**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**

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**DAVIS SERIES, INC.**

(Exact name of registrant as specified in charter)

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2949 East Elvira Road, Suite 101

Tucson, AZ 85756

(Address of principal executive offices)

 

Thomas D. Tays

Davis Selected Advisers, L.P.

2949 East Elvira Road, Suite 101

Tucson, AZ 85756

(Name and address of agent for service)

 

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

**Date of fiscal year end: December 31, 2008**

**Date of reporting period: December 31, 2008**

 

____________________

 

 

 

 

**ITEM 1. REPORT TO STOCKHOLDERS**

 

 

 

 

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| **DAVIS SERIES, INC.** | **Table of Contents** |
|------------------------|-----------------------|

 

 

| Shareholder Letter                                       |   2 |
|----------------------------------------------------------|----------|
|                                                     |     |
| Management's Discussion and Analysis:                    |     |
| Davis Opportunity Fund                                   |   3 |
| Davis Government Bond Fund                               |   3 |
| Davis Financial Fund                                     |   4 |
| Davis Appreciation & Income Fund                     |   4 |
| Davis Real Estate Fund                                   |   5 |
|                                                     |     |
| Fund Overview, Portfolio Activity, and Fund Performance: |     |
| Davis Opportunity Fund                                   |   9 |
| Davis Government Bond Fund                               | 16       |
| Davis Government Money Market Fund                       | 21       |
| Davis Financial Fund                                     | 22       |
| Davis Appreciation & Income Fund                     | 28       |
| Davis Real Estate Fund                                   | 35       |
|                                                     |     |
| Schedule of Investments:                                 |     |
| Davis Opportunity Fund                                   | 42       |
| Davis Government Bond Fund                               | 46       |
| Davis Government Money Market Fund                       | 49       |
| Davis Financial Fund                                     | 52       |
| Davis Appreciation & Income Fund                     | 55       |
| Davis Real Estate Fund                                   | 60       |
|                                                     |     |
| Statements of Assets and Liabilities                     | 63       |
|                                                     |     |
| Statements of Operations                                 | 65       |
|                                                     |     |
| Statements of Changes in Net Assets                      | 66       |
|                                                     |     |
| Notes to Financial Statements                            | 68       |
|                                                     |     |
| Financial Highlights                                     | 81       |
|                                                     |     |
| Report of Independent Registered Public Accounting Firm  | 89       |
|                                                     |     |
| Fund Information                                         | 90       |
|                                                     |     |
| Directors and Officers                                   | 92       |

 

 

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**DAVIS SERIES,            INC.**                                                                                                                                                 **Shareholder Letter**

 

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, 2009

 

 

 

 

 

 

 

 

 

2

 

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**DAVIS SERIES,            INC.**                                                                                                            **Management’s Discussion and Analysis**

 

**Davis Opportunity Fund**

Davis Opportunity Fund’s Class A shares delivered a negative return on net asset value of 44.71% for the year ended December 31, 20081. Over the same time period, the Russell 3000**®**Index2 (“Index”) declined 37.31%. The decline was widespread as every sector3 within the Index posted            substantial declines. The sectors within the Index that turned in the weakest performance over the year were financials, materials, and information technology. The sectors that turned in the strongest (but still negative) performance over the year were consumer staples and health care.

**Factors Impacting the Fund’s Performance**

Three sectors, consumer discretionary, information technology, and financials, accounted for almost three-quarters of the Fund’s negative return.

The Fund had more invested in consumer discretionary companies than in any other sector and they were the most important detractors4 from the Fund’s performance. The Fund’s consumer discretionary companies under-performed the corresponding sector within the Index (down 41% versus down 39% for the Index) and had a higher relative average weighting (31% versus 9% for the Index).            Netflix5, H&R Block, Lowe’s, and Target were among the most important contributors to the Fund’s performance. Garmin, Hunter Douglas, and WPP Group were among the most important detractors from performance. The Fund no longer owns Target, Lowe’s, and WPP Group.

The second largest detractor from performance was information technology companies. The Fund’s information technology companies under-performed the corresponding sector within the Index (down 51% versus down 43% for the Index) and had a higher relative average weighting (18% versus 16% for the Index). Google, Texas Instruments, Microsoft, and Agilent Technologies were among the most important            detractors from performance.

Financial companies were the third largest detractor from performance. The Fund’s financial companies out-performed the corresponding sector within the Index (down 46% versus down 50% for the Index) and had a higher relative average weighting (19% versus 16% for the Index). Discover Financial Services and Charles Schwab were among the most important contributors to performance. Markel and Ambac            Financial were among the most important detractors from performance. The Fund no longer owns Discover Financial Services.

The Fund ended the year with approximately 18% of its assets invested in foreign companies. As a whole these companies under-performed the domestic companies held by the Fund.

 

**Davis Government Bond Fund**

Davis Government Bond Fund’s Class A shares returned 4.38% on net asset value for the year ended December 31, 20081. Over the same time period, the Citigroup U.S. Treasury/Agency 1-3 Year Index2 (“Index”) returned 6.78%. 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. As investors sought ultra safe securities in a turbulent market, treasury securities out-performed agency securities and mortgage-backed securities. As interest rates generally declined over the course of the year, longer-term bonds out-performed shorter-term bonds.

**Factors Impacting the Fund’s Performance**

The most important contributor to the Fund’s performance relative to the Index was that the Fund benefited as mortgage-backed securities, which it had purchased at a discount, were pre-paid faster than anticipated. The second most important contributor to the Fund’s performance was the yield advantage that the Fund enjoyed over the Index.

The most important detractor from performance relative to the Index was that the Fund favored mortgage-backed securities over treasury securities, and treasury securities turned in a stronger performance despite the pre-payment and yield advantages listed above. Another detractor from the Fund’s performance relative to the Index was that the Fund maintained a shorter weighted average maturity            than the Index and thus appreciated less as interest rates declined during the year.

 

3

 

 

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| **DAVIS SERIES, INC.** | **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 45.62% for the year ended December 31, 20081. Over the same time period, the Standard & Poor’s 500® Index2 (“Index”) declined 37.00%. Financial companies as a whole turned in the weakest performance of any sector3 of the Index. The banking,            diversified financial, and insurance industry groups all turned in negative performance.

**Factors Impacting the Fund’s Performance**

The specific financial companies that the Fund owned, out-performed the majority of financial companies in the Index, but still turned in negative performance. The Fund’s non-financial holdings overall also turned in a negative performance.

The Fund’s diversified financial companies out-performed the corresponding industry group within the Index (down 52% versus down 59% for the Index), but were still the largest detractors4 from performance. American Express5, First Marblehead, Bank of New York Mellon, and Merrill Lynch were among the most important detractors from performance, while Visa and Charles Schwab            were among the most important contributors.

The Fund’s insurance companies out-performed the corresponding industry group within the Index (down 47% versus down 58% for the Index). FPIC Insurance was among the most important contributors to performance. American International Group, Transatlantic Holdings, Markel, and Loews were among the most important detractors from performance.

The Fund’s banking companies under-performed the corresponding industry group within the Index (down 56% versus down 47% for the Index). Wells Fargo was among the most important contributors to performance. State Bank of India was among the most important detractors from performance.

H&R Block was the single most important contributor to performance over the year.

The Fund ended the year with approximately 19% of its assets invested in foreign companies. As a whole these companies under-performed the domestic companies held by the Fund.

 

**Davis Appreciation & Income Fund**

Davis Appreciation & Income Fund’s Class A shares delivered a negative return on net asset value of 41.43% for the year ended December 31, 20081. Over the same time period, the Standard & Poor’s 500® Index2 (“Index”) declined by 37.00%. The decline was widespread as every sector3 within the Index posted substantial            declines. The sectors within the Index that turned in the weakest performance over the year were financials, materials, and information technology. The sectors that turned in the strongest (but still negative) performance over the year were consumer staples and health care.

**Factors Impacting the Fund’s Performance**

The Fund’s convertible and corporate bonds declined substantially less than the Index, but the Fund’s common stock holdings under-performed the Index.

The Fund’s common stock holdings under-performed the Index (down 54% versus down 37% for the Index) and were the primary detractors4 from performance. Common stock holdings in AutoZone5, SAP, Prologis, and Waste Connections were among the most important contributors to performance. Common stock holdings in Whole Foods, Merrill Lynch, General Growth Properties, Ambac            Financial, and Forest City Enterprises were among the most important detractors from performance. The Fund no longer owns common stock holdings of AutoZone, SAP, and Prologis.

The Fund’s holdings in convertible and corporate bonds, while still turning in negative returns, out-performed the Index (down 14% versus down 37% for the Index). Convertible bond holdings in Lehman Brothers (which was convertible into Devon Energy), News America, and Valeant Pharmaceuticals were among the most important contributors to performance. The Fund’s holding in a General Growth            Properties convertible bond was among the most important detractors from performance. The Fund no longer owns Lehman Brothers.

 

4

 

 

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**DAVIS SERIES,            INC.**                                                                                  **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 46.89% for the year ended December 31, 20081. Over the same time period, the Dow Jones Wilshire Real Estate Securities Index2 (“Index”) declined 39.83%. All seven of the sub-industries3 within the Index delivered negative returns, with real estate operating            companies, industrial REITs, and retail REITs turning in the weakest performance.

**Factors Impacting the Fund’s Performance**

The Fund’s retail REITs under-performed the corresponding sub-industry within the Index (down 68% versus down 50% for the Index) and were the largest detractors4 from performance. A lower relative average weighting (8% versus 22% for the Index) in this weak sub-industry improved relative performance. General Growth Properties5 and Taubman Centers were among the most            important detractors from performance.

The second largest detractor from performance was office REITs. The Fund’s office REITs out-performed the corresponding sub-industry within the Index (down 33% versus down 41% for the Index). A higher relative average weighting in this sub-industry (33% versus 16% for the Index) detracted from performance. Alexandria Real Estate, Derwent London, and Boston Properties were among the most            important detractors from performance. Digital Realty was among the most important contributors to the Fund’s performance.

Toll Brothers was the single most important contributor to the Fund’s performance. Other companies among the most important contributors to the Fund’s performance included Vornado Realty, U-Store-It, and AMB Property. Forest City Enterprises was the single most important detractor from the Fund’s performance. Other companies among the most important detractors included Ambac            Financial and Gramercy Capital. The Fund no longer owns Gramercy Capital, Vornado Realty, Toll Brothers, U-Store-It, and Ambac Financial.

The Fund ended the year with approximately 11% of its assets invested in foreign companies. As a whole these companies under-performed the domestic companies held by the fund.

 

5

 

 

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**DAVIS SERIES,            INC.**                                                                                  **Management’s Discussion and Analysis – (Continued)**

 

This Annual Report is authorized for use by existing shareholders. Prospective shareholders must receive a current Davis Series, Inc. 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.

 

6

 

 

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**DAVIS SERIES,            INC.**                                                                                  **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,            2008 and the annual operating expense ratios for the year ended December 31, 2008:

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

|                                      |                           |               |                    |                    | **EXPENSE** |
|-------------------------------------------|--------------------------------|--------------------|-------------------------|-------------------------|-------------|
| **FUNDNAME**                              | **1-YEAR**                     | **5-YEAR**         | **10-YEAR**             | **INCEPTION**           | **RATIO**   |
| Davis Opportunity – A*              | (44.71)%                       | (4.68)%            |    2.59%      |   7.73% - 12/01/94 | 1.15%       |
| Davis Government Bond – A           |      4.38% |    2.92% |    3.53%      |   4.58% - 12/01/94 | 0.87%       |
| Davis Financial – A                 | (45.62)%                       | (5.83)%            | (0.23)%                 | 10.38% - 05/01/91       | 1.06%       |
| Davis Appreciation & Income – A | (41.43)%                       | (3.86)%            |    0.64% |   6.21% - 05/01/92 | 1.07%       |
| Davis Real Estate – A               | (46.89)%                       | (1.78)%            |    5.04% |   7.63% - 01/03/94 | 1.23%       |

 

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

| **FUNDNAME**                              | **1-YEAR**     | **5-YEAR**         | **10-YEAR**        | **INCEPTION**           |
|-------------------------------------------|----------------|--------------------|--------------------|-------------------------|
| Davis Opportunity – A*              | (47.35)%       | (5.60)%            |    2.09% |   7.36% - 12/01/94 |
| Davis Government Bond – A           |   (0.59)% |    1.91% |    3.04% |   4.22% - 12/01/94 |
| Davis Financial – A                 | (48.20)%       | (6.74)%            | (0.71)%            | 10.08% - 05/01/91       |
| Davis Appreciation & Income – A | (44.22)%       | (4.78)%            |    0.15% |   5.90% - 05/01/92 |
| Davis Real Estate – A               | (49.41)%       | (2.73)%            |    4.53% |   7.29% - 01/03/94 |

 

|                                       |                           |               |              | **SINCEFUNDS'**  |
|--------------------------------------------|--------------------------------|--------------------|-------------------|------------------|
| **BENCHMARKINDEX**                         | **1-YEAR**                     | **5-YEAR**         | **10-YEAR**       | **INCEPTION**    |
| Russell 3000® Index                    | (37.31)%                       | (1.95)%            | (0.80)%           | 6.97% - 12/01/94 |
| Citigroup U.S. Treasury/Agency             |                           |               |              |             |
| 1-3 Year Index                             |      6.78% |   4.13%  |   4.83% | 5.52% - 12/01/94 |
| Standard & Poor’s 500® Index | (37.00)%                       | (2.19)%            | (1.38)%           | 7.17% - 05/01/91 |
|                                       |                           |               |              | 6.89% - 05/01/92 |
| Dow Jones Wilshire Real Estate             |                           |               |              |             |
| Securities Index                           | (39.83)%                       |    0.62% |   7.33% | 8.00% - 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 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.

 

7

 

 

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**DAVIS SERIES,            INC.**                                                                                  **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 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.

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

III. 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.

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 seven sub-industries.

4     A company’s or sector’s contribution to or detraction from 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.

 

8

 

 

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**DAVIS SERIES,            INC.**                                                                                                                                                          **Fund Overview**

| **DAVIS OPPORTUNITY FUND** | **At December 31, 2008** |
|----------------------------|--------------------------|

 

 

| **Portfolio Composition**          |    | **Industry Weightings**        |
|------------------------------------|---------|--------------------------------|
| **(% of Fund’s Net Assets)** |    | **(% of Long Term Portfolio)** |
|                               |    |                           |   | **Fund** | **Russell 3000®** |
| Common Stock (U.S.)                | 79.40%  |                           | Information Technology | 19.16% | 15.41% |
| Common Stock (Foreign)             | 18.35%  |                           | Health Care | 14.22% | 14.53% |
| Convertible Bonds                  | 0.75%   |                           | Media | 14.16% | 2.55% |
| Short Term Investments             | 1.55%   |                           | Diversified Financials | 8.90% | 5.53% |
| Other Assets & Liabilities     | (0.05)% |                           | Insurance | 6.56% | 3.15% |
|                               | 100.00% |                           | Retailing | 6.06% | 2.93% |
|                               |    |                           | Energy | 5.91% | 12.14% |
|                               |    |                           | Capital Goods | 5.18% | 8.44% |
|                               |    |                           | Materials | 5.17% | 3.37% |
|                               |    |                           | Consumer Durables & Apparel | 3.91% | 1.14% |
|                               |    |                           | Consumer Services | 3.64% | 2.11% |
|                               |    |                           | Other | 3.50% | 24.78% |
|                               |    |                           | Commercial & Professional |   |   |
|                               |    |                           | Services | 2.54% | 1.11% |
|                               |    |                           | Food & Staples Retailing | 1.09% | 2.81% |
|                               |    |                           |   | 100.00% | 100.00% |
|                               |    |                           |   |   |   |
|                               |    |                           |   |   |   |

 

 

**Top 10 Holdings**

**(% of Fund’s Net Assets)**

|                           |                                               |   |
|--------------------------------|----------------------------------------------------|--------|
| Google Inc., Class A           | Software & Services                            | 6.81%  |
| Johnson & Johnson          | Pharmaceuticals, Biotechnology & Life Sciences | 5.61%  |
| Comcast Corp., Special Class A | Media                                              | 4.87%  |
| Netflix Inc.                   | Retailing                                          | 4.66%  |
| Schering-Plough Corp.          | Pharmaceuticals, Biotechnology & Life Sciences | 4.30%  |
| Grupo Televisa S.A., ADR       | Media                                              | 3.75%  |
| Markel Corp.                   | Property & Casualty Insurance                  | 3.49%  |
| Microsoft Corp.                | Software & Services                            | 3.20%  |
| Blount International, Inc.     | Capital Goods                                      | 2.86%  |
| Yum! Brands, Inc.              | Consumer Services                                  | 2.71%  |

 

 

9

 

 

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**DAVIS SERIES,            INC.**                                                                                                                                                     **Portfolio Activity**

| **DAVIS OPPORTUNITY FUND** | **January 1, 2008 through December 31, 2008** |
|----------------------------|-----------------------------------------------|

 

| **New Positions Added (01/01/08-12/31/08)** |
|---------------------------------------------|

(Highlighted positions are those greater than 2.00% of 12/31/08 total net assets)

| **Security**                                 | **Industry**                         |  

**Date of 1st**

**Purchase** | **% of 12/31/08**

**Fund Net Assets**             |
|----------------------------------------------|--------------------------------------|---------------------------------------|----------------------------------------------------|
| Bank of New York Mellon Corp.                | Capital Markets                      | 09/02/08                              | 2.51%                                              |
| Charles Schwab Corp.                         | Capital Markets                      | 12/19/08                              | 1.37%                                              |
| Cisco Systems, Inc.                          | Technology Hardware & Equipment  | 02/15/08                              | 1.37%                                              |
| Clark Holdings, Inc.                         | Transportation                       | 01/07/08                              | 0.13%                                              |
| Compagnie Financiere Richemont S.A.,         |                                 |                                  |                                               |
| Bearer Shares, Unit A                        | Consumer Durables & Apparel      | 06/17/08                              |        –       |
| Devon Energy Corp.                           | Energy                               | 06/25/08                              | 1.25%                                              |
| Expeditors International of Washington, Inc. | Transportation                       | 11/20/08                              |         – |
| Hewlett-Packard Co.                          | Technology Hardware & Equipment  | 10/09/08                              | 0.52%                                              |
| Johnson Controls, Inc.                       | Automobiles & Components         | 01/11/08                              | 0.41%                                              |
| Kuehne & Nagel International AG,         |                                 |                                  |                                               |
| Registered                                   | Transportation                       | 02/07/08                              | 0.60%                                              |
| Liberty Media Corp. - Entertainment,         |                                 |                                  |                                               |
| Series A                                     | Media                                | 06/17/08                              | 0.53%                                              |
| Liberty Media Corp. - Interactive, Series A  | Retailing                            | 06/17/08                              | 0.15%                                              |
| Merrill Lynch & Co., Inc.                | Capital Markets                      | 03/06/08                              |         – |
| Monsanto Co.                                 | Materials                            | 10/22/08                              | 0.92%                                              |
| Occidental Petroleum Corp.                   | Energy                               | 06/25/08                              | 1.49%                                              |
| SAP AG, ADR                                  | Software & Services              | 10/06/08                              | 1.32%                                              |
| Schering-Plough Corp.                        | Pharmaceuticals, Biotechnology & |                                  |                                               |
|                                         | Life Sciences                        | 04/25/08                              | 4.30%                                              |
| Siemens AG, Registered                       | Capital Goods                        | 06/18/08                              | 1.05%                                              |
| Yahoo! Inc.                                  | Software & Services              | 06/13/08                              | 1.03%                                              |
|                                         |                                 |                                  |                                               |

 

 

10

 

 

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**DAVIS SERIES,            INC.**                                                                                                                            **Portfolio Activity – (Continued)**

| **DAVIS OPPORTUNITY FUND** | **January 1, 2008 through December 31, 2008** |
|----------------------------|-----------------------------------------------|

 

| **Positions Closed (01/01/08-12/31/08)** |
|------------------------------------------|

(Gains and losses greater than $5,000,000 are highlighted)

|                                         |                                 | **Date of**    | **Realized**    |
|----------------------------------------------|--------------------------------------|----------------|-----------------|
| **Security**                                 | **Industry**                         | **Final Sale** | **Gain (Loss)** |
| Aflac, Inc.                                  | Life & Health Insurance          | 11/24/08       | $               |   | 2,828,148 |
| Bed Bath & Beyond Inc.                   | Retailing                            | 06/26/08       |            |   | (1,517,692) |
| British American Tobacco PLC                 | Food, Beverage & Tobacco         | 11/12/08       |            |   | 26,523 |
| Compagnie Financiere Richemont S.A.,         |                                 |           |            |   |   |
| Bearer Shares, Unit A                        | Consumer Durables & Apparel      | 11/10/08       |            |   | (1,666,760) |
| Covidien Ltd.                                | Health Care Equipment & Services | 03/10/08       |            |   | 2,736,225 |
| Dell Inc.                                    | Technology Hardware & Equipment  | 10/16/08       |            |   | (9,784,860) |
| Discover Financial Services                  | Consumer Finance                     | 09/12/08       |            |   | (6,335,403) |
| Expeditors International of Washington, Inc. | Transportation                       | 12/17/08       |            |   | 166,471 |
| Fiserv, Inc.                                 | Software & Services              | 02/29/08       |            |   | 494,788 |
| FPIC Insurance Group, Inc.                   | Property & Casualty Insurance    | 06/30/08       |            |   | (74,498) |
| Franklin Electric Co., Inc.                  | Capital Goods                        | 09/23/08       |            |   | (1,126,183) |
| Harley-Davidson, Inc.                        | Automobiles & Components         | 02/12/08       |            |   | (4,238,130) |
| Home Depot, Inc.                             | Retailing                            | 01/22/08       |            |   | (96,188) |
| Ingersoll-Rand Co., Ltd., Class A            | Capital Goods                        | 07/11/08       |            |   | (320,009) |
| Legg Mason, Inc.                             | Capital Markets                      | 08/11/08       |            |   | (7,821,635) |
| Lincare Holdings Inc.                        | Health Care Equipment & Services | 02/04/08       |            |   | (1,718,389) |
| Lowe’s Cos, Inc.                       | Retailing                            | 01/23/08       |            |   | (1,660,006) |
| Merrill Lynch & Co., Inc.                | Capital Markets                      | 10/01/08       |            |   | (5,928,109) |
| Molex Inc., Class A                          | Technology Hardware & Equipment  | 05/15/08       |            |   | 434,830 |
| Nong Shim Holdings Co., Ltd.                 | Food, Beverage & Tobacco         | 02/01/08       |            |   | 290,738 |
| Nymex Holdings Inc.                          | Diversified Financial Services       | 08/22/08       |            |   | 77,274 |
| Omnicare, Inc.                               | Health Care Equipment & Services | 03/10/08       |            |   | (3,916,584) |
| Reinet Investments SCA                       | Diversified Financial Services       | 11/13/08       |            |   | (2,315,563) |
| Sealed Air Corp.                             | Materials                            | 07/09/08       |            |   | (1,110,073) |
| SK Telecom Co., Ltd., ADR                    | Telecommunication Services           | 05/07/08       |            |   | 870,601 |
| Sprint Nextel Corp.                          | Telecommunication Services           | 11/10/08       |            |   | (12,553,049) |
| Target Corp.                                 | Retailing                            | 01/22/08       |            |   | (17,621) |
| Trane, Inc.                                  | Capital Goods                        | 06/06/08       |            |   | 9,349,173 |
| Tyco Electronics Ltd.                        | Technology Hardware & Equipment  | 02/06/08       |            |   | 1,686,022 |
| Tyco International Ltd.                      | Capital Goods                        | 02/06/08       |            |   | 1,289,930 |
| Virgin Media Inc.                            | Media                                | 07/16/08       |            |   | (6,070,498) |
| WABCO Holdings Inc.                          | Automobiles & Components         | 11/21/08       |            |   | (1,638,211) |
| Wachovia Corp.                               | Commercial Banks                     | 02/07/08       |            |   | 2,991,487 |
| Western Union Co.                            | Software & Services              | 02/29/08       |            |   | 249,257 |
| WPP Group PLC                                | Media                                | 12/19/08       |            |   | (6,197,107) |
|                                         |                                 |           |            |   |   |

 

 

11

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                   **Fund Performance**

| **DAVIS OPPORTUNITY FUND** |
|----------------------------|

 

**CLASS A**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                  | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|-----------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes an

      initial sales charge of 4.75%.) |
| One-Year                                                                                      | (47.35)%            | Actual                                                | $1,000.00                                          |   $667.32                                                       | $5.07 |
| Five-Year                                                                                     | (5.60)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,019.05                                                            | $6.14 |
| Ten-Year                                                                                      | 2.09%               |

*Expenses are equal to the Class’s annualized expense ratio (1.21%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and paid a 4.75% sales charge. As the chart shows, by December 31, 2008, the value of your investment would have grown to $12,294 - a 22.94% increase on your initial investment. For comparison, the            Russell 3000® Index is also presented on the chart below.

