Financial Fund amounted to $45,414,619 or 5.12% of the Fund’s net assets as of December 31, 2007. Theaggregate value of illiquid securities in Davis Appreciation & Income Fund amounted to $61,331,270 or 6.92% of the Fund’s net assets as of December 31, 2007. The aggregate value of restricted securities in Davis Appreciation & Income Fund amounted to $23,350,800 or 2.63% of the Fund’s net assets as of December 31, 2007. Securities are as follows:

 

Fund

 

Security

Acquisition

Date

Principal

 

Units/

Shares

 

Cost per

Unit/

Share

 

Valuation per Unit/Share

as of 

December 31, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis

 

 

 

 

 

 

 

 

 

 

 

 

 

Opportunity

 

Oaktree Capital Group

 

 

 

 

 

 

 

 

 

 

 

Fund

 

LLC, Class A

5/21/07

 

NA

 

194,000

 

$

44.00

 

$

32.7500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis Financial

 

Merrill Lynch & Co.,

 

 

 

 

 

 

 

 

 

 

 

Fund

 

Inc., Private Placement

12/24/07

 

NA

 

833,400

 

$

48.00

 

$

46.7016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis Financial

 

Oaktree Capital Group

 

 

 

 

 

 

 

 

 

 

 

Fund

 

LLC, Class A

5/21/07

 

NA

 

76,000

 

$

44.00

 

$

32.7500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis Financial

 

 

 

 

 

 

 

 

 

 

 

 

 

Fund

 

RHJ International, 144A

6/4/07

 

NA

 

396,550

 

$

19.64

 

$

16.3750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis

 

Lehman Brothers

 

 

 

 

 

 

 

 

 

 

 

Appreciation &

 

Holdings Inc., Conv.

 

 

 

 

 

 

 

 

 

 

 

Income Fund

 

Notes, (Convertible into

 

 

 

 

 

 

 

 

 

 

 

 

 

Devon Energy Corp.),

 

 

 

 

 

 

 

 

 

 

 

 

 

0.25%, 08/23/11

8/16/04

$

12,400,000

 

124,000

 

$

100.00

 

$

229.2800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis

 

 

 

 

 

 

 

 

 

 

 

 

 

Appreciation &

 

Merrill Lynch & Co.,

 

 

 

 

 

 

 

 

 

 

 

Income Fund

 

Inc., Private Placement

12/24/07

 

NA

 

500,000

 

$

48.00

 

$

46.7016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis

 

News America Inc.,

 

 

 

 

 

 

 

 

 

 

 

Appreciation &

 

Conv. Notes, Zero Cpn.,

 

 

 

 

 

 

 

 

 

 

 

Income Fund

 

3.38%, 02/28/21

10/07/03

$

16,050,000

 

160,500

 

$

64.33

 

$

59.5000

 

86

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS 

 

The following financial information represents selected data for each share of capital stock outstanding throughout each period:

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Opportunity Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

$

27.52

$

0.05

3

$

(0.43

)

$

(0.38

)

 

Year ended 12/31/2006

 

24.29

 

–

3, 5

 

4.25

 

 

4.25

 

 

Year ended 12/31/2005

 

23.20

 

0.05

3

 

1.88

 

 

1.93

 

 

Year ended 12/31/2004

 

20.47

 

0.08

 

 

2.65

 

 

2.73

 

 

Year ended 12/31/2003

 

14.53

 

(0.07

)

 

6.01

 

 

5.94

 

**Davis Opportunity Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

24.17

 

(0.15

)3

 

(0.36

)

 

(0.51

)

 

Year ended 12/31/2006

 

21.44

 

(0.18

)3

 

3.72

 

 

3.54

 

 

Year ended 12/31/2005

 

20.55

 

(0.13

)3

 

1.66

 

 

1.53

 

 

Year ended 12/31/2004

 

18.28

 

(0.08

)

 

2.35

 

 

2.27

 

 

Year ended 12/31/2003

 

13.07

 

(0.19

)

 

5.40

 

 

5.21

 

**Davis Opportunity Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

25.27

 

(0.15

)3

 

(0.38

)

 

(0.53

)

 

Year ended 12/31/2006

 

22.37

 

(0.18

)3

 

3.90

 

 

3.72

 

 

Year ended 12/31/2005

 

21.42

 

(0.13

)3

 

1.73

 

 

1.60

 

 

Year ended 12/31/2004

 

19.05

 

(0.06

)

 

2.43

 

 

2.37

 

 

Year ended 12/31/2003

 

13.62

 

(0.17

)

 

5.60

 

 

5.43

 

**Davis Opportunity Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

28.29

 

0.13

3

 

(0.44

)

 

(0.31

)

 

Year ended 12/31/2006

 

24.95

 

0.07

3

 

4.37

 

 

4.44

 

 

Year ended 12/31/2005

 

23.81

 

0.13

3

 

1.93

 

 

2.06

 

 

Year ended 12/31/2004

 

20.93

 

0.17

 

 

2.71

 

 

2.88

 

 

Year ended 12/31/2003

 

14.80

 

(0.02

)

 

6.15

 

 

6.13

 

**Davis Government Bond Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

5.52

 

0.21

 

 

0.08

 

 

0.29

 

 

Year ended 12/31/2006

 

5.50

 

0.18

 

 

0.02

 

 

0.20

 

 

Year ended 12/31/2005

 

5.60

 

0.15

 

 

(0.10

)

 

0.05

 

 

Year ended 12/31/2004

 

5.73

 

0.14

 

 

(0.13

)

 

0.01

 

 

Year ended 12/31/2003

 

5.92

 

0.09

 

 

(0.08

)

 

0.01

 

**Davis Government Bond Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

5.51

 

0.17

 

 

0.07

 

 

0.24

 

 

Year ended 12/31/2006

 

5.49

 

0.14

 

 

0.02

 

 

0.16

 

 

Year ended 12/31/2005

 

5.59

 

0.12

 

 

(0.10

)

 

0.02

 

 

Year ended 12/31/2004

 

5.71

 

0.10

 

 

(0.12

)

 

(0.02

)

 

Year ended 12/31/2003

 

5.91

 

0.03

 

 

(0.08

)

 

(0.05

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87

 

 

 

 

Dividends and Distributions

 

 

 

 

 

Dividends from Net Investment Income

Distributions from Realized Gains

Distributions in Excess of Net Investment Income

Distributions in Excess of Net Realized Gains

Return of Capital

Total Distributions

Net Asset Value, End of Period

Total Return1

Net Assets,

End of Period

(000 omitted)

Ratio of Expenses

To Average 

Net Assets

Ratio of Net Investment

Income (Loss) to Average

Net Assets

Gross

Net4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.18

)

$

(1.77

)

$

–

 

$

–

 

$

–

 

$

(1.95

)

$

25.19

(1.42

)%

$

676,995

1.06

%

1.06

%

0.16

%

 

(0.23

)

 

(0.79

)

 

–

 

 

–

 

 

–

 

 

(1.02

)

 

27.52

17.59

 

 

680,181

1.10

 

1.10

 

(0.02

)

 

(0.24

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.84

)

 

24.29

8.33

 

 

446,794

1.15

 

1.15

 

0.18

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

23.20

13.34

 

 

314,526

1.20

 

1.20

 

0.39

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

20.47

40.88

 

 

204,015

1.30

 

1.30

 

(0.47

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

(1.77

)

 

–

 

 

–

 

 

–

 

 

(1.77

)

 

21.89

(2.15

)

 

60,386

1.85

 

1.85

 

(0.63

)

 

(0.02

)

 

(0.79

)

 

–

 

 

–

 

 

–

 

 

(0.81

)

 

24.17

16.60

 

 

81,788

1.88

 

1.88

 

(0.80

)

 

(0.04

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.64

)

 

21.44

7.49

 

 

96,501

1.92

 

1.90

 

(0.57

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

20.55

12.42

 

 

105,077

1.97

 

1.97

 

(0.38

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

18.28

39.86

 

 

96,854

2.06

 

2.06

 

(1.23

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

(1.77

)

 

–

 

 

–

 

 

–

 

 

(1.77

)

 

22.97

(2.14

)

 

287,054

1.81

 

1.81

 

(0.59

)

 

(0.03

)

 

(0.79

)

 

–

 

 

–

 

 

–

 

 

(0.82

)

 

25.27

16.70

 

 

260,254

1.84

 

1.84

 

(0.76

)

 

(0.05

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.65

)

 

22.37

7.48

 

 

150,844

1.91

 

1.90

 

(0.57

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

21.42

12.44

 

 

93,149

1.97

 

1.97

 

(0.38

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

19.05

39.87

 

 

59,174

2.05

 

2.05

 

(1.22

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.27

)

 

(1.77

)

 

–

 

 

–

 

 

–

 

 

(2.04

)

 

25.94

(1.13

)

 

78,537

0.78

 

0.78

 

0.44

 

 

(0.31

)

 

(0.79

)

 

–

 

 

–

 

 

–

 

 

(1.10

)

 

28.29

17.91

 

 

68,591

0.81

 

0.81

 

0.27

 

 

(0.32

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.92

)

 

24.95

8.70

 

 

50,142

0.85

 

0.85

 

0.48

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

23.81

13.76

 

 

17,287

0.86

 

0.86

 

0.73

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

20.93

41.42

 

 

6,577

0.93

 

0.93

 

(0.10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.21

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.21

)

 

5.60

5.45

 

 

27,224

1.03

 

1.03

 

3.95

 

 

(0.18

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.18

)

 

5.52

3.73

 

 

22,134

1.05

 

1.05

 

3.30

 

 

(0.15

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.15

)

 

5.50

0.98

 

 

19,340

1.10

 

1.08

 

2.52

 

 

(0.14

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.14

)

 

5.60

0.17

 

 

19,025

1.25

 

1.25

 

1.84

 

 

(0.17

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.20

)

 

5.73

0.10

 

 

25,168

1.13

 

1.13

 

1.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.17

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.17

)

 

5.58

4.49

 

 

10,402

1.77

 

1.77

 

3.21

 

 

(0.14

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.14

)

 

5.51

3.02

 

 

14,058

1.76

 

1.76

 

2.59

 

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.12

)

 

5.49

0.33

 

 

25,208

1.79

 

1.77

 

1.83

 

 

(0.10

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.10

)

 

5.59

(0.33

)

 

34,921

1.89

 

1.89

 

1.20

 

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.15

)

 

5.71

(0.80

)

 

62,549

1.82

 

1.82

 

1.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

88

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS – (Continued)

 

 

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Government Bond Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

$

5.52

$

0.17

 

$

0.08

 

$

0.25

 

 

Year ended 12/31/2006

 

5.51

 

0.14

 

 

0.01

 

 

0.15

 

 

Year ended 12/31/2005

 

5.61

 

0.12

 

 

(0.10

)

 

0.02

 

 

Year ended 12/31/2004

 

5.73

 

0.10

 

 

(0.12

)

 

(0.02

)

 

Year ended 12/31/2003

 

5.93

 

0.01

 

 

(0.06

)

 

(0.05

)

**Davis Government Bond Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

5.57

 

0.22

 

 

0.07

 

 

0.29

 

 

Year ended 12/31/2006

 

5.55

 

0.19

 

 

0.02

 

 

0.21

 

 

Year ended 12/31/2005

 

5.65

 

0.17

 

 

(0.10

)

 

0.07

 

 

Year ended 12/31/2004

 

5.77

 

0.15

 

 

(0.12

)

 

0.03

 

 

Year ended 12/31/2003

 

5.97

 

0.11

 

 

(0.10

)

 

0.01

 

**Davis Government Money Market Fund Class A, B, C & Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

1.000

 

0.046

 

 

–

 

 

0.046

 

 

Year ended 12/31/2006

 

1.000

 

0.044

 

 

–

 

 

0.044

 

 

Year ended 12/31/2005

 

1.000

 

0.026

 

 

–

 

 

0.026

 

 

Year ended 12/31/2004

 

1.000

 

0.008

 

 

–

 

 

0.008

 

 

Year ended 12/31/2003

 

1.000

 

0.006

 

 

–

 

 

0.006

 

**Davis Financial Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

47.48

 

0.20

 

 

(2.56

)

 

(2.36

)

 

Year ended 12/31/2006

 

42.40

 

0.04

 

 

7.81

 

 

7.85

 

 

Year ended 12/31/2005

 

41.00

 

0.04

 

 

3.27

 

 

3.31

 

 

Year ended 12/31/2004

 

36.57

 

0.02

 

 

4.41

 

 

4.43

 

 

Year ended 12/31/2003

 

26.72

 

0.08

 

 

9.77

 

 

9.85

 

**Davis Financial Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

42.82

 

(0.20

)3

 