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.

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.

 

12

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS OPPORTUNITY FUND** |
|----------------------------|

 

**CLASS B**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                     | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

    contingent deferred sales charge.) |
| One-Year                                                                                         | (47.37)%            | Actual                                                | $1,000.00                                          |   $664.45                                                       |   $8.74 |
| Five-Year                                                                                        | (5.78)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,014.63                                                            | $10.58 |
| Ten-Year                                                                                         | 2.01%               |

*Expenses are equal to the Class’s annualized expense ratio (2.09%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and converted to Class A shares on December 31, 2005. As the chart shows, by December 31, 2008, the value of your investment would have grown to $12,200 - a 22.00% increase on your initial            investment. For comparison, the Russell 3000® Index is also presented on the chart below.

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.

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.

 

13

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS OPPORTUNITY FUND** |
|----------------------------|

 

**CLASS C**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                           | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

     contingent deferred sales charge.) |
| One-Year                                                                                               | (45.70)%            | Actual                                                | $1,000.00                                          | $664.56                                                              |   $8.28 |
| Five-Year                                                                                              | (5.41)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,015.18                                                            | $10.03 |
| Ten-Year                                                                                               | 1.75%               |

*Expenses are equal to the Class’s annualized expense ratio (1.98%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have grown to $11,899- an 18.99% increase on your initial investment. For comparison, the Russell 3000®            Index is also presented on the chart below.

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.

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.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS OPPORTUNITY FUND** |
|----------------------------|

 

**CLASS Y**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**         | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (There is no sales charge applicable

     to this calculation.) |
| One-Year                                                                             | (44.54)%            | Actual                                                | $1,000.00                                          |   $668.48                                                       |           $3.73 |
| Five-Year                                                                            | (4.38)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,020.66                                                            |  $4.52 |
| Ten-Year                                                                             | 2.94%               |

*Expenses are equal to the Class’s annualized expense ratio (0.89%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have grown to $13,355 - a 33.55% increase on your initial investment. For comparison, the Russell 3000®            Index is also presented on the chart below.

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.

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.**                                                                                                                                                          **Fund Overview**

| **DAVIS GOVERNMENT BOND FUND** | **At December 31, 2008** |
|--------------------------------|--------------------------|

 

 

| **Portfolio Composition**          |    | **Industry Weightings** |                                |
|------------------------------------|---------|-------------------------|-------------------------------------|
| **(% of Fund’s Net Assets)** |    | **(% of Fixed Income)** |                                |
|                               |    |                    |                                |   |   |
| Fixed Income                       | 94.26%  |                    | Collateralized Mortgage Obligations | 36.71% |   |
| Short Term Investments             | 5.37%   |                    | Freddie Mac Mortgage Pools          | 28.70% |   |
| Other Assets & Liabilities     | 0.37%   |                    | Fannie Mae Mortgage Pools           | 17.00% |   |
|                               | 100.00% |                    | Government Agency Notes             | 15.96% |   |
|                               |    |                    | Ginnie Mae Mortgage Pools           | 1.63% |   |
|                               |    |                    |                                | 100.00% |   |

 

 

**Top 10 Fixed Income Holdings**

**(% of Fund’s Net Assets)**

|                                           |                                |   |
|------------------------------------------------|-------------------------------------|--------|
| Freddie Mac, 4.50%, 05/01/10, Pool No. M80818  | Freddie Mac Mortgage Pools          | 4.07%  |   |
| Freddie Mac, 4.00%, 03/01/10, Pool No. M80806  | Freddie Mac Mortgage Pools          | 3.60%  |   |
| Ginnie Mae, 5.00%, 08/20/32                    | Collateralized Mortgage Obligations | 3.56%  |   |
| Freddie Mac, 3.25%, 03/10/10                   | Government Agency Notes             | 3.37%  |   |
| Freddie Mac, 4.742%, 04/01/35, Pool No. 782528 | Freddie Mac Mortgage Pools          | 2.44%  |   |
| Fannie Mae, 6.00%, 09/01/17, Pool No. 665776   | Fannie Mae Mortgage Pools           | 2.39%  |   |
| Freddie Mac, 5.00%, 12/15/22                   | Collateralized Mortgage Obligations | 2.38%  |   |
| Fannie Mae, 5.00%, 12/25/17                    | Collateralized Mortgage Obligations | 2.37%  |   |
| Freddie Mac, 4.00%, 10/15/15                   | Collateralized Mortgage Obligations | 2.31%  |   |
| Fannie Mae, 5.50%, 12/25/16                    | Collateralized Mortgage Obligations | 2.31%  |   |
|                                                |                                     |        |  |  |

 

 

16

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                   **Fund Performance**

| **DAVIS GOVERNMENT BOND FUND** |
|--------------------------------|

 

**CLASS A**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                  | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|-----------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes an

      initial sales charge of 4.75%.) |
| One-Year                                                                                      | (0.59)%             | Actual                                                | $1,000.00                                          | $1,027.15                                                            | $4.18 |
| Five-Year                                                                                     | 1.91%               | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,021.01                                                            | $4.17 |
| Ten-Year                                                                                      | 3.04%               |

 

*Expenses are equal to the Class’s annualized expense ratio (0.82%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and paid a 4.75% sales charge. As the chart shows, by December 31, 2008, the value of your investment would have grown to $13,489 - a 34.89% 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.

 

17

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS GOVERNMENT BOND FUND** |
|--------------------------------|

 

**CLASS B**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                                 | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

      contingent deferred sales charge.) |
| One-Year                                                                                                     | (0.23)%             | Actual                                                | $1,000.00                                          | $1,024.92                                                            | $8.45 |
| Five-Year                                                                                                    | 1.87%               | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,016.79                                                            | $8.42 |
| Ten-Year                                                                                                     | 3.02%               |

 

*Expenses are equal to the Class’s annualized expense ratio (1.66%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and converted to Class A shares on December 31, 2005. As the chart shows, by December 31, 2008, the value of your investment would have grown to $13,465 - a 34.65% 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 share.

 

18

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS GOVERNMENT BOND FUND** |
|--------------------------------|

 

**CLASS C**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                                 | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

      contingent deferred sales charge.) |
| One-Year                                                                                                     | 2.63%               | Actual                                                | $1,000.00                                          | $1,023.36                                                            | $8.14 |
| Five-Year                                                                                                    | 2.19%               | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,017.09                                                            | $8.11 |
| Ten-Year                                                                                                     | 2.76%               |

 

*Expenses are equal to the Class’s annualized expense ratio (1.60%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have grown to $13,124 - a 31.24% 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.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS GOVERNMENT BOND FUND** |
|--------------------------------|

 

**CLASS Y**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**               | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (There is no sales charge

      applicable to this calculation.) |
| One-Year                                                                                   | 4.43%               | Actual                                                | $1,000.00                                          | $1,027.27                                                            | $3.87 |
| Five-Year                                                                                  | 3.07%               | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,021.32                                                            | $3.86 |
| Ten-Year                                                                                   | 3.78%               |

 

*Expenses are equal to the Class’s annualized expense ratio (0.76%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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 Government Bond Fund (“DGBF-Y”) on December 31, 1998. As the chart shows, by December 31, 2008, the value of your investment would have grown to $14,496 - a 44.96% 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.

 

20

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                          **Fund Overview**

| **DAVIS GOVERNMENT MONEY MARKET FUND** | **At December 31, 2008** |
|----------------------------------------|--------------------------|

 

 

| **Portfolio Composition**          |    | **Maturity Diversification**  |         |
|------------------------------------|---------|-------------------------------|--------------|
| **(% of Fund’s Net Assets)** |    | **(% of Portfolio Holdings)** |         |
|                               |    |                          |         |   |   |
| Federal Home Loan Bank             | 55.19%  |                          | 0-30 Days    | 50.78% |   |
| Federal Farm Credit Bank           | 10.93%  |                          | 31-90 Days   | 23.43% |   |
| Repurchase Agreements              | 9.52%   |                          | 91-180 Days  | 20.15% |   |
| Freddie Mac                        | 7.20%   |                          | 181-397 Days | 5.64% |   |
| Fannie Mae                         | 6.82%   |                          |         | 100.00% |   |
| Freddie Mac Mortgage Pools         | 3.32%   |                          |         |   |   |
| Private Export Funding             | 0.45%   |                          |         |   |   |
| Other Assets & Liabilities     | 6.57%   |                          |         |   |   |
|                               | 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***      |
|                        | **(07/01/08)**    | **(12/31/08)**    | **(07/01/08-12/31/08)** |
| Actual                      | $1,000.00         | $1,008.47         | $2.98                   |
| Hypothetical (5% return     |              |              |                    |
| before expenses)            | $1,000.00         | $1,022.17         | $3.00                   |

 

*Expenses are equal to the Classes’ annualized expense ratio (0.59%), multiplied by the average account value over the period, multiplied by 184/366 (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 41 for a description of the            “Expense Example”.

 

 

 

21

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                          **Fund Overview**

| **DAVIS FINANCIAL FUND** | **At December 31, 2008** |
|--------------------------|--------------------------|

 

 

| **Portfolio Composition**          |    | **Industry Weightings**   |
|------------------------------------|---------|---------------------------|
| **(% of Fund’s Net Assets)** |    | **(% of Stock Holdings)** |
|                               |    |                      |   | **Fund** | **S&P 500**® |
| Common Stock (U.S.)                | 80.99%  |                      | Insurance | 39.41% |   2.67% |
| Common Stock (Foreign)             | 19.41%  |                      | Diversified Financials | 38.32% |   6.28% |
| Short Term Investments             | 0.02%   |                      | Commercial & Professional Services |      6.44% |   0.71% |
| Other Assets & Liabilities     | (0.42)% |                      | Banks |      6.27% |   3.36% |
|                               | 100.00% |                      | Energy |      4.85% | 13.31% |
|                               |    |                      | Materials |      2.69% |   2.99% |
|                               |    |                      | Consumer Services |      2.02% |   1.75% |
|                               |    |                      | Information Technology |            – | 15.30% |
|                               |    |                      | Health Care |            – | 14.76% |
|                               |    |                      | Capital Goods |            – |   8.12% |
|                               |    |                      | Food, Beverage & Tobacco |            – |    6.22% |
|                               |    |                      | Other |            – |  24.53% |
|                               |    |                      |   | 100.00% | 100.00% |
|                               |    |                      |   |   |   |

 

 

**Top 10 Holdings**

**(% of Fund’s Net Assets)**

|                            |                                   |   |
|---------------------------------|----------------------------------------|--------|
| Transatlantic Holdings, Inc.    | Reinsurance                            | 11.00% |
| Loews Corp.                     | Multi-line Insurance                   | 8.19%  |
| American Express Co.            | Consumer Finance                       | 7.12%  |
| Bank of New York Mellon Corp.   | Capital Markets                        | 6.60%  |
| D&B Corp.                   | Commercial & Professional Services | 6.46%  |
| Markel Corp.                    | Property & Casualty Insurance      | 5.20%  |
| State Bank of India Ltd., GDR   | Commercial Banks                       | 4.99%  |
| Canadian Natural Resources Ltd. | Energy                                 | 4.87%  |
| JPMorgan Chase & Co.        | Diversified Financial Services         | 4.28%  |
| Julius Baer Holding, AG         | Capital Markets                        | 3.67%  |

 

 

22

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                     **Portfolio Activity**

| **DAVIS FINANCIAL FUND** | **January 1, 2008 through December 31, 2008** |
|--------------------------|-----------------------------------------------|

 

 

| **New Positions Added (01/01/08-12/31/08)** |
|---------------------------------------------|

(Highlighted positions are those greater than 2.00% of 12/31/08 total net assets)

| **Security**                              | **Industry**                      |  

**Date of 1st**

**Purchase** | **% of 12/31/08**

**Fund Net Assets** |
|-------------------------------------------|-----------------------------------|---------------------------------------|----------------------------------------|
| ACE Ltd.                                  | Property & Casualty Insurance | 12/18/08                              | 1.48%                                  |
| Brookfield Asset Management Inc., Class A | Capital Markets                   | 05/06/08                              | 1.77%                                  |
| Charles Schwab Corp.                      | Capital Markets                   | 12/19/08                              | 0.11%                                  |
| Goldman Sachs Group, Inc.                 | Capital Markets                   | 04/17/08                              | 2.62%                                  |
| Julius Baer Holding, AG                   | Capital Markets                   | 04/18/08                              | 3.67%                                  |
| T. Rowe Price Group Inc.                  | Capital Markets                   | 10/10/08                              | 0.33%                                  |
| Visa Inc., Class A                        | Diversified Financial Services    | 03/18/08                              | 1.88%                                  |
| Wells Fargo & Co.                     | Commercial Banks                  | 11/21/08                              | 0.73%                                  |
|                                      |                              |                                  |                                   |

 

 

 

 

| **Position Closed (01/01/08-12/31/08)** |
|-----------------------------------------|

|                   |             | **Date of**    | **Realized** |
|------------------------|------------------|----------------|--------------|
| **Security**           | **Industry**     | **Final Sale** | **Gain**     |
| Commerce Bancorp, Inc. | Commercial Banks | 01/02/08       |         | $ | 2,386,039 |
|                   |             |           |         |   |   |
|                   |             |           |         |   |   |

 

 

23

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                   **Fund Performance**

| **DAVIS FINANCIAL FUND** |
|--------------------------|

 

**CLASS A**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                  | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|-----------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes an

      initial sales charge of 4.75%.) |
| One-Year                                                                                      | (48.20)%            | Actual                                                | $1,000.00                                          |   $682.67                                                       | $4.65 |
| Five-Year                                                                                     | (6.74)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,019.61                                                            | $5.58 |
| Ten-Year                                                                                      | (0.71)%             |

*Expenses are equal to the Class’s annualized expense ratio (1.10%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and paid a 4.75% sales charge. As the chart shows, by December 31, 2008, the value of your investment would have been $9,312-a 6.88% decrease on your initial investment. For comparison, the Standard            and Poor’s 500® Index is also presented on the chart below.

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.

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.

 

24

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS FINANCIAL FUND** |
|--------------------------|

 

**CLASS B**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                                 | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

      contingent deferred sales charge.) |
| One-Year                                                                                                     | (48.04)%            | Actual                                                | $1,000.00                                          |   $678.66                                                       |   $9.37 |
| Five-Year                                                                                                    | (6.95)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,013.98                                                            | $11.24 |
| Ten-Year                                                                                                     | (0.83)%             |

*Expenses are equal to the Class’s annualized expense ratio (2.22%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and converted to Class A shares on December 31, 2005. As the chart shows, by December 31, 2008, the value of your investment would have been $9,199 - an 8.01% decrease on your initial investment. For            comparison, the Standard and Poor’s 500® Index is also presented on the chart below.

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.

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.

 

25

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS FINANCIAL FUND** |
|--------------------------|

 

**CLASS C**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                                 | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

      contingent deferred sales charge.) |
| One-Year                                                                                                     | (46.57)%            | Actual                                                | $1,000.00                                          |   $679.75                                                       |   $8.44 |
| Five-Year                                                                                                    | (6.65)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,015.08                                                            | $10.13 |
| Ten-Year                                                                                                     | (1.09)%             |

*Expenses are equal to the Class’s annualized expense ratio (2.00%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have been $8,966- a 10.34% decrease on your initial investment. For comparison, the Standard and Poor’s            500® Index is also presented on the chart below.

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.

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.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS FINANCIAL FUND** |
|--------------------------|

 

**CLASS Y**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**               | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (There is no sales charge

      applicable to this calculation.) |
| One-Year                                                                                   | (45.56)%            | Actual                                                | $1,000.00                                          |   $683.06                                                       | $4.44 |
| Five-Year                                                                                  | (5.69)%             | Hypothetical (5% return                               | $1,000.00                                          | $1,019.86                                                            | $5.33 |
| Ten-Year                                                                                   | (0.06)%             | before expenses)                                      |

*Expenses are equal to the Class’s annualized expense ratio (1.05%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have been $9,940 - a 0.60% decrease on your initial investment. For comparison, the Standard and Poor’s            500® Index is also presented on the chart below.

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.

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.**                                                                                                                                                          **Fund Overview**

| **DAVIS APPRECIATION & INCOME FUND** | **At December 31, 2008** |
|------------------------------------------|--------------------------|

 

 

| **Portfolio Composition**          |    | **Industry Weightings**        |
|------------------------------------|---------|--------------------------------|
| **(% of Fund’s Net Assets)** |    | **(% of Long Term Portfolio)** |
|                               |    |                           |   |  

**Fund** |  

**S&P 500®** |
| Common Stock (U.S.)                | 46.63%  |                           | Real Estate | 20.25% | 0.98% |
| Convertible Bonds                  | 37.83%  |                           | Commercial & Professional Services | 11.95% | 0.71% |
| Convertible Preferred Stocks       | 10.81%  |                           | Capital Goods | 11.68% | 8.12% |
| Corporate Bonds                    | 4.60%   |                           | Retailing | 9.15% | 2.79% |
| Short Term Investments             | 0.17%   |                           | Information Technology | 7.94% | 15.30% |
| Other Assets & Liabilities     | (0.04)% |                           | Diversified Financials | 6.94% | 6.28% |
|                               | 100.00% |                           | Food, Beverage & Tobacco | 5.71% | 6.22% |
|                               |    |                           | Energy | 5.17% | 13.31% |
|                               |    |                           | Utilities | 4.21% | 4.23% |
|                               |    |                           | Media | 4.17% | 2.57% |
|                               |    |                           | Materials | 3.50% | 2.99% |
|                               |    |                           | Health Care | 3.09% | 14.76% |
|                               |    |                           | Food & Staples Retailing | 2.99% | 3.30% |
|                               |    |                           | Household & Personal Products | 2.11% | 3.34% |
|                               |    |                           | Other | 1.14% | 15.10% |
|                               |    |                           |   | 100.00% | 100.00% |
|                               |    |                           |   |   |   |

 

 

**Top 10 Holdings**

**(% of Fund’s Net Assets)**

|                                                                      |                                   |   |
|---------------------------------------------------------------------------|----------------------------------------|--------|
| Kohl's Corp.                                                              | Retailing                              | 5.93%  |
| Intel Corp., Conv. Sub. Deb., 2.95%, 12/15/35                             | Semiconductors & Semiconductor     |   |
|                                                                      | Equipment                              | 5.59%  |
| Vornado Realty L.P., Conv. Sr. Deb., 3.875%, 04/15/25                     | Real Estate                            | 5.55%  |
| School Specialty, Inc., Conv. Sub. Notes, 3.75%/Zero

coupon, 08/01/23    | Commercial & Professional Services | 4.60%  |
| Quanta Services, Inc.                                                     | Capital Goods                          | 4.04%  |
| Digital Realty Trust L.P., 5.50%, 12/31/49, Cum. Conv. Pfd.               | Real Estate                            | 3.55%  |
| Forest City Enterprises, Inc., Class A, Conv. Sr. Notes, 3.625%, 10/15/11 | Real Estate                            | 3.29%  |
| Devon Energy Corp.                                                        | Energy                                 | 3.09%  |
| Tyson Foods, Inc., Conv. Sr. Notes, 3.25%, 10/15/13                       | Food, Beverage & Tobacco           | 3.04%  |
| Citigroup Inc., 6.50%, 12/31/49, Conv. Pfd.                               | Diversified Financial Services         | 3.00%  |

 

 

28

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                     **Portfolio Activity**

| **DAVIS APPRECIATION & INCOME FUND** | **January 1, 2008 through December 31, 2008** |
|------------------------------------------|-----------------------------------------------|

 

 

| **New Positions Added (01/01/08-12/31/08)** |
|---------------------------------------------|

(Highlighted positions are those greater than 3.00% of 12/31/08 total net assets)

| **Security**                                | **Industry**                       |  

**Date of 1st**

**Purchase** | **% of 12/31/08**

**Fund Net Assets**       |
|---------------------------------------------|------------------------------------|---------------------------------------|----------------------------------------------|
| American International Group, Inc.,         |                               |                                  |                                         |
| 8.50%, 08/01/11, Cum. Conv. Pfd.            | Multi-line Insurance               | 05/12/08                              |        – |
| Citigroup Inc., 6.50%, 12/31/49, Conv. Pfd. | Diversified Financial Services     | 01/17/08                              | 3.00%                                        |
| Devon Energy Corp.                          | Energy                             | 09/18/08                              | 3.09%                                        |
| Digital Realty Trust L.P., 144A Conv. Sr.   |                               |                                  |                                         |
| Notes, 4.125%, 08/15/26                     | Real Estate                        | 01/10/08                              | 2.19%                                        |
| Digital Realty Trust L.P., 5.50%, 12/31/49, |                               |                                  |                                         |
| Cum. Conv. Pfd.                             | Real Estate                        | 02/01/08                              | 3.55%                                        |
| Intel Corp.                                 | Semiconductors & Semiconductor |                                  |                                         |
|                                        | Equipment                          | 10/09/08                              | 0.67%                                        |
| ProLogis                                    | Real Estate                        | 02/15/08                              |        – |
| SL Green Realty Corp                        | Real Estate                        | 09/16/08                              | 1.04%                                        |
| Tyson Foods, Inc., Conv. Sr. Notes,         |                               |                                  |                                         |
| 3.25%, 10/15/13                             | Food, Beverage & Tobacco       | 09/09/08                              | 3.04%                                        |

 

 

29

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                            **Portfolio Activity – (Continued)**

| **DAVIS APPRECIATION & INCOME FUND** | **January 1, 2008 through December 31, 2008** |
|------------------------------------------|-----------------------------------------------|

 

| **Positions Closed (01/01/08-12/31/08)** |
|------------------------------------------|