(2.28

)

 

(2.48

)

 

Year ended 12/31/2006

 

38.83

 

(0.33

)3

 

7.09

 

 

6.76

 

 

Year ended 12/31/2005

 

38.03

 

(0.29

)3

 

3.00

 

 

2.71

 

 

Year ended 12/31/2004

 

34.22

 

(0.33

)

 

4.14

 

 

3.81

 

 

Year ended 12/31/2003

 

25.21

 

(0.18

)

 

9.19

 

 

9.01

 

**Davis Financial Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

43.58

 

(0.18

)3

 

(2.32

)

 

(2.50

)

 

Year ended 12/31/2006

 

39.46

 

(0.32

)3

 

7.21

 

 

6.89

 

 

Year ended 12/31/2005

 

38.62

 

(0.30

)3

 

3.05

 

 

2.75

 

 

Year ended 12/31/2004

 

34.75

 

(0.32

)

 

4.19

 

 

3.87

 

 

Year ended 12/31/2003

 

25.61

 

(0.18

)

 

9.32

 

 

9.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

89

 

 

 

 

Dividends and Distributions

 

 

 

 

 

Dividends from Net Investment Income

Distributions from Realized Gains

Distributions in Excess of Net Investment Income

Distributions in Excess of Net Realized Gains

Return of Capital

Total Distributions

Net Asset Value, End of Period

Total Return1

Net Assets,

End of Period

(000 omitted)

Ratio of Expenses

To Average 

Net Assets

Ratio of Net Investment

Income (Loss) to Average

Net Assets

Gross

Net4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.17

)

$

–

 

$

–

 

$

–

 

$

–

 

$

(0.17

)

$

5.60

4.66

%

$

14,754

1.75

%

1.75

%

3.23

%

 

(0.14

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.14

)

 

5.52

2.78

 

 

7,483

1.79

 

1.79

 

2.56

 

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.12

)

 

5.51

0.29

 

 

5,358

1.84

 

1.82

 

1.78

 

 

(0.10

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.10

)

 

5.61

(0.34

)

 

6,688

1.93

 

1.93

 

1.16

 

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.15

)

 

5.73

(0.80

)

 

12,955

1.85

 

1.85

 

1.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.22

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.22

)

 

5.64

5.32

 

 

410

0.99

 

0.99

 

3.99

 

 

(0.19

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.19

)

 

5.57

3.86

 

 

302

0.93

 

0.93

 

3.42

 

 

(0.17

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.17

)

 

5.55

1.22

 

 

115

0.98

 

0.97

 

2.63

 

 

(0.15

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.15

)

 

5.65

0.61

 

 

219

1.02

 

1.02

 

2.07

 

 

(0.18

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.21

)

 

5.77

0.17

 

 

263

0.92

 

0.92

 

2.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.046

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.046

)

 

1.000

4.69

 

 

596,446

0.55

 

0.55

 

4.59

 

 

(0.044

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.044

)

 

1.000

4.47

 

 

558,107

0.56

 

0.56

 

4.41

 

 

(0.026

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.026

)

 

1.000

2.68

 

 

513,221

0.57

 

0.56

 

2.65

 

 

(0.008

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.008

)

 

1.000

0.83

 

 

572,381

0.58

 

0.58

 

0.83

 

 

(0.006

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.006

)

 

1.000

0.62

 

 

571,431

0.60

 

0.60

 

0.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.10

)

 

(4.31

)

 

–

 

 

–

 

 

–

 

 

(4.41

)

 

40.71

(5.31

)

 

740,235

0.97

 

0.97

 

0.44

 

 

–

 

 

(2.77

)

 

–

 

 

–

 

 

–

 

 

(2.77

)

 

47.48

18.74

 

 

818,054

0.98

 

0.98

 

0.09

 

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

42.40

8.03

 

 

613,683

0.99

 

0.98

 

0.10

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

41.00

12.11

 

 

583,387

1.01

 

1.01

 

0.05

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

36.57

36.86

 

 

535,300

1.10

 

1.10

 

0.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

(4.31

)

 

–

 

 

–

 

 

–

 

 

(4.31

)

 

36.03

(6.17

)

 

50,341

1.87

 

1.87

 

(0.46

)

 

–

 

 

(2.77

)

 

–

 

 

–

 

 

–

 

 

(2.77

)

 

42.82

17.65

 

 

95,545

1.88

 

1.88

 

(0.81

)

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

38.83

7.08

 

 

192,049

1.88

 

1.85

 

(0.77

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

38.03

11.13

 

 

276,945

1.88

 

1.88

 

(0.82

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

34.22

35.74

 

 

304,513

1.98

 

1.98

 

(0.61

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

(4.31

)

 

–

 

 

–

 

 

–

 

 

(4.31

)

 

36.77

(6.10

)

 

87,216

1.83

 

1.83

 

(0.42

)

 

–

 

 

(2.77

)

 

–

 

 

–

 

 

–

 

 

(2.77

)

 

43.58

17.70

 

 

96,478

1.85

 

1.85

 

(0.78

)

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

39.46

7.07

 

 

94,512

1.87

 

1.85

 

(0.77

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

38.62

11.14

 

 

104,508

1.89

 

1.89

 

(0.83

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

34.75

35.69

 

 

108,557

1.99

 

1.99

 

(0.62

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS – (Continued)

 

 

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Financial Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

$

48.38

$

0.28

 

$

(2.61

)

$

(2.33

)

 

Year ended 12/31/2006

 

43.10

 

0.11

 

 

7.94

 

 

8.05

 

 

Year ended 12/31/2005

 

41.59

 

0.09

 

 

3.33

 

 

3.42

 

 

Year ended 12/31/2004

 

37.03

 

0.09

 

 

4.47

 

 

4.56

 

 

Year ended 12/31/2003

 

27.00

 

0.17

 

 

9.86

 

 

10.03

 

**Davis Appreciation & Income Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

29.71

 

0.61

 

 

(0.18

)

 

0.43

 

 

Year ended 12/31/2006

 

27.94

 

0.68

 

 

3.52

 

 

4.20

 

 

Year ended 12/31/2005

 

27.50

 

0.59

 

 

1.11

 

 

1.70

 

 

Year ended 12/31/2004

 

24.95

 

0.65

 

 

2.57

 

 

3.22

 

 

Year ended 12/31/2003

 

20.30

 

0.74

 

 

4.65

 

 

5.39

 

**Davis Appreciation & Income Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

29.40

 