(Gains and losses greater than $5,000,000 are highlighted)

|                                             |                                      | **  Date of**          | **                        Realized**               |
|--------------------------------------------------|-------------------------------------------|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Security**                                     | **Industry**                              | **   Final Sale** | **                         Gain (Loss)** |
| Agere Systems Inc., Conv. Sub. Notes,            | Semiconductors & Semiconductor        |                             |                                                                                                                                                                  |   |   |
| 6.50%, 12/15/09                                  | Equipment                                 | 01/22/08                         |                                                                                                                                                                  | $ | (9,375) |
| American International Group, Inc.,              |                                      |                             |                                                                                                                                                                  |   |   |
| 8.50%, 08/01/11, Cum. Conv. Pfd.                 | Multi-line Insurance                      | 09/17/08                         |                                                                                                                                                                  |   | (19,134,907) |
| American International Group, Inc.               | Multi-line Insurance                      | 05/13/08                         |                                                                                                                                                                  |   | (8,561,643) |
| Amgen Inc., Conv. Sr. Notes,                     | Pharmaceuticals, Biotechnology & Life |                             |                                                                                                                                                                  |   |   |
| 0.125%, 02/01/11                                 | Sciences                                  | 01/31/08                         |                                                                                                                                                                  |   | (350,536) |
| AutoZone, Inc.                                   | Retailing                                 | 09/17/08                         |                                                                                                                                                                  |   | 3,236,075 |
| Avon Products, Inc., Sr. Notes,                  |                                      |                             |                                                                                                                                                                  |   |   |
| 4.20%, 07/15/18                                  | Household & Personal Products         | 12/18/08                         |                                                                                                                                                                  |   | (348,649) |
| Citigroup Inc.                                   | Diversified Financial Services            | 01/18/08                         |                                                                                                                                                                  |   | (4,237,647) |
| Coca Cola Co., Sr. Notes, 5.35%, 11/15/17        | Food, Beverage & Tobacco              | 07/11/08                         |                                                                                                                                                                  |   | 340,060 |
| Coca Cola Co.                                    | Food, Beverage & Tobacco              | 09/18/08                         |                                                                                                                                                                  |   | 4,702,397 |
| Costco Wholesale Corp.                           | Food & Staples Retailing              | 04/15/08                         |                                                                                                                                                                  |   | 3,466,090 |
| Fairchild Semiconductor Corp., Conv. Sr.         | Semiconductors & Semiconductor        |                             |                                                                                                                                                                  |   |   |
| Sub., 5.00%, 11/01/08                            | Equipment                                 | 06/10/08                         |                                                                                                                                                                  |   | (217,608) |
| Host Hotels & Resorts Inc., Ser. 144A, Conv. |                                      |                             |                                                                                                                                                                  |   |   |
| Sr. Notes, 2.625%, 04/15/27                      | Real Estate                               | 02/21/08                         |                                                                                                                                                                  |   | (2,510,467) |
| HSBC Holdings PLC                                | Commercial Banks                          | 02/05/08                         |                                                                                                                                                                  |   | (5,008) |
| J. C. Penney Co., Inc.                           | Retailing                                 | 10/10/08                         |                                                                                                                                                                  |   | (4,683,109) |
| JDS Uniphase Corp., Conv. Sr. Notes,             |                                      |                             |                                                                                                                                                                  |   |   |
| Zero coupon, 2.32%, 11/15/10                     | Technology Hardware & Equipment       | 01/22/08                         |                                                                                                                                                                  |   | 430,083 |
| Lehman Brothers Holdings Inc., Conv. Notes,      |                                      |                             |                                                                                                                                                                  |   |   |
| 0.25%, 08/23/11                                  | Energy                                    | 04/25/08                         |                                                                                                                                                                  |   | 24,783,880 |
| Occidental Petroleum Corp., Sr. Notes,           |                                      |                             |                                                                                                                                                                  |   |   |
| 6.75%, 01/15/12                                  | Energy                                    | 03/26/08                         |                                                                                                                                                                  |   | 31,714 |
| Occidental Petroleum Corp.                       | Energy                                    | 03/05/08                         |                                                                                                                                                                  |   | 1,727,478 |
| ProLogis                                         | Real Estate                               | 04/28/08                         |                                                                                                                                                                  |   | 350,483 |
| ProLogis, Conv. Sr. Notes, 1.875%, 11/15/37      | Real Estate                               | 07/18/08                         |                                                                                                                                                                  |   | (209,251) |
| ProLogis, 144A Conv. Sr. Notes,                  |                                      |                             |                                                                                                                                                                  |   |   |
| 2.25%, 04/01/37                                  | Real Estate                               | 08/19/08                         |                                                                                                                                                                  |   | (1,543,591) |
| SAP AG, ADR                                      | Software & Services                   | 09/10/08                         |                                                                                                                                                                  |   | 3,630,440 |
| Tyson Foods Inc., Sr. Notes,                     |                                      |                             |                                                                                                                                                                  |   |   |
| 6.85%, 04/01/16                                  | Food, Beverage & Tobacco              | 09/04/08                         |                                                                                                                                                                  |   | (679,034) |

 

 

30

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                   **Fund Performance**

| **DAVIS APPRECIATION & INCOME FUND** |
|------------------------------------------|

 

**CLASS A**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                  | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|-----------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes an

      initial sales charge of 4.75%.) |
| One-Year                                                                                      | (44.22)%            | Actual                                                | $1,000.00                                          |    $644.66                                                 | $4.63 |
| Five-Year                                                                                     | (4.78)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,019.51                                                            | $5.69 |
| Ten-Year                                                                                      | 0.15%               |

*Expenses are equal to the Class’s annualized expense ratio (1.12%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and paid a 4.75% sales charge. As the chart shows, by December 31, 2008, the value of your investment would have grown to $10,149 -a 1.49% increase on your initial investment. For            comparison, the Standard and Poor’s 500® Index is also presented on the chart below.

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 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.

 

31

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS APPRECIATION & INCOME FUND** |
|------------------------------------------|

 

**CLASS B**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                                 | **Expense Example**                                       | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

      contingent deferred sales charge.) |
| One-Year                                                                                                     |          (44.21)% | Actual                                                | $1,000.00                                          |   $641.82                                                       |   $8.21 |
| Five-Year                                                                                                    | (5.01)%                                                   | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,015.13                                                            | $10.08 |
| Ten-Year                                                                                                     | 0.00%                                                     |

*Expenses are equal to the Class’s annualized expense ratio (1.99%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and converted to Class A shares on December 31, 2005. As the chart shows, by December 31, 2008, the value of your investment would have been $9,997 -a 0.03% decrease on your initial            investment. For comparison, the Standard and Poor’s 500® Index is also presented on the chart below.

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 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.

 

32

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS APPRECIATION & INCOME FUND** |
|------------------------------------------|

 

**CLASS C**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                                 | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

      contingent deferred sales charge.) |
| One-Year                                                                                                     | (42.43)%            | Actual                                                | $1,000.00                                          |   $642.42                                                       | $7.93 |
| Five-Year                                                                                                    | (4.66)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,015.48                                                            | $9.73 |
| Ten-Year                                                                                                     | (0.23)%             |

*Expenses are equal to the Class’s annualized expense ratio (1.92%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have been $9,768-a 2.32% decrease on your initial investment. For comparison, the Standard and            Poor’s 500® Index is also presented on the chart below.

 

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 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.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS APPRECIATION & INCOME FUND** |
|------------------------------------------|

 

**CLASS Y**

 

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**         | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (There is no sales charge

     applicable to this calculation.) |
| One-Year                                                                             | (41.25)%            | Actual                                                | $1,000.00                                          |   $645.64                                                       | $3.43 |
| Five-Year                                                                            | (3.61)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,020.96                                                            | $4.22 |
| Ten-Year                                                                             | 0.87%               |

*Expenses are equal to the Class’s annualized expense ratio (0.83%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998.As the chart shows, by December 31, 2008, the value of your investment would have been $10,909- a 9.09%            increase on your initial investment. For comparison, the Standard and Poor’s 500® Index is also presented on the chart below.

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 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.

 

34

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                          **Fund Overview**

| **DAVIS REAL ESTATE FUND** | **At December 31, 2008** |
|----------------------------|--------------------------|

 

 

| **Portfolio Composition**          |    | **Industry Weightings**        |                               |
|------------------------------------|---------|--------------------------------|------------------------------------|
| **(% of Fund’s Net Assets)** |    | **(% of Long Term Portfolio)** |                               |
|                               |    |                           |                               |   |   |   |
|                               |    |                           |                               |   | **Dow Jones Wilshire** |   |
| Common Stock (U.S.)                | 78.76%  |                           |                               |   | **Real Estate** |   |
| Common Stock (Foreign)             | 11.49%  |                           |                               | **Fund** | **Securities Index** |   |
| Preferred Stock                    | 2.64%   |                           | Office REITs                       | 36.03% | 15.95% |   |
| Convertible Bonds                  | 1.22%   |                           | Specialized REITs                  | 10.69% | 27.95% |   |
| Short Term Investments             | 5.91%   |                           | Residential REITs                  |   9.90% | 17.51% |   |
| Other Assets & Liabilities     | (0.02)% |                           | Industrial REITs                   |   8.62% |   5.60% |   |
|                               | 100.00% |                           | Retail REITs                       |   8.08% | 22.33% |   |
|                               |    |                           | Transportation                     |   6.46% |          – |   |
|                               |    |                           | Diversified REITs                  |   6.35% |   9.30% |   |
|                               |    |                           | Diversified Real Estate Activities |   5.67% |          – |   |
|                               |    |                           | Real Estate Operating Companies    |   4.21% |   1.36% |   |
|                               |    |                           | Capital Markets                    |   3.99% |           – |   |
|                               |    |                           |                               |     100.00% |           100.00% |   |
|                                    |         |                                |                                    |  |  |  |  |

 

 

**Top 10 Holdings**

**(% of Fund’s Net Assets)**

|                                   |                            |   |
|----------------------------------------|---------------------------------|--------|
| Digital Realty Trust, Inc.             | Office REITs                    | 7.16%  |
| Alexandria Real Estate Equities, Inc.  | Office REITs                    | 6.62%  |
| Cousins Properties, Inc.               | Diversified REITs               | 5.98%  |
| Ventas, Inc.                           | Specialized REITs               | 5.80%  |
| Corporate Office Properties Trust      | Office REITs                    | 5.54%  |
| American Campus Communities, Inc.      | Residential REITs               | 5.02%  |
| Cogdell Spencer, Inc.                  | Specialized REITs               | 4.26%  |
| Taubman Centers, Inc.                  | Retail REITs                    | 3.98%  |
| Derwent London PLC                     | Office REITs                    | 3.87%  |
| Forest City Enterprises, Inc., Class A | Real Estate Operating Companies | 3.80%  |

 

 

35

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                     **Portfolio Activity**

| **DAVIS REAL ESTATE FUND** | **January 1, 2008 through December 31, 2008** |
|----------------------------|-----------------------------------------------|

 

| **New Positions Added (01/01/08-12/31/08)** |
|---------------------------------------------|

(Highlighted positions are those greater than 3.50% of 12/31/08 total net assets)

| **Security**                                  | **Industry**                       |  

**Date of 1st**

**Purchase** | **% of 12/31/08**

**Fund Net Assets**       |
|-----------------------------------------------|------------------------------------|---------------------------------------|----------------------------------------------|
| AMB Property Corp., 6.75%, Series M, Pfd.     | Industrial REITs                   | 11/19/08                              | 1.00%                                        |
| Brookfield Asset Management Inc., Class A     | Capital Markets                    | 08/13/08                              | 3.75%                                        |
| Cogdell Spencer, Inc.                         | Specialized REITs                  | 01/24/08                              | 4.26%                                        |
| Digital Realty, 8.50%, Series A, Pfd.         | Office REITs                       | 10/27/08                              | 0.43%                                        |
| Douglas Emmett, Inc.                          | Office REITs                       | 11/05/08                              | 2.66%                                        |
| Federal Realty Investment Trust               | Retail REITs                       | 02/14/08                              | 3.02%                                        |
| Mitsubishi Estate Co., Ltd.                   | Diversified Real Estate Activities | 01/08/08                              |        – |
| SL Green Realty Corp., 7.625%, Series C, Pfd. | Office REITs                       | 12/18/08                              | 0.67%                                        |
| St. Joe Co.                                   | Diversified Real Estate Activities | 10/22/08                              | 3.55%                                        |
| U-Store-It Trust                              | Specialized REITs                  | 02/29/08                              |        – |

 

 

 

 

 

| **Positions Closed (01/01/08-12/31/08)** |
|------------------------------------------|

(Gains and losses greater than $9,000,000 are highlighted)

|                                  |                               | **Date of**    | **                       Realized**    |
|---------------------------------------|------------------------------------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Security**                          | **Industry**                       | **Final Sale** | **                       Gain (Loss)** |
| AMB Property Corp.                    | Industrial REITs                   | 07/21/08       |                                                                                                                                                 | $ | (2,997,998) |
| Ambac Financial Group, Inc.           | Property & Casualty Insurance  | 05/22/08       |                                                                                                                                                 |   | (15,518,919) |
| AvalonBay Communities Inc.            | Residential REITs                  | 10/10/08       |                                                                                                                                                 |   | (4,832,124) |
| General Electric Co.                  | Capital Goods                      | 01/07/08       |                                                                                                                                                 |   | (483,040) |
| General Growth Properties, Inc., Ser. |                               |           |                                                                                                                                                 |   |   |
| 144A Conv. Sr. Notes, 3.98%, 4/15/27  | Retail REITs                       | 01/11/08       |                                                                                                                                                 |   | (3,626,053) |
| Gramercy Capital Corp.                | Diversified REITs                  | 11/11/08       |                                                                                                                                                 |   | (14,211,857) |
| Kimco Realty Corp.                    | Retail REITs                       | 07/08/08       |                                                                                                                                                 |   | 9,662,362 |
| Mitsubishi Estate Co., Ltd.           | Diversified Real Estate Activities | 10/09/08       |                                                                                                                                                 |   | (1,087,676) |
| Regency Centers Corp.                 | Retail REITs                       | 10/13/08       |                                                                                                                                                 |   | 5,845,091 |
| Toll Brothers, Inc.                   | Homebuilding                       | 02/27/08       |                                                                                                                                                 |   | 4,210,107 |
| U-Store-It Trust                      | Specialized REITs                  | 05/12/08       |                                                                                                                                                 |   | 867,411 |
| Vornado Realty Trust                  | Diversified REITs                  | 03/25/08       |                                                                                                                                                 |   | (1,245,816) |

 

 

36

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                   **Fund Performance**

| **DAVIS REAL ESTATE FUND** |
|----------------------------|

 

**CLASS A**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                  | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|-----------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes an

      initial sales charge of 4.75%.) |
| One-Year                                                                                      | (49.41)%            | Actual                                                | $1,000.00                                          |   $577.34                                                       | $5.08 |
| Five-Year                                                                                     | (2.73)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,018.70                                                            | $6.50 |
| Ten-Year                                                                                      | 4.53%               |

*Expenses are equal to the Class’s annualized expense ratio (1.28%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and paid a 4.75% sales charge. As the chart shows, by December 31, 2008, the value of your investment would have grown to $15,577 - a 55.77% increase on your initial investment. For comparison, the            Dow Jones Wilshire Real Estate Securities Index and the Standard & Poor’s 500® Index are also presented on the chart below.

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 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 capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

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.

 

37

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS REAL ESTATE FUND** |
|----------------------------|

 

**CLASS B**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                           | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

     contingent deferred sales charge.) |
| One-Year                                                                                               | (49.41)%            | Actual                                                | $1,000.00                                          |   $573.99                                                       |   $8.86 |
| Five-Year                                                                                              | (2.78)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,013.88                                                            | $11.34 |
| Ten-Year                                                                                               | 4.46%               |

*Expenses are equal to the Class’s annualized expense ratio (2.24%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998 and converted to Class A shares on December 31, 2005. As the chart shows, by December 31, 2008, the value of your investment would have grown to $15,481 - a 54.81% increase on your initial            investment. For comparison, the Dow Jones Wilshire Real Estate Securities Index and the Standard & Poor’s 500® Index are also presented on the chart below.

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 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 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 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.

 

38

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS REAL ESTATE FUND** |
|----------------------------|

 

**CLASS C**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**                           | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (This calculation includes any applicable

     contingent deferred sales charge.) |
| One-Year                                                                                               | (47.83)%            | Actual                                                | $1,000.00                                          |   $574.78                                                       |   $8.19 |
| Five-Year                                                                                              | (2.51)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,014.73                                                            | $10.48 |
| Ten-Year                                                                                               | 4.23%               |

*Expenses are equal to the Class’s annualized expense ratio (2.07%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have grown to $15,134 - a 51.34% increase on your initial investment. For comparison, the Dow Jones Wilshire Real Estate            Securities Index and the Standard & Poor’s 500® Index are also presented on the chart below.

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 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 capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

 

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.

 

39

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                         **Fund Performance – (Continued)**

| **DAVIS REAL ESTATE FUND** |
|----------------------------|

 

**CLASS Y**

 

| **Average Annual Total Return**

**for the periods ended December 31, 2008**         | **Expense Example** | **Beginning**

**Account**

**Value**

**(07/01/08)** | **Ending**

**Account**

**Value**

**(12/31/08)** | **Expenses Paid**

**During Period***

**(07/01/08-**

**12/31/08)** |
|--------------------------------------------------------------------------------------|---------------------|-------------------------------------------------------|----------------------------------------------------|----------------------------------------------------------------------|
| (There is no sales charge

     applicable to this calculation.) |
| One-Year                                                                             | (46.75)%            | Actual                                                | $1,000.00                                          |   $577.93                                                  | $3.81 |
| Five-Year                                                                            | (1.43)%             | Hypothetical (5% return

before expenses)             | $1,000.00                                          | $1,020.31                                                            | $4.88 |
| Ten-Year                                                                             | 5.42%               |

*Expenses are equal to the Class’s annualized expense ratio (0.96%), multiplied by the average account valueover the period, multiplied by 184/366 (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 41 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, 1998. As the chart shows, by December 31, 2008, the value of your investment would have grown to $16,952 - a 69.52% increase on your initial investment. For comparison, the Dow Jones Wilshire Real            Estate Securities Index and the Standard & Poor’s 500® Index are also presented on the chart below.

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 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 capitalization, and represents approximately two-thirds of the total market value of all domestic common stocks.

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.**                                                                                                                                             **Notes to Performance**

 

**The following disclosure provides important information regarding each Fund’s Expense Example, which appears in each Class’s Fund Performance section of 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 contingent deferred sales charges on redemptions; 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 07/01/08 to 12/31/08.

**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. An annual maintenance fee of $15, charged on retirement plan accounts per Social Security Number, is not included in the Expense Example. This fee will be waived for accounts sharing the same Social Security Number if the accounts total at least $50,000 at Davis Funds. If this fee was included, the estimate of expenses you paid during            the period would be higher, and your ending account value lower, by this amount.

**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. An annual maintenance fee of $15, charged on retirement plan accounts per Social Security Number, is not included in the Expense Example. This fee will be waived for accounts sharing the same            Social Security Number if the accounts total at least $50,000 at Davis Funds. If this fee was included, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

 

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 front end or contingent deferred 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.

 

41

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                         **Schedule of Investments**

| **DAVIS OPPORTUNITY FUND** | **December 31, 2008** |
|----------------------------|-----------------------|

 

| **Shares**                |                                                | **Security**                                    |   | **Value****(Note 1)** |       |
|---------------------------|-----------------------------------------------------|-------------------------------------------------|--------|-----------------------|------------|
| **COMMONSTOCK- (97.75%)** |                                                |
|                      | **CONSUMER DISCRETIONARY - (27.78%)**               |                                            |
|                      | **Automobiles & Components – (0.41%)**    |                                            |
|                      | 101,850                                             | Johnson Controls, Inc.                          |   | $                     | 1,849,596  |   |
|                           |
|                      | **Consumer Durables & Apparel – (3.85%)** |                                            |
|                      | 349,610                                             | Garmin Ltd.                                     |   |                  | 6,696,780  |   |
|                      | 323,279                                             | Hunter Douglas NV (Netherlands)                 |   |                  | 10,642,652 |   |
|                           |
|                      |                                                     | 17,339,432                                      |   |
|                           |
|                      | **Consumer Services – (3.59%)**               |                                            |
|                      | 173,830                                             | H&R Block, Inc.                             |   |                  | 3,949,418  |   |
|                      | 387,750                                             | Yum! Brands, Inc.                               |   |                  | 12,214,125 |   |
|                           |
|                      |                                                     | 16,163,543                                      |   |
|                           |
|                      | **Media – (13.96%)**                          |                                            |
|                      | 1,360,400                                           | Comcast Corp., Special Class A                  |   |                  | 21,950,054 |   |
|                      | 1,130,320                                           | Grupo Televisa S.A., ADR (Mexico)               |   |                  | 16,886,981 |   |
|                      | 275,416                                             | Lagardere S.C.A. (France)                       |   |                  | 11,189,666 |   |
|                      | 135,570                                             | Liberty Media Corp. - Entertainment, Series A * |   |                  | 2,367,052  |   |
|                      | 406,580                                             | News Corp., Class A                             |   |                  | 3,689,713  |   |
|                      | 297,000                                             | Walt Disney Co.                                 |   |                  | 6,738,930  |   |
|                           |
|                      |                                                     | 62,822,396                                      |   |
|                           |
|                      | **Retailing – (5.97%)**                       |                                            |
|                      | 662,720                                             | CarMax, Inc. *                                  |   |                  | 5,222,234  |   |
|                      | 214,700                                             | Liberty Media Corp. - Interactive, Series A *   |   |                  | 668,790    |   |
|                      | 702,600                                             | Netflix Inc. *                                  |   |                  | 20,997,201 |   |
|                           |
|                      |                                                     | 26,888,225                                      |   |
|                           |
|                      | **TOTALCONSUMERDISCRETIONARY**                      |                                            |   | **125,063,192**       |       |
|                           |
|                      | **CONSUMER STAPLES - (1.96%)**                      |                                            |
|                      | **Food & Staples Retailing – (1.07%)**    |                                            |
|                      | 70,920                                              | Costco Wholesale Corp.                          |   |                  | 3,721,882  |   |
|                      | 115,300                                             | Whole Foods Market, Inc.                        |   |                  | 1,089,008  |   |
|                           |
|                      |                                                     | 4,810,890                                       |   |
|                           |
|                      | **Food, Beverage & Tobacco – (0.89%)**    |                                            |
|                      | 140,905                                             | Heineken Holding NV (Netherlands)               |   |                  | 4,024,898  |   |
|                           |
|                      | **TOTALCONSUMERSTAPLES**                            |                                            |   | **8,835,788**         |       |
|                           |
|                      | **ENERGY - (5.82%)**                                |                                            |
|                      | 85,800                                              | Devon Energy Corp.                              |   |                  | 5,637,918  |   |
|                      | 111,800                                             | Occidental Petroleum Corp.                      |   |                  | 6,706,882  |   |
|                      | 224,110                                             | Tenaris S.A., ADR (Argentina)                   |   |                  | 4,701,828  |   |
|                      | 194,159                                             | Transocean Ltd. *                               |   |                  | 9,174,012  |   |
|                           |
|                      | **TOTALENERGY**                                     |                                            |   | **26,220,640**        |       |
|                           |
|                      | **FINANCIALS - (15.60%)**                           |                                            |
|                      | **Diversified Financials – (8.77%)**          |                                            |
|                      | **Capital Markets – (4.50%)**                 |                                            |
|                      | 398,810                                             | Bank of New York Mellon Corp.                   |   |                  | 11,298,287 |   |
|                      | 382,500                                             | Charles Schwab Corp.                            |   |                  | 6,186,938  |   |
|                      | 731,465                                             | E*TRADE Financial Corp. *                       |   |                  | 837,527    |   |
|                      | 50,372                                              | Julius Baer Holding, AG (Switzerland)           |   |                  | 1,952,282  |   |
|                           |
|                      | 20,275,034                                          |                                            |
|                           |
|                           |                                                     |                                                 |        |                       |            |  |  |  |  |  |  |  |  |  |

 

42

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS OPPORTUNITY FUND - (Continued)** | **December 31, 2008** |
|------------------------------------------|-----------------------|