0.38

3

 

(0.21

)

 

0.17

 

 

Year ended 12/31/2006

 

27.67

 

0.45

3

 

3.46

 

 

3.91

 

 

Year ended 12/31/2005

 

27.25

 

0.35

 

 

1.08

 

 

1.43

 

 

Year ended 12/31/2004

 

24.72

 

0.41

 

 

2.54

 

 

2.95

 

 

Year ended 12/31/2003

 

20.13

 

0.52

 

 

4.59

 

 

5.11

 

**Davis Appreciation & Income Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

29.84

 

0.38

3

 

(0.20

)

 

0.18

 

 

Year ended 12/31/2006

 

28.06

 

0.45

3

 

3.51

 

 

3.96

 

 

Year ended 12/31/2005

 

27.62

 

0.36

 

 

1.10

 

 

1.46

 

 

Year ended 12/31/2004

 

25.06

 

0.42

 

 

2.57

 

 

2.99

 

 

Year ended 12/31/2003

 

20.40

 

0.53

 

 

4.66

 

 

5.19

 

**Davis Appreciation & Income Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

29.84

 

0.72

3

 

(0.22

)

 

0.50

 

 

Year ended 12/31/2006

 

28.05

 

0.76

 

 

3.54

 

 

4.30

 

 

Year ended 12/31/2005

 

27.61

 

0.66

 

 

1.11

 

 

1.77

 

 

Year ended 12/31/2004

 

25.04

 

0.71

 

 

2.58

 

 

3.29

 

 

Year ended 12/31/2003

 

20.38

 

0.78

 

 

4.66

 

 

5.44

 

**Davis Real Estate Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

46.42

 

0.81

3

 

(7.45

)

 

(6.64

)

 

Year ended 12/31/2006

 

40.23

 

0.61

3

 

13.28

 

 

13.89

 

 

Year ended 12/31/2005

 

39.52

 

0.59

 

 

4.37

 

 

4.96

 

 

Year ended 12/31/2004

 

30.32

 

0.64

 

 

9.32

 

 

9.96

 

 

Year ended 12/31/2003

 

22.79

 

0.90

 

 

7.53

 

 

8.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

91

 

 

 

 

Dividends and Distributions

 

 

 

 

 

Dividends from Net Investment Income

Distributions from Realized Gains

Distributions in Excess of Net Investment Income

Distributions in Excess of Net Realized Gains

Return of Capital

Total Distributions

Net Asset Value, End of Period

Total Return1

Net Assets,

End of Period

(000 omitted)

Ratio of Expenses

To Average 

Net Assets

Ratio of Net Investment

Income (Loss) to Average

Net Assets

Gross

Net4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.17

)

$

(4.31

)

$

–

 

$

–

 

$

–

 

$

(4.48

)

$

41.57

(5.15

)%

$

8,844

0.84

%

0.84

%

0.57

%

 

–

 

 

(2.77

)

 

–

 

 

–

 

 

–

 

 

(2.77

)

 

48.38

18.90

 

 

10,566

0.84

 

0.84

 

0.23

 

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

43.10

8.18

 

 

11,815

0.85

 

0.84

 

0.24

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

41.59

12.31

 

 

9,980

0.85

 

0.85

 

0.21

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

37.03

37.15

 

 

11,563

0.91

 

0.91

 

0.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.60

)

 

(1.33

)

 

–

 

 

–

 

 

–

 

 

(1.93

)

 

28.21

1.30

 

 

567,728

1.01

 

1.01

 

2.04

 

 

(0.64

)

 

(1.79

)

 

–

 

 

–

 

 

–

 

 

(2.43

)

 

29.71

15.19

 

 

393,888

1.06

 

1.06

 

2.35

 

 

(0.62

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.26

)

 

27.94

6.29

 

 

224,600

1.07

 

1.07

 

2.12

 

 

(0.67

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.67

)

 

27.50

13.08

 

 

149,687

1.08

 

1.08

 

2.52

 

 

(0.74

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.74

)

 

24.95

26.94

 

 

114,003

1.10

 

1.10

 

3.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.34

)

 

(1.33

)

 

–

 

 

–

 

 

–

 

 

(1.67

)

 

27.90

0.46

 

 

44,099

1.84

 

1.84

 

1.21

 

 

(0.39

)

 

(1.79

)

 

–

 

 

–

 

 

–

 

 

(2.18

)

 

29.40

14.20

 

 

51,102

1.89

 

1.89

 

1.52

 

 

(0.37

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.01

)

 

27.67

5.30

 

 

75,289

1.94

 

1.93

 

1.26

 

 

(0.42

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.42

)

 

27.25

12.06

 

 

80,729

1.99

 

1.99

 

1.61

 

 

(0.52

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.52

)

 

24.72

25.71

 

 

72,181

2.03

 

2.03

 

2.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.35

)

 

(1.33

)

 

–

 

 

–

 

 

–

 

 

(1.68

)

 

28.34

0.50

 

 

169,456

1.80

 

1.80

 

1.25

 

 

(0.39

)

 

(1.79

)

 

–

 

 

–

 

 

–

 

 

(2.18

)

 

29.84

14.22

 

 

90,692

1.88

 

1.87

 

1.54

 

 

(0.38

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.02

)

 

28.06

5.34

 

 

55,395

1.93

 

1.93

 

1.26

 

 

(0.43

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.43

)

 

27.62

12.05

 

 

34,627

1.98

 

1.98

 

1.62

 

 

(0.53

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.53

)

 

25.06

25.75

 

 

24,531

2.02

 

2.02

 

2.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.68

)

 

(1.33

)

 

–

 

 

–

 

 

–

 

 

(2.01

)

 

28.33

1.55

 

 

105,327

0.75

 

0.74

 

2.31

 

 

(0.72

)

 

(1.79

)

 

–

 

 

–

 

 

–

 

 

(2.51

)

 

29.84

15.49

 

 

50,052

0.80

 

0.80

 

2.61

 

 

(0.69

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.33

)

 

28.05

6.52

 

 

37,110

0.83

 

0.83

 

2.36

 

 

(0.72

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.72

)

 

27.61

13.35

 

 

30,260

0.86

 

0.86

 

2.74

 

 

(0.78

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.78

)

 

25.04

27.13

 

 

25,892

0.88

 

0.88

 

3.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.58

)

 

(8.70

)

 

–

 

 

–

 

 

–

 

 

(9.28

)

 

30.50

(14.87

)

 

460,644

1.08

 

1.08

 

1.84

 

 

(0.88

)

 

(6.82

)

 

–

 

 

–

 

 

–

 

 

(7.70

)

 

46.42

34.58

 

 

573,375

1.09

 

1.09

 

1.37

 

 

(0.83

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(4.25

)

 

40.23

12.76

 

 

372,571

1.10

 

1.09

 

1.48

 

 

(0.76

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.76

)

 

39.52

33.22

 

 

313,378

1.26

 

1.26

 

1.93

 

 

(0.90

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.90

)

 

30.32

37.52

 

 

190,505

1.30

 

1.30

 

3.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

92

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS – (Continued)

 

 

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Real Estate Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

$

46.16

$

0.53

3

$

(7.46

)

$

(6.93

)

 

Year ended 12/31/2006

 

40.05

 

0.38

3

 

13.07

 

 

13.45

 

 

Year ended 12/31/2005

 

39.36

 

0.30

 

 

4.34

 

 

4.64

 

 

Year ended 12/31/2004

 

30.20

 

0.43

 

 

9.26

 

 

9.69

 

 

Year ended 12/31/2003

 

22.71

 

0.72

 

 

7.49

 

 

8.21

 

**Davis Real Estate Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

46.56

 

0.52

3

 

(7.50

)

 

(6.98

)

 

Year ended 12/31/2006

 

40.35

 

0.44

3

 

13.12

 

 

13.56

 

 

Year ended 12/31/2005

 

39.63

 

0.31

 

 

4.37

 

 

4.68

 

 

Year ended 12/31/2004

 

30.41

 

0.43

 

 

9.33

 

 

9.76

 

 

Year ended 12/31/2003

 

22.87

 

0.72

 

 

7.54

 

 

8.26

 

**Davis Real Estate Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 12/31/2007

 

46.81

 

0.92

3

 

(7.47

)

 

(6.55

)

 

Year ended 12/31/2006

 

40.53

 

0.77

 

 

13.37

 

 

14.14

 

 

Year ended 12/31/2005

 

39.78

 

0.74

 

 

4.42

 

 

5.16

 

 

Year ended 12/31/2004

 

30.51

 

0.82

 

 

9.37

 

 

10.19

 

 

Year ended 12/31/2003

 

22.93

 

1.02

 

 

7.58

 

 

8.60

 

 

 

 

 

**Portfolio Turnover2** 

(for all classes of shares)

 

**Year ended December 31,**

 

 

 

**2007**

 

**2006**

 

**2005**

 

**2004**

 

**2003**

 

Davis Opportunity Fund

 

37.05

%

 

40.26

%

 

35.77

%

 

22.22

%

 

42.34

%

 

Davis Government Bond Fund

 

60.23

 

 

64.94

 

 

55.46

 

 

165.17

 

 

121.61

 

 

Davis Financial Fund

 

15.11

 

 

4.20

 

 

5.17

 

 

–

 

 

9.29

 

 

Davis Appreciation & Income Fund

 

23.26

 

 

25.33

 

 

16.64

 

 

21.26

 

 

33.35

 

 

Davis Real Estate Fund

 

46.37

 

 

37.97

 

 

24.86

 

 

31.37

 

 

25.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

Dividends and Distributions

 

 

 

 

 

Dividends from Net Investment Income

Distributions from Realized Gains

Distributions in Excess of Net Investment Income

Distributions in Excess of Net Realized Gains

Return of Capital

Total Distributions

Net Asset Value, End of Period

Total Return1

Net Assets,

End of Period

(000 omitted)

Ratio of Expenses

To Average 

Net Assets

Ratio of Net Investment

Income (Loss) to Average

Net Assets

Gross

Net4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.24

)

$

(8.70

)

$

–

 

$

–

 

$

–

 

$

(8.94

)

$

30.29

(15.52)

%

$

24,872

1.87

%

1.87

%

1.05

%

 

(0.52

)

 

(6.82

)

 

–

 

 

–

 

 

–

 

 

(7.34

)

 

46.16

33.50

 

 

55,347

1.86

 

1.86

 

0.60

 

 

(0.53

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(3.95

)

 

40.05

11.91

 

 

87,039

1.89

 

1.88

 

0.69

 

 

(0.53

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.53

)

 

39.36

32.34

 

 

125,550

1.94

 

1.94

 

1.25

 

 

(0.72

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.72

)

 

30.20

36.52

 

 

110,303

1.99

 

1.99

 

2.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.25

)

 

(8.70

)

 

–

 

 

–

 

 

–

 

 

(8.95

)

 

30.63

(15.48)

 

 

73,594

1.84

 

1.84

 

1.08

 

 

(0.53

)

 

(6.82

)

 

–

 

 

–

 

 

–

 

 

(7.35

)

 

46.56

33.54

 

 

119,093

1.84

 

1.84

 

0.62

 

 

(0.54

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(3.96

)

 

40.35

11.93

 

 

95,229

1.88

 

1.87

 

0.70

 

 

(0.54

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.54

)

 

39.63

32.37

 

 

86,835

1.93

 

1.93

 

1.26

 

 

(0.72

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.72

)

 

30.41

36.52

 

 

57,657

1.97

 

1.97

 

2.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.74

)

 

(8.70

)

 

–

 

 

–

 

 

–

 

 

(9.44

)

 

30.82

(14.58)

 

 

57,995

0.75

 

0.75

 

2.17

 

 

(1.04

)

 

(6.82

)

 

–

 

 

–

 

 

–

 

 

(7.86

)

 

46.81

34.98

 

 

113,856

0.74

 

0.74

 

1.72

 

 

(0.99

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(4.41

)

 

40.53

13.20

 

 

79,156

0.77

 

0.77

 

1.80

 

 

(0.92

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.92

)

 

39.78

33.85

 

 

69,241

0.80

 

0.80

 

2.39

 

 

(1.02

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(1.02

)

 

30.51

38.10

 

 

53,740

0.84

 

0.84

 

3.86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1  Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns.

 

2  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.

 

3  Per share calculations were based on average shares outstanding for the period.

 

4  The ratios in this column reflect the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.

 

5  Less than $0.005 per share.

 

 

 

 

 

***See Notes to Financial Statements***

 

94

 

**DAVIS SERIES, INC.**  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

**To the Shareholders and Board of Directors**

**of Davis Series, Inc.:**

 

We have audited the accompanying statements of assets and liabilities of Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund (comprising the Davis Series, Inc.), including the schedules of investments, as of December 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management.  Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. 