 

| **Shares**                           |                                                                   | **Security**                                       |   | **Value****(Note 1)** |       |
|--------------------------------------|------------------------------------------------------------------------|----------------------------------------------------|--------|-----------------------|------------|
| **COMMON STOCK – (CONTINUED)** |                                                                   |
|                                 | **FINANCIALS – (CONTINUED)**                                     |                                               |
|                                 | **Diversified Financials – (Continued)**                         |                                               |
|                                 | **Diversified Financial Services – (4.27%)**                     |                                               |
|                                 | 2,334                                                                  | CME Group Inc.                                     |   | $                     | 485,285    |   |
|                                 | 495,450                                                                | Oaktree Capital Group LLC, Class A (a)             |   |                  | 9,413,550  |   |
|                                 | 139,285                                                                | Pargesa Holdings S.A., Bearer Shares (Switzerland) |   |                  | 9,308,663  |   |
|                                      |
|                                 | 19,207,498                                                             |                                               |
|                                      |
|                                 |                                                                        | 39,482,532                                         |   |
|                                      |
|                                 | **Insurance – (6.46%)**                                          |                                               |
|                                 | **Insurance Brokers – (0.15%)**                                  |                                               |
|                                 | 31,746                                                                 | Brown & Brown, Inc.                            |   |                  | 663,492    |   |
|                                      |
|                                 | **Life & Health Insurance – (0.64%)**                        |                                               |
|                                 | 160,040                                                                | Power Corp. of Canada (Canada)                     |   |                  | 2,906,518  |   |
|                                      |
|                                 | **Property & Casualty Insurance – (3.73%)**                  |                                               |
|                                 | 539,301                                                                | Ambac Financial Group, Inc.                        |   |                  | 701,091    |   |
|                                 | 52,495                                                                 | Markel Corp. *                                     |   |                  | 15,696,005 |   |
|                                 | 100,810                                                                | MBIA Inc. *                                        |   |                  | 410,297    |   |
|                                      |
|                                 | 16,807,393                                                             |                                               |
|                                      |
|                                 | **Reinsurance – (1.94%)**                                        |                                               |
|                                 | 32,790                                                                 | Everest Re Group, Ltd.                             |   |                  | 2,496,631  |   |
|                                 | 34,230                                                                 | RenaissanceRe Holdings Ltd.                        |   |                  | 1,764,899  |   |
|                                 | 111,325                                                                | Transatlantic Holdings, Inc.                       |   |                  | 4,459,679  |   |
|                                      |
|                                 | 8,721,209                                                              |                                               |
|                                      |
|                                 |                                                                        | 29,098,612                                         |   |
|                                      |
|                                 | **Real Estate – (0.37%)**                                        |                                               |
|                                 | 111,439                                                                | Redwood Trust, Inc.                                |   |                  | 1,661,555  |   |
|                                      |
|                                 | **TOTALFINANCIALS**                                                    |                                               |   | **70,242,699**        |       |
|                                      |
|                                 | **HEALTH CARE - (14.00%)**                                             |                                               |
|                                 | **Health Care Equipment & Services – (4.09%)**               |                                               |
|                                 | 67,355                                                                 | Cardinal Health, Inc.                              |   |                  | 2,321,727  |   |
|                                 | 250,190                                                                | IDEXX Laboratories, Inc. *                         |   |                  | 9,005,589  |   |
|                                 | 266,600                                                                | UnitedHealth Group Inc.                            |   |                  | 7,091,560  |   |
|                                      |
|                                 |                                                                        | 18,418,876                                         |   |
|                                      |
|                                 | **Pharmaceuticals, Biotechnology & Life Sciences – (9.91%)** |                                               |
|                                 | 422,660                                                                | Johnson & Johnson                              |   |                  | 25,287,748 |   |
|                                 | 1,136,200                                                              | Schering-Plough Corp.                              |   |                  | 19,349,486 |   |
|                                      |
|                                 |                                                                        | 44,637,234                                         |   |
|                                      |
|                                 | **TOTALHEALTHCARE**                                                    |                                               |   | **63,056,110**        |       |
|                                      |
|                                 | **INDUSTRIALS - (8.34%)**                                              |                                               |
|                                 | **Capital Goods – (5.11%)**                                      |                                               |
|                                 | 1,360,568                                                              | Blount International, Inc. *                       |   |                  | 12,898,185 |   |
|                                 | 262,570                                                                | Shaw Group Inc. *                                  |   |                  | 5,374,808  |   |
|                                 | 62,570                                                                 | Siemens AG, Registered (Germany)                   |   |                  | 4,710,485  |   |
|                                      |
|                                 |                                                                        | 22,983,478                                         |   |
|                                      |
|                                 | **Commercial & Professional Services – (2.50%)**             |                                               |
|                                 | 27,970                                                                 | D&B Corp.                                      |   |                  | 2,159,284  |   |
|                                 | 368,580                                                                | Iron Mountain Inc. *                               |   |                  | 9,114,983  |   |
|                                      |
|                                 |                                                                        | 11,274,267                                         |   |
|                                      |
|                                      |                                                                        |                                                    |        |                       |            |  |  |  |  |  |  |  |  |  |

 

43

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS OPPORTUNITY FUND - (Continued)** | **December 31, 2008** |
|------------------------------------------|-----------------------|

 

| **Shares/Principal**                 |                                                                                                                                        | **Security**                                                    |   | **Value****(Note 1)** |       |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|--------|-----------------------|------------|
| **COMMON STOCK – (CONTINUED)** |                                                                                                                                        |
|                                 | **INDUSTRIALS – (CONTINUED)**                                                                                                         |                                                            |
|                                 | **Transportation – (0.73%)**                                                                                                          |                                                            |
|                                 | 958,000                                                                                                                                     | Clark Holdings, Inc. *(b)                                       |   | $                     | 598,750    |   |
|                                 | 41,600                                                                                                                                      | Kuehne & Nagel International AG, Registered (Switzerland)   |   |                  | 2,694,361  |   |
|                                      |
|                                 |                                                                                                                                             | 3,293,111                                                       |   |
|                                      |
|                                 | **TOTALINDUSTRIALS**                                                                                                                        |                                                            |   | **37,550,856**        |       |
|                                      |
|                                 | **INFORMATION TECHNOLOGY - (18.87%)**                                                                                                       |                                                            |
|                                 | **Semiconductors & Semiconductor Equipment – (2.69%)**                                                                            |                                                            |
|                                 | 781,680                                                                                                                                     | Texas Instruments Inc.                                          |   |                  | 12,131,674 |   |
|                                      |
|                                 | **Software & Services – (12.39%)**                                                                                                |                                                            |
|                                 | 673,672                                                                                                                                     | Convera Corp., Class A *                                        |   |                  | 163,365    |   |
|                                 | 99,649                                                                                                                                      | Google Inc., Class A *                                          |   |                  | 30,651,036 |   |
|                                 | 740,560                                                                                                                                     | Microsoft Corp.                                                 |   |                  | 14,400,189 |   |
|                                 | 164,000                                                                                                                                     | SAP AG, ADR (Germany)                                           |   |                  | 5,940,080  |   |
|                                 | 380,000                                                                                                                                     | Yahoo! Inc. *                                                   |   |                  | 4,626,500  |   |
|                                      |
|                                 |                                                                                                                                             | 55,781,170                                                      |   |
|                                      |
|                                 | **Technology Hardware & Equipment – (3.79%)**                                                                                     |                                                            |
|                                 | 546,000                                                                                                                                     | Agilent Technologies, Inc. *                                    |   |                  | 8,533,980  |   |
|                                 | 378,400                                                                                                                                     | Cisco Systems, Inc. *                                           |   |                  | 6,162,244  |   |
|                                 | 64,900                                                                                                                                      | Hewlett-Packard Co.                                             |   |                  | 2,355,221  |   |
|                                      |
|                                 |                                                                                                                                             | 17,051,445                                                      |   |
|                                      |
|                                 | **TOTALINFORMATIONTECHNOLOGY**                                                                                                              |                                                            |   | **84,964,289**        |       |
|                                      |
|                                 | **MATERIALS - (5.09%)**                                                                                                                     |                                                            |
|                                 | 59,000                                                                                                                                      | Monsanto Co.                                                    |   |                  | 4,150,650  |   |
|                                 | 262,560                                                                                                                                     | Sigma-Aldrich Corp.                                             |   |                  | 11,083,971 |   |
|                                 | 961,400                                                                                                                                     | Sino-Forest Corp. (Canada)*                                     |   |                  | 7,686,527  |   |
|                                      |
|                                 | **TOTALMATERIALS**                                                                                                                          |                                                            |   | **22,921,148**        |       |
|                                      |
|                                 | **TELECOMMUNICATION SERVICES - (0.29%)**                                                                                                    |                                                            |
|                                 | 44,450                                                                                                                                      | American Tower Corp., Class A *                                 |   |                  | 1,303,274  |   |
|                                      |
|                                 | **TOTALTELECOMMUNICATIONSERVICES**                                                                                                          |                                                            |   | **1,303,274**         |       |
|                                      |
|                                 | **TOTAL COMMON STOCK – (Identified cost $585,121,115)**                                                                               |                                                            |   | **440,157,996**       |       |
|                                      |
| **CONVERTIBLEBONDS- (0.75%)**        |                                                                                                                                        |
|                                 | **TELECOMMUNICATION SERVICES - (0.75%)**                                                                                                    |                                                            |
| $                                    | 5,600,000                                                                                                                                   | Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11 |   |                  | 3,367,000  |   |
|                                      |
|                                 | **TOTAL CONVERTIBLE BONDS – (Identified cost $5,600,000)**                                                                            |                                                            |   | **3,367,000**         |       |
|                                      |
| **SHORTTERMINVESTMENTS- (1.55%)**    |                                                                                                                                        |
|                                 | 3,494,000                                                                                                                                   | Banc of America Securities LLC Joint Repurchase Agreement,      |   |
|                                 | 0.06%, 01/02/09, dated 12/31/08, repurchase value of $3,494,012                                                                             |                                                            |
|                                 | (collateralized by: U.S. Government agency mortgage in a pooled cash account, 6.00%, 10/20/38, total market value $3,563,880)               |                                                            |   | 3,494,000             |       |
|                                 | 1,456,000                                                                                                                                   | Goldman, Sachs & Co. Joint Repurchase Agreement,            |   |
|                                 | 0.04%, 01/02/09, dated 12/31/08, repurchase value of $1,456,003                                                                             |                                                            |
|                                 | (collateralized by: US Government agency mortgages in a pooled cash account, 5.00%-5.50%, 05/01/35-05/01/38, total market value $1,485,120) |                                                            |   | 1,456,000             |       |
|                                      |                                                                                                                                             |                                                                 |        |                       |            |  |  |  |  |  |  |  |  |

 

44

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS OPPORTUNITY FUND - (Continued)** | **December 31, 2008** |
|------------------------------------------|-----------------------|

 

| **Principal**                                  |                                                                                                                                          | **Security**                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | **Value****(Note 1)** |   |
|------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|--------|
| **SHORT TERM INVESTMENTS – (CONTINUED)** |                                                                                                                                          |
| $                                              | 2,038,000                                                                                                                                     | UBS Securities LLC Joint Repurchase Agreement, |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                           | 0.05%, 01/02/09, dated 12/31/08, repurchase value of $2,038,006                                                                               |                                           |
|                                           | (collateralized by: U.S. Government agency mortgages in a pooled cash account, 5.00%-6.50%, 06/01/17-02/01/38, total market value $2,078,760) |                                           | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 2,038,000             |   |
|                                                |
|                                           | **TOTAL SHORT TERM INVESTMENTS – (Identified cost $6,988,000)**                                                                         |                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | **6,988,000**         |   |
|                                                |
|                                           | Total Investments – (100.05%) – (Identified cost $597,709,115) – (c)                                                        |                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 450,512,996           |   |
|                                           | Liabilities Less Other Assets – (0.05%)                                                                                                 |                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | (242,013)             |   |
|                                                |
|                                           | Net Assets – (100.00%)                                                                                                                  |                                           | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 450,270,983           |   |
|                                                |
|                                                |
|                                           | ADR: American Depositary Receipt                                                                                                              |                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                           | *                                                                                                                                             |                                           | Non-Income producing security.                                                                                                                                                                                                                                                                                                                                                                                                                                        |                  |   |
|                                           | (a)                                                                                                                                           |                                           | Illiquid Security – See Note 8 of the Notes to Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                            |                  |   |
|                                           | (b)                                                                                                                                           |                                           | Affiliated Company. Represents ownership of at least 5% of the voting securities of the issuer and is an affiliate, as defined in the Investment Company Act of 1940, at or during the year ended December 31, 2008. The aggregate fair value of the securities of affiliated companies held by the Fund as of December 31, 2008, amounts to $598,750. Transactions during the period in which the issuers were affiliates are as                            follows: |                  |   |
|                                                |                                                                                                                                               |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                       |        |  |  |  |  |  |  |  |  |  |  |  |

 

| Security             |   | Shares

December 31, 2007 |   | Gross

Additions |   | Gross

Reductions |   | Shares

December 31, 2008 |   | Dividend

Income |
|----------------------|--------|---------------------------|--------|------------------|--------|-------------------|--------|---------------------------|--------|------------------|
| Clark Holdings, Inc. |   | –                   |   | 978,700          |   | 20,700            |   | 958,000                   | $      | –          |

 

    (c)          Aggregate cost for federal income tax purposes is $605,545,590. At December 31, 2008 unrealized appreciation                                (depreciation) of securities for federal income tax purposes is as follows:

 
|  | Unrealized appreciation                                                                                                      |  | $ |         27,109,734 |  |
|--|------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------------------------|--|
|  | Unrealized depreciation                                                                                                      |  |   | (182,142,328)                                         |  |
|  |                  Net unrealized depreciation |  | $ | (155,032,594)                                         |  |

 

 

 

***See Notes to Financial Statements***

 

45

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                         **Schedule of Investments**

| **DAVIS GOVERNMENT BOND FUND** | **December 31, 2008** |
|--------------------------------|-----------------------|

 

| **Principal**                       |                                               | **Security**                                     |   | **Value****(Note 1)** |      |
|-------------------------------------|----------------------------------------------------|--------------------------------------------------|--------|-----------------------|-----------|
| **GOVERNMENTAGENCYNOTES- (15.04%)** |                                               |
| $                                   | 125,000                                            | Fannie Mae, 6.50%, 07/15/09                      |   | $                     | 129,007   |   |
|                                | 500,000                                            | Fannie Mae, 4.00%, 11/09/09                      |   |                  | 513,280   |   |
|                                | 130,000                                            | Fannie Mae, 3.00%, 12/18/09                      |   |                  | 130,083   |   |
|                                | 500,000                                            | Fannie Mae, 5.00%, 07/28/10                      |   |                  | 528,176   |   |
|                                | 180,000                                            | Fannie Mae, 3.50%, 06/03/11                      |   |                  | 180,379   |   |
|                                | 3,000,000                                          | Fannie Mae, 4.00%, 08/18/11                      |   |                  | 3,050,825 |   |
|                                | 195,000                                            | Fannie Mae, 4.125%, 01/30/12                     |   |                  | 195,504   |   |
|                                | 400,000                                            | Fannie Mae, 4.00%, 01/28/13                      |   |                  | 426,367   |   |
|                                | 500,000                                            | Federal Farm Credit Bank, 4.125%, 07/17/09       |   |                  | 509,827   |   |
|                                | 340,000                                            | Federal Farm Credit Bank, 4.50%, 10/04/10        |   |                  | 358,413   |   |
|                                | 600,000                                            | Federal Home Loan Bank, 5.00%, 11/03/09          |   |                  | 619,596   |   |
|                                | 1,000,000                                          | Federal Home Loan Bank, 4.875%, 03/12/10         |   |                  | 1,043,872 |   |
|                                | 185,000                                            | Federal Home Loan Bank, 4.75%, 08/13/10          |   |                  | 194,994   |   |
|                                | 459,263                                            | Federal Home Loan Bank, 4.75%, 10/25/10          |   |                  | 466,815   |   |
|                                | 990,688                                            | Federal Home Loan Bank, 5.30%, 06/15/12          |   |                  | 1,054,155 |   |
|                                | 2,000,000                                          | Federal Home Loan Bank, 4.95%, 07/09/12          |   |                  | 2,037,640 |   |
|                                | 1,098,824                                          | Final Maturity Amortizing Notes, 4.10%, 01/25/10 |   |                  | 1,123,526 |   |
|                                | 2,618,320                                          | Final Maturity Amortizing Notes, 4.62%, 04/25/10 |   |                  | 2,674,221 |   |
|                                | 745,046                                            | Final Maturity Amortizing Notes, 4.10%, 11/25/10 |   |                  | 757,675   |   |
|                                | 200,000                                            | Freddie Mac, 4.00%, 09/22/09                     |   |                  | 204,695   |   |
|                                | 5,000,000                                          | Freddie Mac, 3.25%, 03/10/10                     |   |                  | 5,024,702 |   |
|                                | 200,000                                            | Freddie Mac, 5.00%, 10/18/10                     |   |                  | 212,642   |   |
|                                | 1,000,000                                          | Freddie Mac, 5.25%, 02/24/11                     |   |                  | 1,005,229 |   |
|                                     |
|                                | **TOTAL GOVERNMENT AGENCY NOTES –**          |                                             |   | **22,441,623**        |      |
| **(Identified cost $22,081,146)**   |
|                                     |
| **MORTGAGES- (79.22%)**             |                                               |
|                                | **COLLATERALIZED MORTGAGE OBLIGATIONS - (34.60%)** |                                             |
|                                | 84,056                                             | Fannie Mae, 5.00%, 07/25/15                      |   |                  | 84,916    |   |
|                                | 3,353,919                                          | Fannie Mae, 5.50%, 12/25/16                      |   |                  | 3,449,560 |   |
|                                | 1,568,299                                          | Fannie Mae, 5.00%, 02/25/17                      |   |                  | 1,596,534 |   |
|                                | 3,479,043                                          | Fannie Mae, 5.00%, 12/25/17                      |   |                  | 3,529,071 |   |
|                                | 1,571,015                                          | Fannie Mae, 4.50%, 07/25/21                      |   |                  | 1,585,536 |   |
|                                | 997,204                                            | Fannie Mae, 5.00%, 08/25/23                      |   |                  | 1,002,356 |   |
|                                | 1,451,552                                          | Fannie Mae, 5.50%, 11/25/23                      |   |                  | 1,483,143 |   |
|                                | 441,282                                            | Fannie Mae, 8.00%, 12/17/24                      |   |                  | 449,210   |   |
|                                | 616,349                                            | Fannie Mae, 5.00%, 02/25/25                      |   |                  | 623,165   |   |
|                                | 987,553                                            | Fannie Mae, 5.50%, 11/25/25                      |   |                  | 996,627   |   |
|                                | 1,504,119                                          | Fannie Mae, 5.50%, 01/25/28                      |   |                  | 1,505,926 |   |
|                                | 3,049,602                                          | Fannie Mae, 5.50%, 06/25/30                      |   |                  | 3,060,462 |   |
|                                | 720,574                                            | Freddie Mac, 4.00%, 09/15/10                     |   |                  | 724,364   |   |
|                                | 472,749                                            | Freddie Mac, 5.00%, 08/15/14                     |   |                  | 474,506   |   |
|                                | 3,417,500                                          | Freddie Mac, 4.00%, 10/15/15                     |   |                  | 3,451,220 |   |
|                                | 1,829,268                                          | Freddie Mac, 5.00%, 08/15/16                     |   |                  | 1,859,838 |   |
|                                | 1,960,595                                          | Freddie Mac, 5.00%, 01/15/18                     |   |                  | 2,000,706 |   |
|                                | 1,250,000                                          | Freddie Mac, 4.50%, 09/15/18                     |   |                  | 1,263,675 |   |
|                                | 3,517,066                                          | Freddie Mac, 5.00%, 12/15/22                     |   |                  | 3,551,644 |   |
|                                | 414,359                                            | Freddie Mac, 5.00%, 06/15/25                     |   |                  | 420,489   |   |
|                                | 1,363,665                                          | Freddie Mac, 5.50%, 10/15/25                     |   |                  | 1,378,155 |   |
|                                | 175,627                                            | Freddie Mac, 5.50%, 02/15/26                     |   |                  | 177,411   |   |
|                                     |                                                    |                                                  |        |                       |           |  |  |  |  |  |

 

46

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS GOVERNMENT BOND FUND - (Continued)** | **December 31, 2008** |
|----------------------------------------------|-----------------------|

 

| **Principal**                     |                                                        | **Security**                          |   | **Value****(Note 1)** |      |
|-----------------------------------|-------------------------------------------------------------|---------------------------------------|--------|-----------------------|-----------|
| **MORTGAGES – (CONTINUED)** |                                                        |
|                              | **COLLATERALIZED MORTGAGE OBLIGATIONS – (CONTINUED)** |                                  |
| $                                 | 300,000                                                     | Freddie Mac, 5.00%, 05/15/27          |   | $                     | 307,742   |   |
|                              | 2,000,000                                                   | Freddie Mac, 5.00%, 05/15/27          |   |                  | 2,029,543 |   |
|                              | 2,000,000                                                   | Freddie Mac, 5.00%, 10/15/27          |   |                  | 2,033,863 |   |
|                              | 2,378,026                                                   | Freddie Mac, 5.50%, 12/15/27          |   |                  | 2,404,461 |   |
|                              | 274,899                                                     | Freddie Mac, 6.00%, 03/15/30          |   |                  | 278,905   |   |
|                              | 1,411,354                                                   | Freddie Mac, 5.50%, 12/15/30          |   |                  | 1,433,361 |   |
|                              | 1,876,948                                                   | Freddie Mac, 6.00%, 05/15/35          |   |                  | 1,855,061 |   |
|                              | 224,941                                                     | Ginnie Mae, 6.00%, 03/20/14           |   |                  | 225,466   |   |
|                              | 1,073,861                                                   | Ginnie Mae, 6.00%, 05/16/30           |   |                  | 1,080,541 |   |
|                              | 5,257,511                                                   | Ginnie Mae, 5.00%, 08/20/32           |   |                  | 5,305,728 |   |
|                                   |
|                              | **Total Collateralized Mortgage Obligations**               |                                  |   | **51,623,185**        |      |
|                                   |
|                              | **FANNIE MAE POOLS - (16.03%)**                             |                                  |
|                              | 181,304                                                     | 5.50%, 09/01/09, Pool No. 254469      |   |                  | 182,476   |   |
|                              | 2,282,623                                                   | 4.50%, 11/01/09, Pool No. 254566      |   |                  | 2,308,604 |   |
|                              | 330,840                                                     | 4.00%, 08/01/10, Pool No. 254861      |   |                  | 335,852   |   |
|                              | 702,786                                                     | 4.00%, 09/01/10, Pool No. 254901      |   |                  | 715,824   |   |
|                              | 2,269,096                                                   | 3.50%, 04/01/11, Pool No. 255245      |   |                  | 2,303,431 |   |
|                              | 535,132                                                     | 4.50%, 01/01/13, Pool No. 254646      |   |                  | 550,450   |   |
|                              | 1,229,479                                                   | 4.564%, 01/01/15, Pool No. 725788     |   |                  | 1,254,772 |   |
|                              | 3,427,158                                                   | 6.00%, 09/01/17, Pool No. 665776      |   |                  | 3,563,709 |   |
|                              | 1,819,686                                                   | 5.00%, 03/01/18, Pool No. 357369      |   |                  | 1,883,943 |   |
|                              | 2,585,814                                                   | 4.50%, 08/01/18, Pool No. 254833      |   |                  | 2,671,146 |   |
|                              | 1,789,150                                                   | 4.00%, 01/01/19, Pool No. 976841      |   |                  | 1,825,604 |   |
|                              | 172,553                                                     | 6.50%, 07/01/32, Pool No. 635069      |   |                  | 180,523   |   |
|                              | 1,999,111                                                   | 4.667%, 10/01/32, Pool No. 648917 (a) |   |                  | 1,977,027 |   |
|                              | 1,017,702                                                   | 4.809%, 05/01/35, Pool No. 826242 (a) |   |                  | 1,026,510 |   |
|                              | 1,435,425                                                   | 5.066%, 01/01/36, Pool No. 848973 (a) |   |                  | 1,455,198 |   |
|                              | 276,250                                                     | 5.803%, 03/01/36, Pool No. 843396 (a) |   |                  | 268,626   |   |
|                              | 1,379,779                                                   | 5.613%, 04/01/36, Pool No. 851605 (a) |   |                  | 1,404,060 |   |
|                                   |
|                              | **Total Fannie Mae Pools**                                  |                                  |   | **23,907,755**        |      |
|                                   |
|                              | **FREDDIE MAC POOLS - (27.05%)**                            |                                  |
|                              | 544,569                                                     | 4.00%, 02/01/09, Pool No. L75353      |   |                  | 545,634   |   |
|                              | 1,723,248                                                   | 4.00%, 03/01/09, Pool No. M90903      |   |                  | 1,727,709 |   |
|                              | 1,266,015                                                   | 4.50%, 04/01/09, Pool No. M90914      |   |                  | 1,268,797 |   |
|                              | 1,154,616                                                   | 4.50%, 07/01/09, Pool No. M90934      |   |                  | 1,162,385 |   |
|                              | 409,583                                                     | 4.50%, 10/01/09, Pool No. M80778      |   |                  | 414,166   |   |
|                              | 1,112,541                                                   | 5.00%, 02/01/10, Pool No. M90972      |   |                  | 1,126,633 |   |
|                              | 5,301,969                                                   | 4.00%, 03/01/10, Pool No. M80806      |   |                  | 5,373,960 |   |
|                              | 816,712                                                     | 4.50%, 03/01/10, Pool No. M80807      |   |                  | 828,191   |   |
|                              | 5,974,264                                                   | 4.50%, 05/01/10, Pool No. M80818      |   |                  | 6,075,350 |   |
|                              | 696,408                                                     | 3.00%, 10/01/10, Pool No. M91001      |   |                  | 695,968   |   |
|                              | 807,671                                                     | 4.00%, 11/01/10, Pool No. M80864      |   |                  | 824,190   |   |
|                              | 3,217,933                                                   | 4.50%, 11/01/10, Pool No. M80865      |   |                  | 3,293,889 |   |
|                              | 1,205,951                                                   | 4.00%, 02/01/11, Pool No. M80897      |   |                  | 1,233,726 |   |
|                              | 2,374,810                                                   | 4.00%, 03/01/11, Pool No. M80903      |   |                  | 2,429,505 |   |
|                              | 1,011,350                                                   | 5.00%, 03/01/12, Pool No. M80963      |   |                  | 1,042,702 |   |
|                              | 857,549                                                     | 3.50%, 04/01/12, Pool No. M80974      |   |                  | 874,813   |   |
|                              | 1,218,412                                                   | 4.00%, 12/01/12, Pool No. M81008      |   |                  | 1,254,279 |   |
|                              | 920,863                                                     | 4.50%, 03/01/15, Pool No. B18794      |   |                  | 929,811   |   |
|                                   |                                                             |                                       |        |                       |           |  |  |  |  |  |  |