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund as of December 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

 

 

KPMG LLP

 

Denver, Colorado

February 25, 2008

 

95

 

**DAVIS SERIES, INC.**

FEDERAL INCOME TAX INFORMATION

For the Year Ended December 31, 2007 (Unaudited)

 

In early 2008, shareholders will receive information regarding all dividends and distributions paid to them by the Funds during calendar year 2007.  Regulations of the U.S. Treasury Department require the Funds to report this information to the Internal Revenue Service.

The information and distributions reported herein may differ from the information reported as distributions taxable to certain shareholders for the calendar year 2007 with their 2007 Form 1099-DIV.

 

The information is presented to assist shareholders in reporting distributions received from the Funds to the Internal Revenue Service.  Because of the complexity of the federal regulations that may affect your individual tax return and the many variations in state and local regulations, we recommend that you consult your tax adviser for specific guidance.

 

**Davis Opportunity Fund**

During the calendar year 2007, the Fund declared and paid long-term capital gain distributions in the amount of $68,648,185.

During the calendar year 2007, $12,582,397 of dividends paid by the Fund constituted income dividends for Federal Income Tax Purposes. The Fund designates $4,261,040 or 34% as income qualifying for the corporate dividends-received deduction. 

For the calendar year 2007, certain dividends paid by the Fund constitute qualified dividend income for Federal Income Tax purposes. The Fund designates $5,746,144 or 46% as qualified dividend income.

Recent tax legislation allows a regulated investment company to designate distributions not designated as capital gain distributions, either as interest related dividends or short-term capital gain dividends, both of which are exempt from the U.S. withholding tax applicable to non U.S. taxpayers. The Fund paid a qualified short term capital gain dividend of $7,274,199.

 

**Davis Government Bond Fund**

During the calendar year 2007, $1,643,859 of dividends paid by the Fund constituted income dividends for Federal Income Tax Purposes. 

None of the dividends paid by the Fund during the calendar year ended 2007 are eligible for the corporate dividend-received deduction.

 

For the calendar year ended 2007, none of the dividends paid by the Fund constitute qualified dividend income for Federal Income Tax purposes.

 

**Davis Government Money Market Fund**

During the calendar year 2007, $25,326,942 of dividends paid by the Fund constituted income dividends for Federal Income Tax Purposes. 

None of the dividends paid by the Fund during the calendar year ended 2007 are eligible for the corporate dividend-received deduction.

 

For the calendar year ended 2007, none of the dividends paid by the Fund constitute qualified dividend income for Federal Income Tax purposes.

 

Recent tax legislation allows a regulated investment company to designate distributions not designated as capital gain distributions, either as interest related dividends or short-term capital gain dividends, both of which are exempt from the U.S. withholding tax applicable to non U.S. taxpayers.  For the calendar year 2007, $25,326,942 or 100% of the ordinary distributions paid by the Fund qualifies as an interest related dividend.

 

96

 

**DAVIS SERIES, INC.**

FEDERAL INCOME TAX INFORMATION - (Continued)

For the Year Ended December 31, 2007 (Unaudited)

 

**Davis Financial Fund**

During the calendar year 2007, the Fund declared and paid long-term capital gain distributions in the amount of $86,312,293.

During the calendar year 2007, $1,674,670 of dividends paid by the Fund constituted income dividends for Federal Income Tax Purposes. The Fund designates $1,674,670 or 100% as income qualifying for the corporate dividends-received deduction. 

For the calendar year 2007, certain dividends paid by the Fund constitute qualified dividend income for Federal Income Tax purposes. The Fund designates $1,674,670 or 100% as qualified dividend income.

Recent tax legislation allows a regulated investment company to designate distributions not designated as capital gain distributions, either as interest related dividends or short-term capital gain dividends, both of which are exempt from the U.S. withholding tax applicable to non U.S. taxpayers.  For the calendar year 2007, $13,627 or 1% of the ordinary distributions paid by the Fund qualifies as an interest related dividend. 

 

**Davis Appreciation & Income Fund**

During the calendar year 2007, the Fund declared and paid long-term capital gain distributions in the amount of $27,481,020.

During the calendar year 2007, $28,017,614 of dividends paid by the Fund constituted income dividends for Federal Income Tax Purposes. The Fund designates $5,089,132 or 18% as income qualifying for the corporate dividends-received deduction. 

For the calendar year 2007, certain dividends paid by the Fund constitute qualified dividend income for Federal Income Tax purposes. The Fund designates $5,419,537 or 19% as qualified dividend income.

Recent tax legislation allows a regulated investment company to designate distributions not designated as capital gain distributions, either as interest related dividends or short-term capital gain dividends, both of which are exempt from the U.S. withholding tax applicable to non U.S. taxpayers.  For the calendar year 2007, $12,047,159 or 43% of the ordinary distributions paid by the Fund qualifies as an interest related dividend. In addition, the Fund paid a qualified short term capital gain dividend of $12,689,421.

 

**Davis Real Estate Fund**

During the calendar year 2007, the Fund declared and paid long-term capital gain distributions in the amount of $137,902,182.

During the calendar year 2007, $13,503,572 of dividends paid by the Fund constituted income dividends for Federal Income Tax Purposes. The Fund designates $5,020,730 or 37% as income qualifying for the corporate dividends-received deduction. 

For the calendar year 2007, certain dividends paid by the Fund constitute qualified dividend income for Federal Income Tax purposes. The Fund designates $6,071,348 or 45% as qualified dividend income.

Recent tax legislation allows a regulated investment company to designate distributions not designated as capital gain distributions, either as interest related dividends or short-term capital gain dividends, both of which are exempt from the U.S. withholding tax applicable to non U.S. taxpayers. For the calendar year 2007, $2,217,301 or 16% of the ordinary distributions paid by the Fund qualifies as an interest related dividend. In addition, the Fund paid a qualified short term capital gain dividend of $4,002,270.

 

 

97

 

**DAVIS SERIES, INC.**

For the Year Ended December 31, 2007 (Unaudited)

 

 

**Portfolio Proxy Voting Policies and Procedures**

 

The Funds have adopted Portfolio Proxy Voting Policies and Procedures under which the Funds vote proxies relating to securities held by the Funds.  A description of the Funds’ Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Funds toll-free at 1-800-279-0279, (ii) on the Funds’ website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

 

In addition, the Funds are required to file Form N-PX, with their complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year.  The Funds’ Form N-PX filing is available (i) without charge, upon request, by calling the Funds toll-free at 1-800-279-0279, (ii) on the Funds’ website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

 

**Form N-Q**

 

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Funds’ Form N-Q is available without charge upon request by calling 1-800-279-0279 or on the Funds’ website at www.davisfunds.com or on the SEC’s website at www.sec.gov.  The Funds’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

 

98

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**DIRECTORS**

 

For the purposes of their service as directors to the Davis Funds, the business address for each of the directors is 2949 E. Elvira Road, Suite 101, Tucson, AZ 85706. Each Director serves until their retirement, resignation, death or removal. Subject to exceptions and exemptions which may be granted by the Independent Directors, effective January 1, 2006, Directors must retire at the close of business on the last day of the calendar year in which the Director attains age seventy-four (74).

 

 

 

 

 

**Number of**

 

 

 

**Term of**

 

**Portfolios in**

 

 

 

**Office and**

 

**Fund**

 

 

**Position(s)**

**Length of**

 

**Complex**

 

**Name**

**Held With**

**Time**

**Principal Occupation(s)**

**Overseen by**

**Other Directorships**

(birthdate)

**Fund**

**Served**

**During Past Five Years**

**Director**

**Held by Director**

 

***Independent Directors***

 

 

 

 

 

 

**Marc P. Blum**

(9/9/42)

Director

Director since 1986

Chief Executive Officer, World Total Return Fund, LLLP; of Counsel to Gordon, Feinblatt, Rothman, Hoffberger and Hollander, LLC (law firm).

13

Director, Legg Mason  Investment Counsel and Trust Company N.A. (asset management company) and Rodney Trust Company (Delaware).

 

 

 

 

 

 

**John S. Gates, Jr.**

(8/2/53)

Director

Director since 2007

Chairman and Chief Executive Officer of PortaeCo LLC, a private investment company (beginning in 2006); Co-founder of Centerpoint Properties Trust (REIT) and former Co-chairman and Chief Executive Officer for the last 22 years (until 2006).

13

 

Director, DCT Industrial Trust (a REIT).

 

 

 

 

 

 

**Thomas S. Gayner**

(12/16/61)

Director

Director since 2004

Executive Vice President and Chief Investment Officer, Markel Corporation (insurance company).

13

Director, First Market Bank; Director, Washington Post, Co. (newspaper publisher).

 

 

 

 

 

 

**Jerry D. Geist**

(5/23/34)

Director

Director since 1986

Chairman, Santa Fe Center Enterprises (energy project development).

13

 

Director, CH2M-Hill, Inc. (engineering); Member, Investment Committee for Microgeneration Technology Fund; UTECH Funds.

 

 

 

 

 

 

**G. Bernard Hamilton**

(3/18/37)

Director

Director since 1978

Managing General Partner, Avanti Partners, L.P. (investment partnership), retired 2005.

13

none 

 

 

99

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**DIRECTORS – (Continued)**

 

 

 

 

 

**Number of**

 

 

 

**Term of**

 

**Portfolios in**

 

 

 

**Office and**

 

**Fund**

 

 

**Position(s)**

**Length of**

 

**Complex**

 

**Name**

**Held With**

**Time**

**Principal Occupation(s)**

**Overseen by**

**Other Directorships**

(birthdate)

**Fund**

**Served**

**During Past Five Years**

**Director**

**Held by Director**

 

***Independent Directors – (Continued)***

 

 

 

 

 

 

**Samuel H. Iapalucci**

(7/19/52)

Director

Director since 2006

Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc., (engineering).

13

none 

 

 

 

 

 

 

**Robert P. Morgenthau**

(3/22/57)

Director

Director since 2002

Chairman, NorthRoad Capital Management, LLC (an investment management firm) since June 2002.

13

none 

 

 

 

 

 

 

**Christian R. Sonne**

(5/6/36)

Director

Director since 1990

General Partner of Tuxedo Park Associates (land holding and development firm).

13

none

 

 

 

 

 

 

**Marsha Williams**

(3/28/51)

Director

Director since 1999

Senior Vice President and Chief Financial Officer, Orbitz Worldwide, Inc. (travel-service provider); former Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a real estate investment trust).

16

Director, the Selected Funds (consisting of three portfolios) since 1996; Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering).

 

 

100

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**DIRECTORS – (Continued)**

 

 

 

 

 

**Number of**

 

 

 

**Term of**

 

**Portfolios in**

 

 

 

**Office and**

 

**Fund**

 

 

**Position(s)**

**Length of**

 

**Complex**

 

**Name**

**Held With**

**Time**

**Principal Occupation(s)**

**Overseen by**

**Other Directorships**

(birthdate)

**Fund**

**Served**

**During Past Five Years**

**Director**

**Held by Director**

 

***Inside Directors****

 

 

 

 

 

 

**Jeremy H. Biggs**

(8/16/35)

Director/

Chairman

Director since 1994

Vice Chairman, Member of the Audit Committee and Member of the International Investment Committee, former Chief Investment Officer (1980 through 2005), all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P. 

13

none

 

 

 

 

 

 

**Andrew A. Davis**

(6/25/63)

Director

Director since 1997

President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

16

Director, the Selected Funds (consisting of three portfolios) since 1998.

 

 

 

 

 

 

**Christopher C. Davis**

(7/13/65)

Director

Director since 1997

President or Vice President of each Davis Fund, Selected Fund, and Clipper Fund; Chairman, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser, including sole member of the Adviser’s general partner, Davis Investments, LLC; Employee of Shelby Cullom Davis & Co. (registered broker/dealer).

16

Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (newspaper publisher).

 

*Jeremy H. Biggs, Andrew A. Davis, and Christopher C. Davis own partnership units (directly, indirectly or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.

 

101

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Tucson, Arizona 85706

 

 

**Directors**

**Officers**

 

Jeremy H. Biggs

Jeremy H. Biggs

 

Marc P. Blum

*Chairman*

 

Andrew A. Davis

Andrew A. Davis

 

Christopher C. Davis

*President – Davis Appreciation & Income*

 

John S. Gates, Jr.