 

47

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS GOVERNMENT BOND FUND - (Continued)** | **December 31, 2008** |
|----------------------------------------------|-----------------------|

 

| **Principal**                           |                                                                                                                                          | **Security**                                               |                                                                                                                                                                                     | **Value****(Note 1)** |      |
|-----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|-----------|
| **MORTGAGES – (CONTINUED)**       |                                                                                                                                          |
|                                    | **FREDDIE MAC POOLS – (CONTINUED)**                                                                                                     |                                                       |
| $                                       | 2,890,699                                                                                                                                     | 5.00%, 05/01/21, Pool No. G13296                           |                                                                                                                                                                                     | $                     | 2,990,789 |   |
|                                    | 1,897,382                                                                                                                                     | 5.50%, 06/01/22, Pool No. G12688                           |                                                                                                                                                                                     |                  | 1,956,557 |   |
|                                    | 681,497                                                                                                                                       | 4.532%, 12/01/34, Pool No. 1H1238 (a)                      |                                                                                                                                                                                     |                  | 672,631   |   |
|                                    | 3,648,278                                                                                                                                     | 4.742%, 04/01/35, Pool No. 782528 (a)                      |                                                                                                                                                                                     |                  | 3,638,129 |   |
|                                         |
|                                    | **Total Freddie Mac Pools**                                                                                                                   |                                                       |                                                                                                                                                                                     | **40,359,814**        |      |
|                                         |
|                                    | **GINNIE MAE POOLS - (1.54%)**                                                                                                                |                                                       |
|                                    | 2,222,056                                                                                                                                     | 6.50%, 09/15/13, Pool No. 780856                           |                                                                                                                                                                                     |                  | 2,289,968 |   |
|                                         |
|                                    | **Total Ginnie Mae Pools**                                                                                                                    |                                                       |                                                                                                                                                                                     | **2,289,968**         |      |
|                                         |
|                                    | **TOTAL MORTGAGES – (Identified cost $117,151,278)**                                                                                    |                                                       |                                                                                                                                                                                     | **118,180,722**       |      |
|                                         |
| **SHORTTERMINVESTMENTS- (5.37%)**       |                                                                                                                                          |
|                                    | 4,005,000                                                                                                                                     | Banc of America Securities LLC Joint Repurchase Agreement, |                                                                                                                                                                                     |
|                                    | 0.06%, 01/02/09, dated 12/31/08, repurchase value of $4,005,013                                                                               |                                                       |
|                                    | (collateralized by: U.S. Government agency mortgage in a pooled cash account, 6.00%, 10/20/38, total market value $4,085,100)                 |                                                       |                                                                                                                                                                                     | 4,005,000             |      |
|                                    | 1,669,000                                                                                                                                     | Goldman, Sachs & Co. Joint Repurchase Agreement,       |                                                                                                                                                                                     |
|                                    | 0.04%, 01/02/09, dated 12/31/08, repurchase value of $1,669,004                                                                               |                                                       |
|                                    | (collateralized by: US Government agency mortgages in a pooled cash account, 5.00%-5.50%, 05/01/35-05/01/38, total market value $1,702,380)   |                                                       |                                                                                                                                                                                     | 1,669,000             |      |
|                                    | 2,337,000                                                                                                                                     | UBS Securities LLC Joint Repurchase Agreement,             |                                                                                                                                                                                     |
|                                    | 0.05%, 01/02/09, dated 12/31/08, repurchase value of $2,337,006                                                                               |                                                       |
|                                    | (collateralized by: U.S. Government agency mortgages in a pooled cash account, 5.00%-6.50%, 06/01/17-02/01/38, total market value $2,383,740) |                                                       |                                                                                                                                                                                     | 2,337,000             |      |
|                                         |
|                                    | **TOTAL SHORT TERM INVESTMENTS – (Identified cost $8,011,000)**                                                                         |                                                       |                                                                                                                                                                                     | **8,011,000**         |      |
|                                         |
|                                    | Total Investments – (99.63%) – (Identified cost $147,243,424) – (b)                                                         |                                                       |                                                                                                                                                                                     | 148,633,345           |      |
|                                    | Other Assets Less Liabilities – (0.37%)                                                                                                 |                                                       |                                                                                                                                                                                     | 547,019               |      |
|                                         |
|                                    | Net Assets – (100.00%)                                                                                                                  |                                                       | $                                                                                                                                                                                        | 149,180,364           |      |
|                                         |
|                                         |
|                                    | (a)                                                                                                                                           |                                                       | The interest rates on adjustable rate securities, shown as of December 31, 2008, may change daily or less frequently and are based on indices of market interest rates.                  |                  |      |
|                                    | (b)                                                                                                                                           |                                                       | Aggregate cost for federal income tax purposes is $147,243,424. At December 31, 2008 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows: |                  |      |
|                                    | Unrealized appreciation                                                                                                                       |                                                       | $                                                                                                                                                                                        | 1,623,840             |      |
|                                    | Unrealized depreciation                                                                                                                       |                                                       |                                                                                                                                                                                     | (233,919)             |      |
|                                         |
|                                    | Net unrealized appreciation                                                                                                                   |                                                       | $                                                                                                                                                                                        | 1,389,921             |      |
|                                         |
|                                         |
| ***See Notes to Financial Statements*** |                                                                                                                                          |
|                                         |                                                                                                                                               |                                                            |                                                                                                                                                                                          |                       |           |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

48

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                         **Schedule of Investments**

| **DAVIS GOVERNMENT MONEY MARKET FUND** | **December 31, 2008** |
|----------------------------------------|-----------------------|

 

| **Principal**                       |                                                       | **Security**          |   | **Value****(Note 1)** |       |
|-------------------------------------|------------------------------------------------------------|-----------------------|--------|-----------------------|------------|
| **FANNIEMAE- (6.82%)**              |                                                       |
| $                                   | 2,336,000                                                  | 5.25%, 01/15/09       |   | $                     | 2,338,493  |   |
|                                | 4,000,000                                                  | 5.00%, 01/23/09       |   |                  | 4,006,316  |   |
|                                | 2,000,000                                                  | 3.25%, 02/15/09       |   |                  | 2,000,575  |   |
|                                | 7,500,000                                                  | 6.0769%, 02/17/09 (a) |   |                  | 7,543,483  |   |
|                                | 300,000                                                    | 3.60%, 03/03/09       |   |                  | 300,377    |   |
|                                | 2,400,000                                                  | 3.85%, 04/14/09       |   |                  | 2,410,158  |   |
|                                | 600,000                                                    | 4.02%, 04/20/09       |   |                  | 601,973    |   |
|                                | 7,000,000                                                  | 3.00%, 05/01/09 (b)   |   |                  | 6,930,000  |   |
|                                | 300,000                                                    | 4.25%, 05/15/09       |   |                  | 302,535    |   |
|                                | 509,000                                                    | 6.625%, 09/15/09      |   |                  | 524,997    |   |
|                                     |
|                                | **TOTAL FANNIE MAE – (Identified cost $26,958,907)** |                  |   | **26,958,907**        |       |
|                                     |
| **FEDERALFARMCREDITBANK- (10.93%)** |                                                       |
|                                | 20,000,000                                                 | 0.861%, 01/02/09 (a)  |   |                  | 20,000,000 |   |
|                                | 8,381,000                                                  | 2.49%, 02/05/09 (b)   |   |                  | 8,360,711  |   |
|                                | 300,000                                                    | 4.875%, 04/13/09      |   |                  | 301,334    |   |
|                                | 1,000,000                                                  | 4.125%, 04/15/09      |   |                  | 1,003,106  |   |
|                                | 12,000,000                                                 | 1.15%, 06/02/09 (a)   |   |                  | 12,016,582 |   |
|                                | 500,000                                                    | 4.125%, 07/17/09      |   |                  | 501,907    |   |
|                                | 1,000,000                                                  | 4.75%, 08/03/09       |   |                  | 1,011,349  |   |
|                                     |
|                                | **TOTAL FEDERAL FARM CREDIT BANK –**                 |                  |   | **43,194,989**        |       |
| **(Identified cost $43,194,989)**   |
|                                     |
| **FEDERALHOMELOANBANK- (55.19%)**   |                                                       |
|                                | 10,000,000                                                 | 3.20%, 01/05/09 (b)   |   |                  | 9,996,444  |   |
|                                | 5,000,000                                                  | 3.31%, 01/09/09 (b)   |   |                  | 4,996,322  |   |
|                                | 9,000,000                                                  | 3.25%, 01/13/09       |   |                  | 9,001,387  |   |
|                                | 5,000,000                                                  | 3.25%, 01/14/09       |   |                  | 5,000,000  |   |
|                                | 20,000,000                                                 | 3.664%, 01/23/09 (a)  |   |                  | 20,001,854 |   |
|                                | 3,000,000                                                  | 0.20%, 01/27/09 (b)   |   |                  | 2,999,567  |   |
|                                | 3,000,000                                                  | 5.477%, 01/28/09      |   |                  | 3,005,788  |   |
|                                | 5,000,000                                                  | 3.30%, 02/02/09 (b)   |   |                  | 4,985,333  |   |
|                                | 6,000,000                                                  | 2.76%, 02/12/09       |   |                  | 6,000,000  |   |
|                                | 600,000                                                    | 3.70%, 02/12/09       |   |                  | 601,575    |   |
|                                | 1,000,000                                                  | 3.50%, 02/13/09       |   |                  | 1,000,952  |   |
|                                | 12,000,000                                                 | 0.66%, 02/18/09 (a)   |   |                  | 12,000,000 |   |
|                                | 4,000,000                                                  | 0.63%, 02/25/09 (a)   |   |                  | 4,000,000  |   |
|                                | 3,000,000                                                  | 3.20%, 02/27/09 (b)   |   |                  | 2,984,800  |   |
|                                | 12,000,000                                                 | 1.095%, 03/13/09 (a)  |   |                  | 11,993,633 |   |
|                                | 10,000,000                                                 | 2.50%, 03/17/09       |   |                  | 10,001,782 |   |
|                                | 17,000,000                                                 | 0.35%, 03/20/09 (a)   |   |                  | 17,000,000 |   |
|                                | 1,000,000                                                  | 3.32%, 03/30/09       |   |                  | 1,001,574  |   |
|                                | 17,000,000                                                 | 3.58%, 03/30/09       |   |                  | 17,007,563 |   |
|                                | 750,000                                                    | 4.08%, 03/30/09       |   |                  | 752,059    |   |
|                                | 5,000,000                                                  | 2.32%, 04/01/09       |   |                  | 4,995,424  |   |
|                                | 5,000,000                                                  | 0.39%, 04/03/09 (a)   |   |                  | 5,000,000  |   |
|                                | 5,200,000                                                  | 3.24%, 04/03/09       |   |                  | 5,200,859  |   |
|                                | 5,000,000                                                  | 0.43%, 04/08/09 (a)   |   |                  | 5,000,000  |   |
|                                | 2,000,000                                                  | 3.00%, 04/15/09       |   |                  | 2,000,225  |   |
|                                | 1,000,000                                                  | 4.00%, 04/21/09       |   |                  | 1,003,205  |   |
|                                     |                                                            |                       |        |                       |            |  |  |  |  |  |

 

49

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS GOVERNMENT MONEY MARKET FUND - (Continued)** | **December 31, 2008** |
|------------------------------------------------------|-----------------------|

 

| **Principal**                                  |                                                                                                                           | **Security**                                               |   | **Value****(Note 1)** |       |
|------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|--------|-----------------------|------------|
| **FEDERAL HOME LOAN BANK – (CONTINUED)** |                                                                                                                           |
| $                                              | 1,250,000                                                                                                                      | 5.863%, 04/22/09                                           |   | $                     | 1,262,263  |   |
|                                           | 3,500,000                                                                                                                      | 5.00%, 04/23/09                                            |   |                  | 3,524,643  |   |
|                                           | 1,500,000                                                                                                                      | 2.32%, 04/28/09                                            |   |                  | 1,505,587  |   |
|                                           | 1,800,000                                                                                                                      | 2.60%, 05/14/09                                            |   |                  | 1,798,131  |   |
|                                           | 4,000,000                                                                                                                      | 4.25%, 05/15/09                                            |   |                  | 4,025,342  |   |
|                                           | 1,000,000                                                                                                                      | 2.036%, 05/18/09 (a)                                       |   |                  | 998,195    |   |
|                                           | 1,700,000                                                                                                                      | 2.75%, 06/04/09                                            |   |                  | 1,696,730  |   |
|                                           | 2,590,000                                                                                                                      | 5.25%, 06/12/09                                            |   |                  | 2,625,018  |   |
|                                           | 12,500,000                                                                                                                     | 3.05%, 06/18/09                                            |   |                  | 12,496,769 |   |
|                                           | 2,200,000                                                                                                                      | 5.25%, 06/19/09                                            |   |                  | 2,234,296  |   |
|                                           | 1,360,000                                                                                                                      | 5.375%, 07/17/09                                           |   |                  | 1,376,546  |   |
|                                           | 500,000                                                                                                                        | 4.50%, 08/11/09                                            |   |                  | 511,020    |   |
|                                           | 500,000                                                                                                                        | 5.25%, 09/11/09                                            |   |                  | 508,785    |   |
|                                           | 6,000,000                                                                                                                      | 4.449%, 10/13/09 (a)                                       |   |                  | 6,012,739  |   |
|                                           | 10,000,000                                                                                                                     | 3.50%, 10/14/09                                            |   |                  | 10,024,500 |   |
|                                                |
|                                           | **TOTAL FEDERAL HOME LOAN BANK – (Identified cost $218,130,910)**                                                        |                                                       |   | **218,130,910**       |       |
|                                                |
| **FREDDIEMAC- (7.20%)**                        |                                                                                                                           |
|                                           | 500,000                                                                                                                        | 4.875%, 02/17/09                                           |   |                  | 501,206    |   |
|                                           | 10,000,000                                                                                                                     | 4.75%, 03/05/09                                            |   |                  | 10,035,802 |   |
|                                           | 2,321,000                                                                                                                      | 5.75%, 03/15/09                                            |   |                  | 2,336,255  |   |
|                                           | 1,000,000                                                                                                                      | 3.755%, 03/18/09                                           |   |                  | 1,002,060  |   |
|                                           | 6,660,000                                                                                                                      | 3.375%, 04/15/09                                           |   |                  | 6,673,807  |   |
|                                           | 910,000                                                                                                                        | 3.00%, 05/04/09 (b)                                        |   |                  | 900,673    |   |
|                                           | 2,300,000                                                                                                                      | 5.00%, 06/11/09                                            |   |                  | 2,318,104  |   |
|                                           | 500,000                                                                                                                        | 4.25%, 07/15/09                                            |   |                  | 505,074    |   |
|                                           | 4,000,000                                                                                                                      | 6.625%, 09/15/09                                           |   |                  | 4,162,679  |   |
|                                                |
|                                           | **TOTAL FREDDIE MAC – (Identified cost $28,435,660)**                                                                    |                                                       |   | **28,435,660**        |       |
|                                                |
| **MORTGAGES- (3.32%)**                         |                                                                                                                           |
|                                           | **FREDDIE MAC POOLS - (3.32%)**                                                                                                |                                                       |
|                                           | 978,628                                                                                                                        | 4.00%, 02/01/09, Pool No. M90895                           |   |                  | 979,247    |   |
|                                           | 1,495,839                                                                                                                      | 3.50%, 03/01/09, Pool No. M90909                           |   |                  | 1,496,363  |   |
|                                           | 351,602                                                                                                                        | 4.50%, 03/01/09, Pool No. M90904                           |   |                  | 352,096    |   |
|                                           | 2,677,965                                                                                                                      | 3.50%, 04/01/09, Pool No. M90913                           |   |                  | 2,679,957  |   |
|                                           | 5,908,068                                                                                                                      | 4.50%, 04/01/09, Pool No. M90914                           |   |                  | 5,909,367  |   |
|                                           | 1,678,491                                                                                                                      | 5.00%, 11/01/09, Pool No. M80779                           |   |                  | 1,701,851  |   |
|                                                |
|                                           | **Total Freddie Mac Pools**                                                                                                    |                                                       |   | **13,118,881**        |       |
|                                                |
|                                           | **TOTAL MORTGAGES – (Identified cost $13,118,881)**                                                                      |                                                       |   | **13,118,881**        |       |
|                                                |
| **PRIVATEEXPORTFUNDING- (0.45%)**              |                                                                                                                           |
|                                           | 1,780,000                                                                                                                      | 3.375%, 02/15/09                                           |   |                  | 1,784,462  |   |
|                                                |
|                                           | **TOTAL PRIVATE EXPORT FUNDING – (Identified cost $1,784,462)**                                                          |                                                       |   | **1,784,462**         |       |
|                                                |
| **REPURCHASEAGREEMENTS- (9.52%)**              |                                                                                                                           |
|                                           | 18,814,000                                                                                                                     | Banc of America Securities LLC Joint Repurchase Agreement, |   |
|                                           | 0.06%, 01/02/09, dated 12/31/08, repurchase value of $18,814,063                                                               |                                                       |
|                                           | (collateralized by: U.S. Government agency mortgage in a pooled cash account, 6.00%, 10/20/38, total market value $19,190,280) |                                                       |   | 18,814,000            |       |
|                                                |                                                                                                                                |                                                            |        |                       |            |  |  |  |  |  |  |

 

50

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS GOVERNMENT MONEY MARKET FUND - (Continued)** | **December 31, 2008** |
|------------------------------------------------------|-----------------------|

 

| **Principal**                                 |                                                                                                                                           | **Security**                                         |                                                                                                                                                                                                                                                                                                                                                              | **Value****(Note 1)** |   |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|--------|
| **REPURCHASE AGREEMENTS – (CONTINUED)** |                                                                                                                                           |
| $                                             | 7,839,000                                                                                                                                      | Goldman, Sachs & Co. Joint Repurchase Agreement, |                                                                                                                                                                                                                                                                                                                                                              |
|                                          | 0.04%, 01/02/09, dated 12/31/08, repurchase value of $7,839,017                                                                                |                                                 |
|                                          | (collateralized by: US Government agency mortgages in a pooled cash account, 5.00%-5.50%, 05/01/35-05/01/38, total market value $7,995,780)    |                                                 | $                                                                                                                                                                                                                                                                                                                                                                 | 7,839,000             |   |
|                                          | 10,974,000                                                                                                                                     | UBS Securities LLC Joint Repurchase Agreement,       |                                                                                                                                                                                                                                                                                                                                                              |
|                                          | 0.05%, 01/02/09, dated 12/31/08, repurchase value of $10,974,030                                                                               |                                                 |
|                                          | (collateralized by: U.S. Government agency mortgages in a pooled cash account, 5.00%-6.50%, 06/01/17-02/01/38, total market value $11,193,480) |                                                 |                                                                                                                                                                                                                                                                                                                                                              | 10,974,000            |   |
|                                               |
|                                          | **TOTAL REPURCHASE AGREEMENTS – (Identified cost $37,627,000)**                                                                          |                                                 |                                                                                                                                                                                                                                                                                                                                                              | **37,627,000**        |   |
|                                               |
|                                          | Total Investments – (93.43%) – (Identified cost $369,250,809) – (c)                                                          |                                                 |                                                                                                                                                                                                                                                                                                                                                              | 369,250,809           |   |
|                                          | Other Assets Less Liabilities – (6.57%)                                                                                                  |                                                 |                                                                                                                                                                                                                                                                                                                                                              | 25,960,178            |   |
|                                               |
|                                          | Net Assets – (100.00%)                                                                                                                   |                                                 | $                                                                                                                                                                                                                                                                                                                                                                 | 395,210,987           |   |
|                                               |
|                                               |
|                                          | (a)                                                                                                                                            |                                                 | The interest rates on floating rate securities, shown as of December 31, 2008, 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. |                  |   |
|                                          | (b)                                                                                                                                            |                                                 | Zero coupon bonds reflect the effective yield on the date of purchase.                                                                                                                                                                                                                                                                                            |                  |   |
|                                          | (c)                                                                                                                                            |                                                 | Aggregate cost for federal income tax purposes is $369,250,809.                                                                                                                                                                                                                                                                                                   |                  |   |
| ***See Notes to Financial Statements***       |
|                                               |                                                                                                                                                |                                                      |                                                                                                                                                                                                                                                                                                                                                                   |                       |        |  |  |  |  |  |  |  |  |  |  |  |

 

 

51

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                         **Schedule of Investments**

| **DAVIS FINANCIAL FUND** | **December 31, 2008** |
|--------------------------|-----------------------|