*Fund, Davis Real Estate Fund &*

 

Thomas S. Gayner

*Vice President – Davis Opportunity Fund, Davis*

 

Jerry D. Geist

*Government Bond Fund, Davis Government*

 

G. Bernard Hamilton

*Money Market Fund, & Davis Financial Fund*

 

Samuel H. Iapalucci

Christopher C. Davis

 

Robert P. Morgenthau

*President – Davis Opportunity Fund,*

 

Christian R. Sonne

*Davis Financial Fund & Vice President - Davis*

 

Marsha Williams

*Government Bond Fund, Davis Government*

 

 

*Money Market Fund, Davis Appreciation &*

 

 

*Income Fund, & Davis Real Estate Fund*

 

 

Creston A. King

 

 

*President – Davis Government Money Market*

**Investment Adviser**

*Fund & Davis Government Bond Fund*

Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”)

Kenneth C. Eich

2949 East Elvira Road, Suite 101

*Executive Vice President & Principal*

Tucson, Arizona 85706

*Executive Officer*

(800) 279-0279

Sharra L. Haynes

 

*Vice President & Chief Compliance Officer*

**Distributor**

Douglas A. Haines

Davis Distributors, LLC

*Vice President & Principal Accounting Officer*

2949 East Elvira Road, Suite 101

Thomas D. Tays

Tucson, Arizona 85706

*Vice President & Secretary*

 

 

**Transfer Agent**

 

Boston Financial Data Services, Inc

 

c/o The Davis Funds

 

P.O. Box 8406

 

Boston, Massachusetts 02266-8406

 

 

 

**Custodian**

 

State Street Bank and Trust Co.

 

One Lincoln Street

 

Boston, Massachusetts 02111

 

 

 

**Counsel**

 

Seyfarth Shaw LLP

 

131 South Dearborn Street, Suite 2400

 

Chicago, Illinois 60603-5577

 

 

 

**Independent Registered Public Accounting Firm**

 

KPMG LLP

 

707 Seventeenth Street, Suite 2700

 

Denver, Colorado 80202

 

 

 

***For more information about Davis Series, Inc. including management fee, charges and expenses, see the current prospectus, which must precede or accompany this report.  The Funds’ Statement of Additional Information contains additional information about the Funds’ Directors and is available without charge upon request by calling 1-800-279-0279 or on the Funds’ website  at www.davisfunds.com.  Quarterly Fact sheets are available on the Funds’ website  at www.davisfunds.com.***

 

 

 

102

 

 

**ITEM 2.  CODE OF ETHICS**

 

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

 

A copy of the code of ethics is filed as an exhibit to this form N-CSR.

 

**ITEM 3.  AUDIT COMMITTEE FINANCIAL EXPERT**

 

The registrant’s board of directors has determined that independent trustee Marsha Williams qualifies as the “audit committee financial expert”, as defined in Item 3 of form N-CSR.

 

**ITEM 4.  PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

 

(a)

Audit Fees.  The aggregate Audit Fees billed by KPMP LLP (“KPMG”) for professional    services rendered for the audits of the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for the fiscal year ends December 31, 2007 and December 31, 2006 were $138,000 and $123,600, respectively.

 

 

(b)

Audit-Related Fees.  The aggregate Audit-Related Fees billed by KPMG for services rendered for assurance and related services that are not reasonably related to the performance of the audit or review of the fund financial statements, but not reported as Audit Fees fore fiscal year ends December 31, 2007 and December 31, 2006 were $0 and $0, respectively.

 

 

(c)

Tax Fees.  The aggregate Tax Fees billed by KPMG for professional services rendered for tax compliance, tax advise and tax planning for the fiscal year ends December 31, 2007 and December 31, 2006 were $40,320 and $34,740, respectively. 

 

Fees included in the Tax Fee category comprise all services performed by professional staff in the independent accountant’s tax division except those services related to the audit.  These services include preparation of tax returns, tax advice related to mergers and a review of the fund income and capital gain distributions.

 

 

(d)

All Other Fees.  The aggregate Other Fees billed by KPMG for all other non-audit services rendered to the fund for the fiscal year ends December 31, 2007 and December 31, 2006 were $0 and $0, respectively.

 

(e)(1)  Audit Committee Pre-Approval Policies and Procedures.

 

The fund Audit Committee must pre-approve all audit and non-audit services provided by the independent accountant relating to the operations or financial reporting of the funds.  Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.

 

The fund Audit Committee has adopted a policy whereby audit and non-audit services performed by the fund independent accountant require pre-approval in advance at regularly scheduled Audit Committee meetings.  If such a service is required between regularly scheduled Audit Committee meetings, pre-approval may be authorized by the Audit Committee Chairperson with ratification at the next scheduled audit committee meeting.

 

 

 

(2)

No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of 

Rule 2-01 of Regulation S-X.

 

 

(f)  

Not applicable

 

 

(g)

The Funds’ independent accountant did not provide any services to the investment advisor or any affiliate for the fiscal years ended July 31, 2005 and July 31, 2004.  The fund has not paid any fees for non-audit not previously disclosed in items 4 (b) – (d).

 

 

(h)

The registrant’s audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.  No such services were rendered.

 

**ITEM 5.  AUDIT COMMITTEE OF LISTED REGISTRANTS**

 

Not Applicable

 

**ITEM 6.  SCHEDULE OF INVESTMENTS**

 

Not Applicable.  The complete Schedule of Investments is included in Item 1 of this for N-CSR

 

**ITEM 7.  DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES**

 

Not Applicable****

 

**ITEM 8.  PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES**

 

Not Applicable

 

**ITEM 9.  PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS**

 

Not Applicable

 

**ITEM 10.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

There have been no changes to the procedure by which shareholders may recommend nominees to the registrant’s Board of Trustees.

 

**ITEM 11.  CONTROLS AND PROCUDURES**

 

 

(a)

The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2 (c) under the Investment Company Act of 1940, as amended) are effective as of a date within 90 days of the filing date of this report.

 

 

 

(b)

There have been no significant changes in the registrant’s internal controls or in other factors that could significantly affect these controls.

 

**ITEM 12.  EXHIBITS**

 

(a)(1)  The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is filed as an exhibit to this form N-CSR.

 

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached.

 

(a)(3)  Not applicable

 

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

DAVIS SERIES, INC.

 

By

/s/ Kenneth C. Eich

 

Kenneth C. Eich

 

Principal Executive Officer

 

Date:  March 5, 2008

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By

/s/ Kenneth C. Eich

 

Kenneth C. Eich

 

Principal Executive Officer

 

Date:  March 5, 2008

 

By

/s/ Douglas A. Haines

 

Douglas A. Haines

 

Principal Financial Officer

 

Date:  March 5, 2008