 

| **Shares**                 |                                                   | **Security**                                                                        |   | **Value****(Note 1)** |       |
|----------------------------|--------------------------------------------------------|-------------------------------------------------------------------------------------|--------|-----------------------|------------|
| **COMMONSTOCK- (100.40%)** |                                                   |
|                       | **CONSUMER DISCRETIONARY - (2.03%)**                   |                                                                                |
|                       | **Consumer Services – (2.03%)**                  |                                                                                |
|                       | 452,100                                                | H&R Block, Inc.                                                                 |   | $                     | 10,271,712 |   |
|                            |
|                       | **TOTALCONSUMERDISCRETIONARY**                         |                                                                                |   | **10,271,712**        |       |
|                            |
|                       | **ENERGY - (4.87%)**                                   |                                                                                |
|                       | 618,700                                                | Canadian Natural Resources Ltd. (Canada)                                            |   |                  | 24,735,626 |   |
|                            |
|                       | **TOTALENERGY**                                        |                                                                                |   | **24,735,626**        |       |
|                            |
|                       | **FINANCIALS - (84.34%)**                              |                                                                                |
|                       | **Banks – (6.30%)**                              |                                                                                |
|                       | **Commercial Banks – (6.30%)**                   |                                                                                |
|                       | 150,700                                                | ICICI Bank Ltd., ADR (India)                                                        |   |                  | 2,900,975  |   |
|                       | 459,950                                                | State Bank of India Ltd., GDR (India)                                               |   |                  | 25,342,658 |   |
|                       | 126,500                                                | Wells Fargo & Co.                                                               |   |                  | 3,729,220  |   |
|                            |
|                       |                                                        | 31,972,853                                                                          |   |
|                            |
|                       | **Diversified Financials – (38.47%)**            |                                                                                |
|                       | **Capital Markets – (17.27%)**                   |                                                                                |
|                       | 393,500                                                | Ameriprise Financial, Inc.                                                          |   |                  | 9,192,160  |   |
|                       | 1,183,200                                              | Bank of New York Mellon Corp.                                                       |   |                  | 33,520,056 |   |
|                       | 587,300                                                | Brookfield Asset Management Inc., Class A (Canada)                                  |   |                  | 8,968,071  |   |
|                       | 33,100                                                 | Charles Schwab Corp.                                                                |   |                  | 535,393    |   |
|                       | 157,400                                                | Goldman Sachs Group, Inc.                                                           |   |                  | 13,282,986 |   |
|                       | 480,300                                                | Julius Baer Holding, AG (Switzerland)                                               |   |                  | 18,615,127 |   |
|                       | 160,350                                                | Merrill Lynch & Co., Inc.(merged into Bank of America Corp. on January 2, 2009) |   |                  | 1,866,474  |   |
|                       | 47,200                                                 | T. Rowe Price Group Inc.                                                            |   |                  | 1,670,408  |   |
|                            |
|                       | 87,650,675                                             |                                                                                |
|                            |
|                       | **Consumer Finance – (7.47%)**                   |                                                                                |
|                       | 1,949,000                                              | American Express Co.                                                                |   |                  | 36,153,950 |   |
|                       | 1,351,000                                              | First Marblehead Corp. *                                                            |   |                  | 1,742,790  |   |
|                            |
|                       | 37,896,740                                             |                                                                                |
|                            |
|                       | **Diversified Financial Services – (13.73%)**    |                                                                                |
|                       | 689,060                                                | JPMorgan Chase & Co.                                                            |   |                  | 21,726,062 |   |
|                       | 872,600                                                | Moody's Corp.                                                                       |   |                  | 17,530,534 |   |
|                       | 972,000                                                | Oaktree Capital Group LLC, Class A (a)                                              |   |                  | 18,468,000 |   |
|                       | 106,400                                                | RHJ International (Belgium)*                                                        |   |                  | 514,688    |   |
|                       | 396,550                                                | RHJ International, 144A (Belgium)(b)(c)*                                            |   |                  | 1,918,271  |   |
|                       | 182,000                                                | Visa Inc., Class A                                                                  |   |                  | 9,545,900  |   |
|                            |
|                       | 69,703,455                                             |                                                                                |
|                            |
|                       |                                                        | 195,250,870                                                                         |   |
|                            |
|                       | **Insurance – (39.57%)**                         |                                                                                |
|                       | **Life & Health Insurance – (3.06%)**        |                                                                                |
|                       | 334,733                                                | China Life Insurance Co., Ltd., ADR (China)                                         |   |                  | 15,531,611 |   |
|                            |
|                       | **Multi-line Insurance – (8.46%)**               |                                                                                |
|                       | 866,796                                                | American International Group, Inc.                                                  |   |                  | 1,360,870  |   |
|                       | 1,470,600                                              | Loews Corp.                                                                         |   |                  | 41,544,450 |   |
|                            |
|                       | 42,905,320                                             |                                                                                |
|                            |
|                       | **Property & Casualty Insurance – (13.67%)** |                                                                                |
|                       | 141,500                                                | ACE Ltd.                                                                            |   |                  | 7,488,180  |   |
|                            |                                                        |                                                                                     |        |                       |            |  |  |  |  |  |  |  |  |  |

 

52

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS FINANCIAL FUND - (Continued)** | **December 31, 2008** |
|----------------------------------------|-----------------------|

 

| **Shares/Principal**                 |                                                                                                                                       | **Security**                                               |                                                                       | **Value****(Note 1)** |       |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|----------------------------------------------------------------------------|-----------------------|------------|
| **COMMON STOCK – (CONTINUED)** |                                                                                                                                       |
|                                 | **FINANCIALS – (CONTINUED)**                                                                                                         |                                                       |
|                                 | **Insurance – (Continued)**                                                                                                          |                                                       |
|                                 | **Property & Casualty Insurance – (Continued)**                                                                                  |                                                       |
|                                 | 169,800                                                                                                                                    | Ambac Financial Group, Inc.                                |                                                                       | $                     | 220,740    |   |
|                                 | 337,300                                                                                                                                    | FPIC Insurance Group, Inc. *                               |                                                                       |                  | 14,697,848 |   |
|                                 | 88,200                                                                                                                                     | Markel Corp. *                                             |                                                                       |                  | 26,371,800 |   |
|                                 | 534,000                                                                                                                                    | MBIA Inc. *                                                |                                                                       |                  | 2,173,380  |   |
|                                 | 1,244,000                                                                                                                                  | Progressive Corp. (Ohio)                                   |                                                                       |                  | 18,423,640 |   |
|                                      |
|                                 | 69,375,588                                                                                                                                 |                                                       |
|                                      |
|                                 | **Reinsurance – (14.38%)**                                                                                                           |                                                       |
|                                 | 225,000                                                                                                                                    | Everest Re Group, Ltd.                                     |                                                                       |                  | 17,131,500 |   |
|                                 | 1,394,187                                                                                                                                  | Transatlantic Holdings, Inc.                               |                                                                       |                  | 55,851,131 |   |
|                                      |
|                                 | 72,982,631                                                                                                                                 |                                                       |
|                                      |
|                                 |                                                                                                                                            | 200,795,150                                                |                                                                       |
|                                      |
|                                 | **TOTALFINANCIALS**                                                                                                                        |                                                       |                                                                       | **428,018,873**       |       |
|                                      |
|                                 | **INDUSTRIALS - (6.46%)**                                                                                                                  |                                                       |
|                                 | **Commercial & Professional Services – (6.46%)**                                                                                 |                                                       |
|                                 | 424,750                                                                                                                                    | D&B Corp.                                              |                                                                       |                  | 32,790,700 |   |
|                                      |
|                                 | **TOTALINDUSTRIALS**                                                                                                                       |                                                       |                                                                       | **32,790,700**        |       |
|                                      |
|                                 | **MATERIALS - (2.70%)**                                                                                                                    |                                                       |
|                                 | 918,000                                                                                                                                    | Sealed Air Corp.                                           |                                                                       |                  | 13,714,920 |   |
|                                      |
|                                 | **TOTALMATERIALS**                                                                                                                         |                                                       |                                                                       | **13,714,920**        |       |
|                                      |
|                                 | **TOTAL COMMON STOCK – (Identified cost $564,797,848)**                                                                              |                                                       |                                                                       | **509,531,831**       |       |
|                                      |
| **SHORTTERMINVESTMENTS- (0.02%)**    |                                                                                                                                       |
| $                                    | 54,000                                                                                                                                     | Banc of America Securities LLC Joint Repurchase Agreement, |                                                                       |
|                                 | 0.06%, 01/02/09, dated 12/31/08, repurchase value of $54,000                                                                               |                                                       |
|                                 | (collateralized by: U.S. Government agency mortgage in a pooled cash account, 6.00%, 10/20/38, total market value $55,080)                 |                                                       |                                                                       | 54,000                |       |
|                                 | 23,000                                                                                                                                     | Goldman, Sachs & Co. Joint Repurchase Agreement,       |                                                                       |
|                                 | 0.04%, 01/02/09, dated 12/31/08, repurchase value of $23,000                                                                               |                                                       |
|                                 | (collateralized by: US Government agency mortgages in a pooled cash account, 5.00%-5.50%, 05/01/35-05/01/38, total market value $23,460)   |                                                       |                                                                       | 23,000                |       |
|                                 | 32,000                                                                                                                                     | UBS Securities LLC Joint Repurchase Agreement,             |                                                                       |
|                                 | 0.05%, 01/02/09, dated 12/31/08, repurchase value of $32,000                                                                               |                                                       |
|                                 | (collateralized by: U.S. Government agency mortgages in a pooled cash account, 5.00%-6.50%, 06/01/17-02/01/38, total market value $32,640) |                                                       |                                                                       | 32,000                |       |
|                                      |
|                                 | **TOTAL SHORT TERM INVESTMENTS – (Identified cost $109,000)**                                                                        |                                                       |                                                                       | **109,000**           |       |
|                                      |
|                                 | Total Investments – (100.42%) – (Identified cost $564,906,848) – (d)                                                     |                                                       |                                                                       | 509,640,831           |       |
|                                 | Liabilities Less Other Assets – (0.42%)                                                                                              |                                                       |                                                                       | (2,118,957)           |       |
|                                      |
|                                 | Net Assets – (100.00%)                                                                                                               |                                                       | $                                                                          | 507,521,874           |       |
|                                      |
|                                      |
|                                 | ADR: American Depositary Receipt                                                                                                           |                                                       |                                                                       |
|                                 | GDR: Global Depositary Receipt                                                                                                             |                                                       |                                                                       |
|                                 | *                                                                                                                                          |                                                       | Non-Income producing security.                                             |                  |       |
|                                 | (a)                                                                                                                                        |                                                       | Illiquid Security – See Note 8 of the Notes to Financial Statements. |                  |       |
|                                      |                                                                                                                                            |                                                            |                                                                            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

53

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS FINANCIAL FUND - (Continued)** | **December 31, 2008** |
|----------------------------------------|-----------------------|

 

|                                    | (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 $1,918,271, or 0.38% of the Fund's net assets, as of December 31, 2008. |          |   |
|-----------------------------------------|-----------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|--------|
|                                    | (c)                         |   | Restricted Security - See Note 8 of the Notes to Financial Statements.                                                                                                                                                                                                                  |          |   |
|                                    | (d)                         |   | Aggregate cost for federal income tax purposes is $564,966,095. At December 31, 2008 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:                                                                                                |          |   |
|                                    | Unrealized appreciation     |   | $                                                                                                                                                                                                                                                                                       | 112,779,112   |   |
|                                    | Unrealized depreciation     |   |                                                                                                                                                                                                                                                                                    | (168,104,376) |   |
|                                         |
|                                    | Net unrealized depreciation |   | $                                                                                                                                                                                                                                                                                       | (55,325,264)  |   |
|                                         |
|                                         |
| ***See Notes to Financial Statements*** |
|                                         |                             |        |                                                                                                                                                                                                                                                                                         |               |        |  |  |  |  |  |

 

 

54

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                         **Schedule of Investments**

| **DAVIS APPRECIATION & INCOME FUND** | **December 31, 2008** |
|------------------------------------------|-----------------------|

 

| **Shares**                |                                                     | **Security**                                                                        |   | **Value****(Note 1)** |       |
|---------------------------|----------------------------------------------------------|-------------------------------------------------------------------------------------|--------|-----------------------|------------|
| **COMMONSTOCK- (46.63%)** |                                                     |
|                      | **CONSUMER DISCRETIONARY - (9.16%)**                     |                                                                                |
|                      | **Media – (1.57%)**                                |                                                                                |
|                      | 525,000                                                  | News Corp., Class A                                                                 |   | $                     | 4,764,375  |   |
|                      | 115,000                                                  | News Corp., Class B                                                                 |   |                  | 1,101,125  |   |
|                           |
|                      |                                                          | 5,865,500                                                                           |   |
|                           |
|                      | **Retailing – (7.59%)**                            |                                                                                |
|                      | 121,213                                                  | Amazon.com, Inc. *                                                                  |   |                  | 6,214,590  |   |
|                      | 612,400                                                  | Kohl's Corp. *                                                                      |   |                  | 22,168,880 |   |
|                           |
|                      |                                                          | 28,383,470                                                                          |   |
|                           |
|                      | **TOTALCONSUMERDISCRETIONARY**                           |                                                                                |   | **34,248,970**        |       |
|                           |
|                      | **CONSUMER STAPLES - (7.75%)**                           |                                                                                |
|                      | **Food & Staples Retailing – (2.98%)**         |                                                                                |
|                      | 1,180,000                                                | Whole Foods Market, Inc.                                                            |   |                  | 11,145,100 |   |
|                           |
|                      | **Food, Beverage & Tobacco – (2.67%)**         |                                                                                |
|                      | 1,137,300                                                | Tyson Foods, Inc., Class A                                                          |   |                  | 9,962,748  |   |
|                           |
|                      | **Household & Personal Products – (2.10%)**    |                                                                                |
|                      | 327,200                                                  | Avon Products, Inc.                                                                 |   |                  | 7,862,616  |   |
|                           |
|                      | **TOTALCONSUMERSTAPLES**                                 |                                                                                |   | **28,970,464**        |       |
|                           |
|                      | **ENERGY - (4.60%)**                                     |                                                                                |
|                      | 176,000                                                  | Devon Energy Corp.                                                                  |   |                  | 11,564,960 |   |
|                      | 472,000                                                  | Nabors Industries Ltd. *                                                            |   |                  | 5,649,840  |   |
|                           |
|                      | **TOTALENERGY**                                          |                                                                                |   | **17,214,800**        |       |
|                           |
|                      | **FINANCIALS - (6.31%)**                                 |                                                                                |
|                      | **Diversified Financials – (3.93%)**               |                                                                                |
|                      | **Capital Markets – (2.42%)**                      |                                                                                |
|                      | 777,750                                                  | Merrill Lynch & Co., Inc.(merged into Bank of America Corp. on January 2, 2009) |   |                  | 9,053,010  |   |
|                           |
|                      | **Consumer Finance – (1.51%)**                     |                                                                                |
|                      | 305,000                                                  | American Express Co.                                                                |   |                  | 5,657,750  |   |
|                           |
|                      |                                                          | 14,710,760                                                                          |   |
|                           |
|                      | **Insurance – (0.27%)**                            |                                                                                |
|                      | **Property & Casualty Insurance – (0.27%)**    |                                                                                |
|                      | 772,300                                                  | Ambac Financial Group, Inc.                                                         |   |                  | 1,003,990  |   |
|                           |
|                      | **Real Estate – (2.11%)**                          |                                                                                |
|                      | 490,040                                                  | Forest City Enterprises, Inc., Class A                                              |   |                  | 3,283,268  |   |
|                      | 559,300                                                  | General Growth Properties, Inc.                                                     |   |                  | 721,497    |   |
|                      | 150,000                                                  | SL Green Realty Corp.                                                               |   |                  | 3,885,000  |   |
|                           |
|                      |                                                          | 7,889,765                                                                           |   |
|                           |
|                      | **TOTALFINANCIALS**                                      |                                                                                |   | **23,604,515**        |       |
|                           |
|                      | **HEALTH CARE - (2.18%)**                                |                                                                                |
|                      | **Health Care Equipment & Services – (2.18%)** |                                                                                |
|                      | 216,500                                                  | Universal Health Services, Inc., Class B                                            |   |                  | 8,133,905  |   |
|                           |
|                      | **TOTALHEALTHCARE**                                      |                                                                                |   | **8,133,905**         |       |
|                           |
|                      | **INDUSTRIALS - (11.45%)**                               |                                                                                |
|                      | **Capital Goods – (8.30%)**                        |                                                                                |
|                      | 431,200                                                  | General Electric Co.                                                                |   |                  | 6,985,440  |   |
|                      | 638,400                                                  | Masco Corp.                                                                         |   |                  | 7,105,392  |   |
|                           |                                                          |                                                                                     |        |                       |            |  |  |  |  |  |  |  |  |  |  |

 

55

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS APPRECIATION & INCOME FUND - (Continued)** | **December 31, 2008** |
|--------------------------------------------------------|-----------------------|

 

| **Shares**                              |                                                             | **Security**                                                            |   | **Value****(Note 1)** |       |
|-----------------------------------------|------------------------------------------------------------------|-------------------------------------------------------------------------|--------|-----------------------|------------|
| **COMMON STOCK – (CONTINUED)**    |                                                             |
|                                    | **INDUSTRIALS – (CONTINUED)**                              |                                                                    |
|                                    | **Capital Goods – (Continued)**                            |                                                                    |
|                                    | 763,290                                                          | Quanta Services, Inc. *                                                 |   | $                     | 15,113,142 |   |
|                                    | 200,000                                                          | United Rentals, Inc. *                                                  |   |                  | 1,824,000  |   |
|                                         |
|                                    |                                                                  | 31,027,974                                                              |   |
|                                         |
|                                    | **Commercial & Professional Services – (3.15%)**       |                                                                    |
|                                    | 120,000                                                          | School Specialty, Inc. *                                                |   |                  | 2,295,000  |   |
|                                    | 300,000                                                          | Waste Connections, Inc. *                                               |   |                  | 9,471,000  |   |
|                                         |
|                                    |                                                                  | 11,766,000                                                              |   |
|                                         |
|                                    | **TOTALINDUSTRIALS**                                             |                                                                    |   | **42,793,974**        |       |
|                                         |
|                                    | **INFORMATION TECHNOLOGY - (2.34%)**                             |                                                                    |
|                                    | **Semiconductors & Semiconductor Equipment – (2.34%)** |                                                                    |
|                                    | 457,900                                                          | Fairchild Semiconductor International, Inc. *                           |   |                  | 2,239,131  |   |
|                                    | 170,000                                                          | Intel Corp.                                                             |   |                  | 2,495,600  |   |
|                                    | 296,700                                                          | International Rectifier Corp. *                                         |   |                  | 4,005,450  |   |
|                                         |
|                                    |                                                             |                                                                    |   | 8,740,181             |       |
|                                         |
|                                    | **TOTALINFORMATIONTECHNOLOGY**                                   |                                                                    |   | **8,740,181**         |       |
|                                         |
|                                    | **MATERIALS - (1.56%)**                                          |                                                                    |
|                                    | 390,000                                                          | Sealed Air Corp.                                                        |   |                  | 5,826,600  |   |
|                                         |
|                                    | **TOTALMATERIALS**                                               |                                                                    |   | **5,826,600**         |       |
|                                         |
|                                    | **UTILITIES - (1.28%)**                                          |                                                                    |
|                                    | 580,700                                                          | AES Corp. *                                                             |   |                  | 4,784,968  |   |
|                                         |
|                                    | **TOTALUTILITIES**                                               |                                                                    |   | **4,784,968**         |       |
|                                         |
|                                    | **TOTAL COMMON STOCK – (Identified cost $382,529,895)**    |                                                                    |   | **174,318,377**       |       |
|                                         |
| **CONVERTIBLEPREFERREDSTOCK- (10.81%)** |                                                             |
|                                    | **FINANCIALS - (6.55%)**                                         |                                                                    |
|                                    | **Diversified Financials – (3.00%)**                       |                                                                    |
|                                    | **Diversified Financial Services – (3.00%)**               |                                                                    |
|                                    | 400,000                                                          | Citigroup Inc., 6.50%, 12/31/49, Conv. Pfd.                             |   |                  | 11,196,000 |   |
|                                         |
|                                    | **Real Estate – (3.55%)**                                  |                                                                    |
|                                    | 650,000                                                          | Digital Realty Trust L.P., 5.50%, 12/31/49, Cum. Conv. Pfd.             |   |                  | 13,284,375 |   |
|                                         |
|                                    | **TOTALFINANCIALS**                                              |                                                                    |   | **24,480,375**        |       |
|                                         |
|                                    | **INDUSTRIALS - (1.34%)**                                        |                                                                    |
|                                    | **Capital Goods – (0.47%)**                                |                                                                    |
|                                    | 109,741                                                          | United Rentals Trust I, 6.50%, 08/01/28, Conv. Pfd.                     |   |                  | 1,742,138  |   |
|                                         |
|                                    | **Transportation – (0.87%)**                               |                                                                    |
|                                    | 161,300                                                          | Continental Airlines Finance Trust II, 6.00%, 11/15/30, Cum. Conv. Pfd. |   |                  | 3,266,325  |   |
|                                         |
|                                    | **TOTALINDUSTRIALS**                                             |                                                                    |   | **5,008,463**         |       |
|                                         |
|                                    | **UTILITIES - (2.92%)**                                          |                                                                    |
|                                    | 288,810                                                          | AES Trust III, 6.75%, 10/15/29, Conv. Pfd.                              |   |                  | 10,928,571 |   |
|                                         |
|                                    | **TOTALUTILITIES**                                               |                                                                    |   | **10,928,571**        |       |
|                                         |
|                                    | **TOTAL CONVERTIBLE PREFERRED STOCK –**                    |                                                                    |   | **40,417,409**        |       |
| **(Identified cost $54,879,026)**       |
|                                         |
|                                         |                                                                  |                                                                         |        |                       |            |  |  |  |  |  |  |  |  |  |

 

56

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS APPRECIATION & INCOME FUND - (Continued)** | **December 31, 2008** |
|--------------------------------------------------------|-----------------------|

 

| **Principal**                          |                                                                   | **Security**                                                                                                   |   | **Value****(Note 1)** |       |
|----------------------------------------|------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|--------|-----------------------|------------|
| **CONVERTIBLEBONDS- (37.83%)**         |                                                                   |
|                                   | **CONSUMER DISCRETIONARY - (2.59%)**                                   |                                                                                                           |
|                                   | **Media – (2.59%)**                                              |                                                                                                           |
| $                                      | 16,050,000                                                             | News America Inc., Conv. Notes, Zero coupon, 3.38%, 02/28/21 (a)(b)(c)                                         |   | $                     | 9,687,459  |   |
|                                        |
|                                   | **TOTALCONSUMERDISCRETIONARY**                                         |                                                                                                           |   | **9,687,459**         |       |
|                                        |
|                                   | **CONSUMER STAPLES - (3.04%)**                                         |                                                                                                           |
|                                   | **Food, Beverage & Tobacco – (3.04%)**                       |                                                                                                           |
|                                   | 14,000,000                                                             | Tyson Foods, Inc., Conv. Sr. Notes, 3.25%, 10/15/13                                                            |   |                  | 11,357,500 |   |
|                                        |
|                                   | **TOTALCONSUMERSTAPLES**                                               |                                                                                                           |   | **11,357,500**        |       |
|                                        |
|                                   | **ENERGY - (0.55%)**                                                   |                                                                                                           |
|                                   | 2,500,000                                                              | Nabors Industries Inc., Conv. Sr. Notes, 0.94%, 05/15/11                                                       |   |                  | 2,071,875  |   |
|                                        |
|                                   | **TOTALENERGY**                                                        |                                                                                                           |   | **2,071,875**         |       |
|                                        |
|                                   | **FINANCIALS - (13.73%)**                                              |                                                                                                           |
|                                   | **Real Estate – (13.73%)**                                       |                                                                                                           |
|                                   | 7,750,000                                                              | Digital Realty Trust L.P., 144A Conv. Sr. Notes, 4.125%, 08/15/26 (d)                                          |   |                  | 8,170,554  |   |
|                                   | 23,000,000                                                             | Forest City Enterprises, Inc., Class A, Conv. Sr. Notes, 3.625%, 10/15/11                                      |   |                  | 12,316,500 |   |
|                                   | 21,000,000                                                             | General Growth Properties, Inc., 144A Conv. Sr. Notes, 3.98%, 04/15/27 (d)                                     |   |                  | 1,706,250  |   |
|                                   | 10,000,000                                                             | Reckson Operating Partnership, L.P., Conv. Sr. Notes (Convertible into SL Green Realty Corp.), 4.00%, 06/15/25 |   |                  | 8,375,000  |   |
|                                   | 24,000,000                                                             | Vornado Realty L.P., Conv. Sr. Deb., 3.875%, 04/15/25                                                          |   |                  | 20,760,000 |   |
|                                        |
|                                   |                                                                   |                                                                                                           |   | 51,328,304            |       |
|                                        |
|                                   | **TOTALFINANCIALS**                                                    |                                                                                                           |   | **51,328,304**        |       |
|                                        |
|                                   | **HEALTH CARE - (0.91%)**                                              |                                                                                                           |
|                                   | **Pharmaceuticals, Biotechnology & Life Sciences – (0.91%)** |                                                                                                           |
|                                   | 3,900,000                                                              | Valeant Pharmaceuticals International, Conv. Sub. Notes, 4.00%, 11/15/13                                       |   |                  | 3,393,000  |   |
|                                        |
|                                   | **TOTALHEALTHCARE**                                                    |                                                                                                           |   | **3,393,000**         |       |
|                                        |
|                                   | **INDUSTRIALS - (9.48%)**                                              |                                                                                                           |
|                                   | **Capital Goods – (0.69%)**                                      |                                                                                                           |
|                                   | 3,720,000                                                              | United Rentals North America Inc., Conv. Sr. Sub., 1.875%, 10/15/23                                            |   |                  | 2,587,985  |   |
|                                        |
|                                   | **Commercial & Professional Services – (8.79%)**             |                                                                                                           |
|                                   | 8,500,000                                                              | School Specialty, Inc., Conv. Sub. Deb., 3.75%, 11/30/26                                                       |   |                  | 5,971,250  |   |
|                                   | 22,101,000                                                             | School Specialty, Inc., Conv. Sub. Notes, 3.75%/Zero coupon, 08/01/23 (e)                                      |   |                  | 17,211,154 |   |
|                                   | 9,000,000                                                              | Waste Connections, Inc., Conv. Sr. Notes, 3.75%, 04/01/26                                                      |   |                  | 9,675,000  |   |
|                                        |
|                                   |                                                                        | 32,857,404                                                                                                     |   |
|                                        |
|                                   | **TOTALINDUSTRIALS**                                                   |                                                                                                           |   | **35,445,389**        |       |
|                                        |
|                                   | **INFORMATION TECHNOLOGY - (5.59%)**                                   |                                                                                                           |
|                                   | **Semiconductors & Semiconductor Equipment – (5.59%)**       |                                                                                                           |
|                                   | 24,000,000                                                             | Intel Corp., Conv. Sub. Deb., 2.95%, 12/15/35                                                                  |   |                  | 20,910,000 |   |
|                                        |
|                                   | **TOTALINFORMATIONTECHNOLOGY**                                         |                                                                                                           |   | **20,910,000**        |       |
|                                        |
|                                   | **MATERIALS - (1.94%)**                                                |                                                                                                           |
|                                   | 8,000,000                                                              | Sealed Air Corp., 144A, Conv. Sr. Notes, 3.00%, 06/30/33 (d)                                                   |   |                  | 7,240,000  |   |
|                                        |
|                                   | **TOTALMATERIALS**                                                     |                                                                                                           |   | **7,240,000**         |       |
|                                        |
|                                   | **TOTAL CONVERTIBLE BONDS – (Identified cost $196,321,450)**     |                                                                                                           |   | **141,433,527**       |       |
|  

 

 

 

  |
|                                        |                                                                        |                                                                                                                |        |                       |            |  |  |  |  |  |  |  |  |

 

57

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS APPRECIATION & INCOME FUND - (Continued)** | **December 31, 2008** |
|--------------------------------------------------------|-----------------------|

 

| **Principal**                     |                                                                                                                                        | **Security**                                               |                                                                                                                                                                                                                                                                                     | **Value****(Note 1)** |      |
|-----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|-----------|
| **CORPORATEBONDS- (4.60%)**       |                                                                                                                                        |
|                              | **CONSUMER DISCRETIONARY - (1.55%)**                                                                                                        |                                                       |
|                              | **Retailing – (1.55%)**                                                                                                               |                                                       |
| $                                 | 1,900,000                                                                                                                                   | AutoZone, Inc., Sr. Notes, 5.50%, 11/15/15                 |                                                                                                                                                                                                                                                                                     | $                     | 1,546,026 |   |
|                              | 5,300,000                                                                                                                                   | Kohl's Corp., Sr. Notes, 6.25%, 12/15/17                   |                                                                                                                                                                                                                                                                                     |                  | 4,251,178 |   |
|                                   |
|                              |                                                                                                                                        |                                                       |                                                                                                                                                                                                                                                                                     | 5,797,204             |      |
|                                   |
|                              | **TOTALCONSUMERDISCRETIONARY**                                                                                                              |                                                       |                                                                                                                                                                                                                                                                                     | **5,797,204**         |      |
|                                   |
|                              | **FINANCIALS - (0.84%)**                                                                                                                    |                                                       |
|                              | **Real Estate – (0.84%)**                                                                                                             |                                                       |
|                              | 14,000,000                                                                                                                                  | Thornburg Mortgage, Inc., Sr. Notes, 8.00%, 05/15/13 (a)   |                                                                                                                                                                                                                                                                                     |                  | 3,150,000 |   |
|                                   |
|                              | **TOTALFINANCIALS**                                                                                                                         |                                                       |                                                                                                                                                                                                                                                                                     | **3,150,000**         |      |
|                                   |
|                              | **INDUSTRIALS - (2.21%)**                                                                                                                   |                                                       |
|                              | **Capital Goods – (2.21%)**                                                                                                           |                                                       |
|                              | 12,000,000                                                                                                                                  | Masco Corp., 6.125%, 10/03/16                              |                                                                                                                                                                                                                                                                                     |                  | 8,247,696 |   |
|                                   |
|                              | **TOTALINDUSTRIALS**                                                                                                                        |                                                       |                                                                                                                                                                                                                                                                                     | **8,247,696**         |      |
|                                   |
|                              | **TOTAL CORPORATE BONDS – (Identified cost $31,370,230)**                                                                             |                                                       |                                                                                                                                                                                                                                                                                     | **17,194,900**        |      |
|                                   |
| **SHORTTERMINVESTMENTS- (0.17%)** |                                                                                                                                        |
|                              | 315,000                                                                                                                                     | Banc of America Securities LLC Joint Repurchase Agreement, |                                                                                                                                                                                                                                                                                     |
|                              | 0.06%, 01/02/09, dated 12/31/08, repurchase value of $315,001                                                                               |                                                       |
|                              | (collateralized by: U.S. Government agency mortgage in a pooled cash account, 6.00%, 10/20/38, total market value $321,300)                 |                                                       |                                                                                                                                                                                                                                                                                     | 315,000               |      |
|                              | 131,000                                                                                                                                     | Goldman, Sachs & Co. Joint Repurchase Agreement,       |                                                                                                                                                                                                                                                                                     |
|                              | 0.04%, 01/02/09, dated 12/31/08, repurchase value of $131,000                                                                               |                                                       |
|                              | (collateralized by: US Government agency mortgages in a pooled cash account, 5.00%-5.50%, 05/01/35-05/01/38, total market value $133,620)   |                                                       |                                                                                                                                                                                                                                                                                     | 131,000               |      |
|                              | 184,000                                                                                                                                     | UBS Securities LLC Joint Repurchase Agreement,             |                                                                                                                                                                                                                                                                                     |
|                              | 0.05%, 01/02/09, dated 12/31/08, repurchase value of $184,001                                                                               |                                                       |
|                              | (collateralized by: U.S. Government agency mortgages in a pooled cash account, 5.00%-6.50%, 06/01/17-02/01/38, total market value $187,680) |                                                       |                                                                                                                                                                                                                                                                                     | 184,000               |      |
|                                   |
|                              | **TOTAL SHORT TERM INVESTMENTS – (Identified cost $630,000)**                                                                         |                                                       |                                                                                                                                                                                                                                                                                     | **630,000**           |      |
|                                   |
|                              | Total Investments – (100.04%) – (Identified cost $665,730,601) – (f)                                                      |                                                       |                                                                                                                                                                                                                                                                                     | 373,994,213           |      |
|                              | Liabilities Less Other Assets – (0.04%)                                                                                               |                                                       |                                                                                                                                                                                                                                                                                     | (150,789)             |      |
|                                   |
|                              | Net Assets – (100.00%)                                                                                                                |                                                       | $                                                                                                                                                                                                                                                                                        | 373,843,424           |      |
|                                   |
|                                   |
|                              | *                                                                                                                                           |                                                       | Non-Income producing security.                                                                                                                                                                                                                                                           |                  |      |
|                              | (a)                                                                                                                                         |                                                       | Illiquid Security – See Note 8 of the Notes to Financial Statements.                                                                                                                                                                                                               |                  |      |
|                              | (b)                                                                                                                                         |                                                       | As of December 31, 2008, zero coupon bonds represented $9,687,459, or 2.59% 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.                                                          |                  |      |
|                              | (c)                                                                                                                                         |                                                       | Zero coupon bonds reflect the effective yield on the date of purchase.                                                                                                                                                                                                                   |                  |      |
|                              | (d)                                                                                                                                         |                                                       | 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 $17,116,804, or 4.58% of the Fund's net assets, as of December 31, 2008. |                  |      |
|                              | (e)                                                                                                                                         |                                                       | Represents a step-down bond: a bond that pays one coupon rate for an initial period followed by a lower coupon rate.                                                                                                                                                                     |                  |      |
|                                   |                                                                                                                                             |                                                            |                                                                                                                                                                                                                                                                                          |                       |           |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

58

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS APPRECIATION & INCOME FUND - (Continued)** | **December 31, 2008** |
|--------------------------------------------------------|-----------------------|

 

|                                    | (f)                         |   | Aggregate cost for federal income tax purposes is $665,918,097. At December 31, 2008 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows: |          |   |
|-----------------------------------------|-----------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|--------|
|                                    | Unrealized appreciation     |   | $                                                                                                                                                                                        | 7,752,606     |   |
|                                    | Unrealized depreciation     |   |                                                                                                                                                                                     | (299,676,490) |   |
|                                         |
|                                    | Net unrealized depreciation |   | $                                                                                                                                                                                        | (291,923,884) |   |
|                                         |
|                                         |
| ***See Notes to Financial Statements*** |                        |
|                                         |                             |        |                                                                                                                                                                                          |               |        |  |  |  |  |  |

 

 

59

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                         **Schedule of Investments**

| **DAVIS REAL ESTATE FUND** | **December 31, 2008** |
|----------------------------|-----------------------|

 

| **Shares**                |                                                         | **Security**                                       |   | **Value****(Note 1)** |       |
|---------------------------|--------------------------------------------------------------|----------------------------------------------------|--------|-----------------------|------------|
| **COMMONSTOCK- (90.25%)** |                                                         |
|                      | **FINANCIALS - (84.17%)**                                    |                                               |
|                      | **Diversified Financials – (3.75%)**                   |                                               |
|                      | **Capital Markets – (3.75%)**                          |                                               |
|                      | 660,450                                                      | Brookfield Asset Management Inc., Class A (Canada) |   | $                     | 10,085,071 |   |
|                           |
|                      | **Real Estate – (80.42%)**                             |                                               |
|                      | **Real Estate Investment Trusts (REITs) – (71.12%)**   |                                               |
|                      | **Diversified REITs – (5.98%)**                        |                                               |
|                      | 1,158,300                                                    | Cousins Properties, Inc.                           |   |                  | 16,042,455 |   |
|                           |
|                      | **Industrial REITs – (6.16%)**                         |                                               |
|                      | 2,658,100                                                    | Brixton PLC (United Kingdom)                       |   |                  | 5,137,895  |   |
|                      | 1,291,200                                                    | DCT Industrial Trust Inc.                          |   |                  | 6,533,472  |   |
|                      | 524,500                                                      | First Potomac Realty Trust                         |   |                  | 4,877,850  |   |
|                           |
|                      | 16,549,217                                                   |                                               |
|                           |
|                      | **Office REITs – (32.53%)**                            |                                               |
|                      | 294,613                                                      | Alexandria Real Estate Equities, Inc.              |   |                  | 17,776,948 |   |
|                      | 173,242                                                      | Boston Properties, Inc.                            |   |                  | 9,528,310  |   |
|                      | 484,838                                                      | Corporate Office Properties Trust                  |   |                  | 14,884,527 |   |
|                      | 987,419                                                      | Derwent London PLC (United Kingdom)                |   |                  | 10,387,077 |   |
|                      | 585,300                                                      | Digital Realty Trust, Inc.                         |   |                  | 19,227,105 |   |
|                      | 546,500                                                      | Douglas Emmett, Inc.                               |   |                  | 7,137,290  |   |
|                      | 324,800                                                      | SL Green Realty Corp.                              |   |                  | 8,412,320  |   |
|                           |
|                      | 87,353,577                                                   |                                               |
|                           |
|                      | **Residential REITs – (8.79%)**                        |                                               |
|                      | 658,000                                                      | American Campus Communities, Inc.                  |   |                  | 13,475,840 |   |
|                      | 131,800                                                      | Essex Property Trust, Inc.                         |   |                  | 10,115,650 |   |
|                           |
|                      | 23,591,490                                                   |                                               |
|                           |
|                      | **Retail REITs – (7.60%)**                             |                                               |
|                      | 130,700                                                      | Federal Realty Investment Trust                    |   |                  | 8,113,856  |   |
|                      | 1,248,657                                                    | General Growth Properties, Inc.                    |   |                  | 1,610,768  |   |
|                      | 419,600                                                      | Taubman Centers, Inc.                              |   |                  | 10,683,016 |   |
|                           |
|                      | 20,407,640                                                   |                                               |
|                           |
|                      | **Specialized REITs – (10.06%)**                       |                                               |
|                      | 1,222,847                                                    | Cogdell Spencer, Inc. (a)                          |   |                  | 11,445,848 |   |
|                      | 464,000                                                      | Ventas, Inc.                                       |   |                  | 15,576,480 |   |
|                           |
|                      | 27,022,328                                                   |                                               |
|                           |
|                      | 190,966,707                                                  |                                               |
|                           |
|                      | **Real Estate Management & Development – (9.30%)** |                                               |
|                      | **Diversified Real Estate Activities – (5.34%)**       |                                               |
|                      | 288,000                                                      | Mitsui Fudosan Co., Ltd. (Japan)                   |   |                  | 4,801,601  |   |
|                      | 392,000                                                      | St. Joe Co. *                                      |   |                  | 9,533,440  |   |
|                           |
|                      | 14,335,041                                                   |                                               |
|                           |
|                      | **Real Estate Operating Companies – (3.96%)**          |                                               |
|                      | 1,522,884                                                    | Forest City Enterprises, Inc., Class A             |   |                  | 10,203,323 |   |
|                           |                                                              |                                                    |        |                       |            |  |  |  |  |  |  |  |  |

 

60

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS REAL ESTATE FUND - (Continued)** | **December 31, 2008** |
|------------------------------------------|-----------------------|

 

| **Shares/Principal**                 |                                                                                                                          | **Security**                                                     |   | **Value****(Note 1)** |      |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|--------|-----------------------|-----------|
| **COMMON STOCK – (CONTINUED)** |                                                                                                                          |
|                                 | **FINANCIALS – (CONTINUED)**                                                                                            |                                                             |
|                                 | **Real Estate – (Continued)**                                                                                           |                                                             |
|                                 | **Real Estate Management & Development – (Continued)**                                                              |                                                             |
|                                 | **Real Estate Operating Companies – (Continued)**                                                                       |                                                             |
|                                 | 2,286,100                                                                                                                     | Minerva PLC (United Kingdom)*                                    |   | $                     | 445,091   |   |
|                                      |
|                                 | 10,648,414                                                                                                                    |                                                             |
|                                      |
|                                 | 24,983,455                                                                                                                    |                                                             |
|                                      |
|                                 |                                                                                                                               | 215,950,162                                                      |   |
|                                      |
|                                 | **TOTALFINANCIALS**                                                                                                           |                                                             |   | **226,035,233**       |      |
|                                      |
|                                 | **INDUSTRIALS - (6.08%)**                                                                                                     |                                                             |
|                                 | **Transportation – (6.08%)**                                                                                            |                                                             |
|                                 | 320,800                                                                                                                       | Alexander & Baldwin, Inc.                                    |   |                  | 8,039,248 |   |
|                                 | 109,300                                                                                                                       | Burlington Northern Santa Fe Corp.                               |   |                  | 8,275,103 |   |
|                                      |
|                                 |                                                                                                                               | 16,314,351                                                       |   |
|                                      |
|                                 | **TOTALINDUSTRIALS**                                                                                                          |                                                             |   | **16,314,351**        |      |
|                                      |
|                                 | **TOTAL COMMON STOCK – (Identified cost $451,682,921)**                                                                 |                                                             |   | **242,349,584**       |      |
|                                      |
| **PREFERREDSTOCK- (2.64%)**          |                                                                                                                          |
|                                 | **FINANCIALS - (2.64%)**                                                                                                      |                                                             |
|                                 | **Real Estate – (2.64%)**                                                                                               |                                                             |
|                                 | **Real Estate Investment Trusts (REITs) – (2.64%)**                                                                     |                                                             |
|                                 | **Industrial REITs – (1.00%)**                                                                                          |                                                             |
|                                 | 171,000                                                                                                                       | AMB Property Corp., 6.75%, Series M                              |   |                  | 2,689,830 |   |
|                                      |
|                                 | **Office REITs – (1.10%)**                                                                                              |                                                             |
|                                 | 71,693                                                                                                                        | Digital Realty, 8.50%, Series A                                  |   |                  | 1,151,569 |   |
|                                 | 111,600                                                                                                                       | SL Green Realty Corp., 7.625%, Series C                          |   |                  | 1,813,779 |   |
|                                      |
|                                 | 2,965,348                                                                                                                     |                                                             |
|                                      |
|                                 | **Residential REITs – (0.54%)**                                                                                         |                                                             |
|                                 | 43,700                                                                                                                        | Equity Residential, 7.00%, Series E, Cum. Conv. Pfd.             |   |                  | 1,442,100 |   |
|                                      |
|                                 | **TOTALFINANCIALS**                                                                                                           |                                                             |   | **7,097,278**         |      |
|                                      |
|                                 | **TOTAL PREFERRED STOCK – (Identified cost $5,659,121)**                                                                |                                                             |   | **7,097,278**         |      |
|                                      |
| **CONVERTIBLEBONDS- (1.22%)**        |                                                                                                                          |
|                                 | **FINANCIALS - (1.22%)**                                                                                                      |                                                             |
|                                 | **Real Estate – (1.22%)**                                                                                               |                                                             |
|                                 | **Real Estate Investment Trusts (REITs) – (1.22%)**                                                                     |                                                             |
|                                 | **Industrial REITs – (0.95%)**                                                                                          |                                                             |
| $                                    | 5,727,000                                                                                                                     | Prologis, Conv. Sr. Notes, 2.25%, 04/01/37                       |   |                  | 2,548,515 |   |
|                                      |
|                                 | **Office REITs – (0.27%)**                                                                                              |                                                             |
|                                 | 1,230,000                                                                                                                     | SL Green Realty Corp., 144A Conv. Sr. Notes, 3.00%, 03/30/27 (b) |   |                  | 730,313   |   |
|                                      |
|                                 | **TOTALFINANCIALS**                                                                                                           |                                                             |   | **3,278,828**         |      |
|                                      |
|                                 | **TOTAL CONVERTIBLE BONDS – (Identified cost $3,451,409)**                                                              |                                                             |   | **3,278,828**         |      |
|                                      |
| **SHORTTERMINVESTMENTS- (5.91%)**    |                                                                                                                          |
|                                 | 7,934,000                                                                                                                     | Banc of America Securities LLC Joint Repurchase Agreement,       |   |
|                                 | 0.06%, 01/02/09, dated 12/31/08, repurchase value of $7,934,026                                                               |                                                             |
|                                 | (collateralized by: U.S. Government agency mortgage in a pooled cash account, 6.00%, 10/20/38, total market value $8,092,680) |                                                             |   | 7,934,000             |      |
|                                      |                                                                                                                               |                                                                  |        |                       |           |  |  |  |  |  |  |  |  |  |  |

 

61

 

 

----

| **DAVIS SERIES, INC.** | **Schedule of Investments** |
|------------------------|-----------------------------|

| **DAVIS REAL ESTATE FUND - (Continued)** | **December 31, 2008** |
|------------------------------------------|-----------------------|

 

| **Principal**                                  |                                                                                                                                          | **Security**                                         |                           | **Value****(Note 1)** |   |
|------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|--------------------------------|-----------------------|--------|
| **SHORT TERM INVESTMENTS – (CONTINUED)** |                                                                                                                                          |
| $                                              | 3,306,000                                                                                                                                     | Goldman, Sachs & Co. Joint Repurchase Agreement, |                           |
|                                           | 0.04%, 01/02/09, dated 12/31/08, repurchase value of $3,306,007                                                                               |                                                 |
|                                           | (collateralized by: US Government agency mortgages in a pooled cash account, 5.00%-5.50%, 05/01/35-05/01/38, total market value $3,372,120)   |                                                 | $                              | 3,306,000             |   |
|                                           | 4,628,000                                                                                                                                     | UBS Securities LLC Joint Repurchase Agreement,       |                           |
|                                           | 0.05%, 01/02/09, dated 12/31/08, repurchase value of $4,628,013                                                                               |                                                 |
|                                           | (collateralized by: U.S. Government agency mortgages in a pooled cash account, 5.00%-6.50%, 06/01/17-02/01/38, total market value $4,720,560) |                                                 |                           | 4,628,000             |   |
|                                                |
|                                           | **TOTAL SHORT TERM INVESTMENTS – (Identified cost $15,868,000)**                                                                        |                                                 |                           | **15,868,000**        |   |
|                                                |
|                                           | Total Investments – (100.02%) – (Identified cost $476,661,451) – (c)                                                        |                                                 |                           | 268,593,690           |   |
|                                           | Liabilities Less Other Assets – (0.02%)                                                                                                 |                                                 |                           | (63,985)              |   |
|                                                |
|                                           | Net Assets – (100.00%)                                                                                                                  |                                                 | $                              | 268,529,705           |   |
|                                                |
|                                                |
|                                           | *                                                                                                                                             |                                                 | Non-Income producing security. |                  |   |
|                                                |                                                                                                                                               |                                                      |                                |                       |        |  |  |  |  |  |  |  |  |  |  |  |

   

|   | (a) |   | Affiliated Company. Represents ownership of at least 5% of the voting securities of the issuer and is an affiliate, as defined in the Investment Company Act of 1940, at or during the year ended December 31, 2008. The aggregate fair value of the securities of affiliated companies held by the Fund as of December 31, 2008, amounts to $11,445,848. Transactions during the period in which the issuers were affiliates are as follows: |   |
|--------|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

   

| Security              |   | Shares

December 31, 2007 |   | Gross

Additions |   | Gross

Reductions |   | Shares

December 31, 2008 |   | Dividend

Income |    |
|-----------------------|--------|---------------------------|--------|------------------|--------|-------------------|--------|---------------------------|--------|------------------|---------|
| Cogdell Spencer, Inc. |   | –                   |   | 1,222,847        |   | –           |   | 1,222,847                 |   | $                | 536,624 |

   

(b)This security is subject to Rule 144A. The Board of Directors of the Fund has determined that there is sufficient liquidity in this security to realize current valuations. This security amounted to $730,313, or 0.27% of the Fund's net assets, as of December 31, 2008.

(c)Aggregate cost for federal income tax purposes is $476,906,579. At December 31, 2008 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:  
|             Unrealized appreciation                                                                              | $ |  3,344,308     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|---------------------|
|             Unrealized depreciation                                                                              |   | (211,657,197)       |
|                          Net unrealized depreciation | $ |  (208,312,889) |

***See Notes to Financial Statements***

 

 

 

62

 

 

 

----

| **DAVIS SERIES, INC.** | **Statements of Assets and Liabilities** |
|------------------------|------------------------------------------|

|   | **At December 31, 2008** |
|--------|--------------------------|

 

|                                                                                        |                            |   |          | **Davis Opportunity Fund** |   |                                                                                                                      | **Davis Government Bond Fund** |   |                                                                                                                      | **Davis Government Money Market Fund** |   |         | **Davis****Financial****Fund** |   |          | **Davis Appreciation & Income Fund** |   |          | **Davis****Real Estate Fund** |
|---------------------------------------------------------------------------------------------|---------------------------------|--------|---------------|----------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|----------------------------------------|--------|--------------|--------------------------------|--------|---------------|------------------------------------------|--------|---------------|-------------------------------|
| **ASSETS:**                                                                                 |                            |   |          |                       |   |                                                                                                                      |                           |   |                                                                                                                      |                                   |   |         |                           |   |          |                                     |   |          |
| Investments in securities at value* (see accompanyingSchedules of Investments):             |                            |   |          |                       |   |                                                                                                                      |                           |   |                                                                                                                      |                                   |   |         |                           |   |          |                                     |   |          |
|                                                                                        | Unaffiliated companies          |   | $             | 449,914,246                |   | $                                                                                                                         | 148,633,345                    |   | $                                                                                                                         | 369,250,809                            |   | $            | 509,640,831                    |   | $             | 373,994,213                              |   | $             | 257,147,842                   |
|                                                                                        | Affiliated companies            |   |          | 598,750                    |   |                                                                                                                      | –                        |   |                                                                                                                      | –                                |   |         | –                        |   |          | –                                  |   |          | 11,445,848                    |
| Cash                                                                                        |                            |   | 5,098         |                       |   | 4,245                                                                                                                     |                           |   | 14,523                                                                                                                    |                                   |   | 16,587       |                           |   | 124,769       |                                     |   | 7,333         |
| Cash - foreign currencies**                                                                 |                            |   | 31,956        |                       |   | –                                                                                                                   |                           |   | –                                                                                                                   |                                   |   | –      |                           |   | –       |                                     |   | 375,754       |
| Receivables:                                                                                |                            |
|                                                                                        | Capital stock sold              |   |          | 2,681,204                  |   |                                                                                                                      | 577,385                        |   |                                                                                                                      | 25,166,587                             |   |         | 1,516,341                      |   |          | 1,748,453                                |   |          | 654,245                       |
|                                                                                        | Dividends and interest          |   |          | 521,955                    |   |                                                                                                                      | 726,831                        |   |                                                                                                                      | 1,853,072                              |   |         | 138,915                        |   |          | 1,745,958                                |   |          | 1,720,531                     |
| Prepaid expenses                                                                            |                            |   | 7,555         |                       |   | 1,122                                                                                                                     |                           |   | 5,158                                                                                                                     |                                   |   | 8,281        |                           |   | 6,429         |                                     |   | 6,013         |
|                                                                                        | Total assets                    |   |          | 453,760,764                |   |                                                                                                                      | 149,942,928                    |   |                                                                                                                      | 396,290,149                            |   |         | 511,320,955                    |   |          | 377,619,822                              |   |          | 271,357,566                   |
| **LIABILITIES:**                                                                            |                            |
| Payables:                                                                                   |                            |
|                                                                                        | Investment securities purchased |   |          | –                    |   |                                                                                                                      | –                        |   |                                                                                                                      | –                                |   |         | –                        |   |          | –                                  |   |          | 454,832                       |
|                                                                                        | Capital stock redeemed          |   |          | 2,526,575                  |   |                                                                                                                      | 394,903                        |   |                                                                                                                      | 724,564                                |   |         | 2,909,274                      |   |          | 3,101,992                                |   |          | 1,830,764                     |
|                                                                                        | Distributions payable           |   |          | –                    |   |                                                                                                                      | 109,353                        |   |                                                                                                                      | 7,783                                  |   |         | –                        |   |          | –                                  |   |          | –                       |
| Accrued management fees                                                                     |                            |   | 285,504       |                       |   | 40,584                                                                                                                    |                           |   | 179,337                                                                                                                   |                                   |   | 321,890      |                           |   | 239,900       |                                     |   | 177,382       |
| Accrued transfer agent fees                                                                 |                            |   | 283,172       |                       |   | 34,714                                                                                                                    |                           |   | 30,428                                                                                                                    |                                   |   | 218,608      |                           |   | 136,003       |                                     |   | 177,960       |
| Accrued distribution and service plan fees                                                  |                            |   | 288,031       |                       |   | 98,461                                                                                                                    |                           |   | –                                                                                                                   |                                   |   | 272,774      |                           |   | 203,625       |                                     |   | 153,538       |
| Other accrued expenses                                                                      |                            |   | 106,499       |                       |   | 84,549                                                                                                                    |                           |   | 137,050                                                                                                                   |                                   |   | 76,535       |                           |   | 94,878        |                                     |   | 33,385        |
|                                                                                        | Total liabilities               |   |          | 3,489,781                  |   |                                                                                                                      | 762,564                        |   |                                                                                                                      | 1,079,162                              |   |         | 3,799,081                      |   |          | 3,776,398                                |   |          | 2,827,861                     |
| **NET ASSETS**                                                                              |                            | $      | 450,270,983   |                       | $      | 149,180,364                                                                                                               |                           | $      | 395,210,987                                                                                                               |                                   | $      | 507,521,874  |                           | $      | 373,843,424   |                                     | $      | 268,529,705   |
| **NET ASSETS CONSIST OF:**                                                                  |                            |
| Par value of shares of capital stock                                                        |                            | $      | 334,081       |                       | $      | 263,950                                                                                                                   |                           | $      | 3,952,110                                                                                                                 |                                   | $      | 261,908      |                           | $      | 231,176       |                                     | $      | 175,459       |
| Additional paid-in capital                                                                  |                            |   | 713,721,672   |                       |   | 151,977,267                                                                                                               |                           |   | 391,258,877                                                                                                               |                                   |   | 570,302,365  |                           |   | 670,014,365   |                                     |   | 486,076,899   |
| Undistributed (overdistributed) net investment income                                       |                            |   | (262,212)     |                       |   |                    – |                           |   |                    – |                                   |   | 594,360      |                           |   | 165,146       |                                     |   | (16,911)      |
| Accumulated net realized losses from investments and foreign currency transactions          |                            |   | (116,326,262) |                       |   | (4,450,774)                                                                                                               |                           |   |                    – |                                   |   | (8,371,641)  |                           |   | (4,830,875)   |                                     |   | (9,638,342)   |
| Net unrealized appreciation (depreciation) on investments and foreign currency transactions |                            |   | (147,196,296) |                       |   | 1,389,921                                                                                                                 |                           |   |                    – |                                   |   | (55,265,118) |                           |   | (291,736,388) |                                     |   | (208,067,400) |
|                                                                                        | Net Assets                      |   | $             | 450,270,983                |   | $                                                                                                                         | 149,180,364                    |   | $                                                                                                                         | 395,210,987                            |   | $            | 507,521,874                    |   | $             | 373,843,424                              |   | $             | 268,529,705                   |
|                                                                                        |                            |
| *Including:                                                                                 |                            |
|                                                                                        | Cost of investments:            |   |          |                       |   |                                                                                                                      |                           |   |                                                                                                                      |                                   |   |         |                           |   |          |                                     |   |          |                          |   |
|                                                                                        | Unaffiliated companies          |   | $             | 589,999,823                |   | $                                                                                                                         | 147,243,424                    |   | $                                                                                                                         | 369,250,809                            |   | $            | 564,906,848                    |   | $             | 665,730,601                              |   | $             | 457,657,407                   |
|                                                                                        | Affiliated companies            |   |          | 7,709,292                  |   |                                                                                                                      | –                        |   |                                                                                                                      | –                                |   |         | –                        |   |          | –                                  |   |          | 19,004,044                    |
| **Cost of cash - foreign currencies                                                         |                            |   | 32,309        |                       |   | –                                                                                                                   |                           |   | –                                                                                                                   |                                   |   | –      |                           |   | –       |                                     |   | 384,368       |
|                                                                                        |                            |
|                                                                                             |                                 |        |               |                            |        |                                                                                                                           |                                |        |                                                                                                                           |                                        |        |              |                                |        |               |                                          |        |               |                               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

63

 

----

| **DAVIS SERIES, INC.** | **Statements of Assets and Liabilities – (Continued)** |
|------------------------|--------------------------------------------------------------|

|   | **At December 31, 2008** |
|--------|--------------------------|

 

|                                                              |                                                                                               |   | **Davis Opportunity Fund** |        |   | **Davis Government Bond Fund** |                                                                                                             |   | **Davis Government Money Market Fund** |                                                                                                                  |   | **Davis****Financial****Fund** |        |   | **Davis Appreciation & Income Fund** |        |   | **Davis****Real Estate Fund** |
|-------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|--------|----------------------------|-------------|--------|--------------------------------|------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-------------|--------|------------------------------------------|-------------|--------|-------------------------------|
| **CLASS A SHARES:**                                               |                                                                                               |
|                                                              | Net assets                                                                                         |   | $                          | 266,524,872 |   | $                              | 91,851,635                                                                                                       |   | $                                      | 331,032,714                                                                                                           |   | $                              | 425,853,993 |   | $                                        | 227,940,050 |   | $                             | 202,877,775 |
|                                                              | Shares outstanding                                                                                 |   |                       | 19,141,586  |   |                           | 16,249,247                                                                                                       |   |                                   | 331,032,714                                                                                                           |   |                           | 21,592,018  |   |                                     | 14,111,886  |   |                          | 13,272,121 |
|                                                              | Net asset value and redemption price per share (Net Assets ÷ Shares Outstanding)            |   | $                          | 13.92       |   | $                              | 5.65                                                                                                             |   | $                                      | 1.00                                                                                                                  |   | $                              | 19.72       |   | $                                        | 16.15       |   | $                             | 15.29 |
|                                                              | Maximum offering price per share (100/95.25 of net asset value)*                                   |   | $                          | 14.61       |   | $                              |                   5.93 |   | $                                      |                    N/A |   | $                              | 20.70       |   | $                                        | 16.96       |   | $                             | 16.05 |
| **CLASS B SHARES:**                                               |                                                                                               |
|                                                              | Net assets                                                                                         |   | $                          | 21,950,761  |   | $                              | 16,442,035                                                                                                       |   | $                                      | 31,915,647                                                                                                            |   | $                              | 14,235,903  |   | $                                        | 16,890,503  |   | $                             | 7,581,143 |
|                                                              | Shares outstanding                                                                                 |   |                       | 1,829,372   |   |                           | 2,916,973                                                                                                        |   |                                   | 31,915,647                                                                                                            |   |                           | 829,022     |   |                                     | 1,056,705   |   |                          | 500,992 |
|                                                              | Net asset value, offering, and redemption price per share (Net Assets ÷ Shares Outstanding) |   | $                          | 12.00       |   | $                              |                   5.64 |   | $                                      |                   1.00      |   | $                              | 17.17       |   | $                                        | 15.98       |   | $                             | 15.13 |
| **CLASS C SHARES:**                                               |                                                                                               |
|                                                              | Net assets                                                                                         |   | $                          | 119,676,191 |   | $                              | 39,260,638                                                                                                       |   | $                                      | 32,113,573                                                                                                            |   | $                              | 58,473,971  |   | $                                        | 79,698,903  |   | $                             | 28,788,985 |
|                                                              | Shares outstanding                                                                                 |   |                       | 9,494,799   |   |                           | 6,943,199                                                                                                        |   |                                   | 32,113,573                                                                                                            |   |                           | 3,325,447   |   |                                     | 4,908,959   |   |                          | 1,879,159 |
|                                                              | Net asset value, offering, and redemption price per share (Net Assets ÷ Shares Outstanding) |   | $                          | 12.60       |   | $                              |                   5.65 |   | $                                      |                   1.00      |   | $                              | 17.58       |   | $                                        | 16.24       |   | $                             | 15.32 |
| **CLASS Y SHARES:**                                               |                                                                                               |
|                                                              | Net assets                                                                                         |   | $                          | 42,119,159  |   | $                              | 1,626,056                                                                                                        |   | $                                      | 149,053                                                                                                               |   | $                              | 8,958,007   |   | $                                        | 49,313,968  |   | $                             | 29,281,802 |
|                                                              | Shares Outstanding                                                                                 |   |                       | 2,942,310   |   |                           | 285,612                                                                                                          |   |                                   | 149,053                                                                                                               |   |                           | 444,276     |   |                                     | 3,040,035   |   |                          | 1,893,664 |
|                                                              | Net asset value, offering, and redemption price per share (Net Assets ÷ Shares Outstanding) |   | $                          | 14.31       |   | $                              |                   5.69 |   | $                                      |                   1.00      |   | $                              | 20.16       |   | $                                        | 16.22       |   | $                             | 15.46 |
|                                                              |                                                                                               |
| *On purchases of $100,000 or more, the offering price is reduced. |                                                                                               |
|                                                                   |                                                                                                    |        |                            |             |        |                                |                                                                                                                  |        |                                        |                                                                                                                       |        |                                |             |        |                                          |             |        |                               |  |  |  |

 

 

 

 

 

 

| ***See Notes to Financial Statements*** |
|-----------------------------------------|

 

 

64

 

----

**DAVIS SERIES,            INC.**                                                                                                                                      **Statements of Operations**

|   | **For the year ended December 31, 2008** |
|--------|------------------------------------------|

 

|                                                                                        |                                                                        | **Davis Opportunity Fund** |          | **Davis Government Bond Fund** |   | **Davis Government Money Market Fund** |      | **Davis****Financial****Fund** |    | **Davis Appreciation & Income Fund** |   | **Davis****Real Estate Fund** |
|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------|----------------------------|---------------|--------------------------------|--------|----------------------------------------|-----------|--------------------------------|---------|------------------------------------------|--------|-------------------------------|
| **INVESTMENT INCOME:**                                                                      |                                                                        |
| Income:                                                                                     |                                                                        |
|                                                                                        | Dividends:                                                                  |                       |          |                           |   |                                   |      |                           |    |                                     |   |                          |   |   |   |   |   |   |   |
|                                                                                        | Unaffiliated companies*                                                     |                       | $             | 11,184,820                     |   | $                                      | –   |                           | $       | –                                  |   | $                             | 11,421,832 |   | $ | 9,251,656 |   | $ | 12,773,369 |
|                                                                                        | Affiliated companies                                                        |                       |          | –                        |   |                                   | –   |                           |    | –                                  |   |                          | – |   |   | – |   |   | 536,624 |
|                                                                                        | Interest                                                                    |                       |          | 903,998                        |   |                                   | 3,880,861 |                           |    | 14,064,526                               |   |                          | 175,821 |   |   | 12,740,087 |   |   | 828,338 |
|                                                                                        | Total income                                                                |                       |          | 12,088,818                     |   |                                   | 3,880,861 |                           |    | 14,064,526                               |   |                          | 11,597,653 |   |   | 21,991,743 |   |   | 14,138,331 |
|                                                                                        |                                                                        |
| Expenses:                                                                                   |                                                                        |
|                                                                                        | Management fees (Note 2)                                                    |                       |          | 4,849,402                      |   |                                   | 280,049   |                           |    | 2,321,102                                |   |                          | 4,828,953 |   |   | 4,374,091 |   |   | 3,430,599 |
|                                                                                        | Custodian fees                                                              |                       |          | 122,986                        |   |                                   | 38,629    |                           |    | 63,474                                   |   |                          | 99,940 |   |   | 128,746 |   |   | 80,042 |
|                                                                                        | Transfer agent fees:                                                        |                       |
|                                                                                        | Class A                                                                     |                       |          | 801,973                        |   |                                   | 68,567    |                           |    | 118,621                                  |   |                          | 811,751 |   |   | 470,788 |   |   | 757,489 |
|                                                                                        | Class B                                                                     |                       |          | 106,829                        |   |                                   | 27,106    |                           |    | 7,464                                    |   |                          | 107,076 |   |   | 58,781 |   |   | 55,453 |
|                                                                                        | Class C                                                                     |                       |          | 363,460                        |   |                                   | 33,862    |                           |    | 5,445                                    |   |                          | 173,385 |   |   | 164,129 |   |   | 125,293 |
|                                                                                        | Class Y                                                                     |                       |          | 71,218                         |   |                                   | 2,753     |                           |    | 31                                       |   |                          | 24,069 |   |   | 40,124 |   |   | 49,044 |
|                                                                                        | Audit fees                                                                  |                       |          | 21,600                         |   |                                   | 18,000    |                           |    | 21,600                                   |   |                          | 33,600 |   |   | 22,800 |   |   | 30,000 |
|                                                                                        | Legal fees                                                                  |                       |          | 16,000                         |   |                                   | 2,500     |                           |    | 10,778                                   |   |                          | 17,187 |   |   | 14,299 |   |   | 10,919 |
|                                                                                        | Accounting fees (Note 2)                                                    |                       |          | 9,504                          |   |                                   | 2,832     |                           |    | 17,836                                   |   |                          | 10,168 |   |   | 9,164 |   |   | 7,832 |
|                                                                                        | Reports to shareholders                                                     |                       |          | 221,420                        |   |                                   | 26,953    |                           |    | 88,201                                   |   |                          | 184,778 |   |   | 175,266 |   |   | 202,872 |
|                                                                                        | Directors’ fees and expenses                                          |                       |          | 82,721                         |   |                                   | 15,464    |                           |    | 56,581                                   |   |                          | 85,864 |   |   | 73,013 |   |   | 56,524 |
|                                                                                        | Registration and filing fees                                                |                       |          | 95,000                         |   |                                   | 68,000    |                           |    | 60,150                                   |   |                          | 85,013 |   |   | 117,500 |   |   | 71,457 |
|                                                                                        | Interest expense                                                            |                       |          | –                        |   |                                   | –   |                           |    | –                                  |   |                          | 8,738 |   |   | – |   |   | – |
|                                                                                        | Miscellaneous                                                               |                       |          | 23,320                         |   |                                   | 9,866     |                           |    | 9,594                                    |   |                          | 26,337 |   |   | 18,514 |   |   | 18,456 |
|                                                                                        | Payments under distribution                                                 |                       |
|                                                                                        | plan (Note 3):                                                              |                       |          |                           |   |                                   |      |                           |    |                                     |   |                          |   |   |   |   |   |   |   |
|                                                                                        | Class A                                                                     |                       |          | 1,094,774                      |   |                                   | 129,973   |                           |    | –                                  |   |                          | 1,243,476 |   |   | 919,416 |   |   | 892,564 |
|                                                                                        | Class B                                                                     |                       |          | 387,606                        |   |                                   | 143,533   |                           |    | –                                  |   |                          | 296,932 |   |   | 308,073 |   |   | 163,025 |
|                                                                                        | Class C                                                                     |                       |          | 1,960,781                      |   |                                   | 253,618   |                           |    | –                                  |   |                          | 792,484 |   |   | 1,314,550 |   |   | 578,462 |
|                                                                                        | Total expenses                                                              |                       |          | 10,228,594                     |   |                                   | 1,121,705 |                           |    | 2,780,877                                |   |                          | 8,829,751 |   |   | 8,209,254 |   |   | 6,530,031 |
|                                                                                        | Expenses paid indirectly (Note 6)                                           |                       |          | (711)                          |   |                                   | (269)     |                           |    | (27)                                     |   |                          | (1,698) |   |   | (975) |   |   | (1,160) |
|                                                                                        | Net expenses                                                                |                       |          | 10,227,883                     |   |                                   | 1,121,436 |                           |    | 2,780,850                                |   |                          | 8,828,053 |   |   | 8,208,279 |   |   | 6,528,871 |
|                                                                                        | Net investment income                                                       |                       |          | 1,860,935                      |   |                                   | 2,759,425 |                           |    | 11,283,676                               |   |                          | 2,769,600 |   |   | 13,783,464 |   |   | 7,609,460 |
|                                                                                        |                                                                        |
| **REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:** |                                                                        |
| Net realized gain (loss) from:                                                              |                                                                        |
|                                                                                        | Investment transactions:                                                    |                       |
|                                                                                        | Unaffiliated companies                                                      |                       |          | (98,497,184)                   |   |                                   | 266,942   |                           |    | –                                  |   |                          | (8,312,393) |   |   | (2,481,552) |   |   | (16,948,283) |
|                                                                                        | Affiliated companies                                                        |                       |          | (114,868)                      |   |                                   | –   |                           |    | –                                  |   |                          | – |   |   | – |   |   | – |
|                                                                                        | Foreign currency transactions                                               |                       |          | (53,471)                       |   |                                   | –   |                           |    | –                                  |   |                          | (9,603) |   |   | – |   |   | (7,578) |
| Net change in unrealized appreciation (depreciation)                                        |                                                                        |                       | (322,839,932) |                           |   | 924,030                                |      |                           | – |                                     |   | (434,667,201)                 |   |   | (320,576,140) |   |   | (255,911,728) |
|                                                                                        | Net realized and unrealized gain (loss) on investments and foreign currency |                       |          | (421,505,455)                  |   |                                   | 1,190,972 |                           |    | –                                  |   |                          | (442,989,197) |   |   | (323,057,692) |   |   | (272,867,589) |
|                                                                                        | Net increase (decrease) in net assets resulting from operations             |                       | $             | (419,644,520)                  |   | $                                      | 3,950,397 |                           | $       | 11,283,676                               |   | $                             | (440,219,597) |   | $ | (309,274,228) |   | $ | (265,258,129) |
|                                                                                        |                                                                        |
| *Net of foreign taxes withheld as follows                                                   |                                                                        | $                          | 457,649       |                           | $      | –                                |      | $                              | – |                                     | $      | 53,651                        |   | $ | 18,284 |   | $ | 98,640 |
|                                                                                             |                                                                             |                            |               |                                |        |                                        |           |                                |         |                                          |        |                               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

 

 

***See Notes to Financial Statements***

 

65

 

----

**DAVIS SERIES,            INC.**                                                                                                                 **Statements of Changes in Net Assets**

|   | **For the year ended December 31, 2008** |
|--------|------------------------------------------|

 

|                                                  |                                                                                                  | **Davis Opportunity Fund** |          | **Davis Government Bond Fund** |   | **Davis Government Money Market Fund** |        | **Davis****Financial****Fund** |          | **Davis Appreciation & Income Fund** |   | **Davis****Real Estate Fund** |
|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------|----------------------------|---------------|--------------------------------|--------|----------------------------------------|-------------|--------------------------------|---------------|------------------------------------------|--------|-------------------------------|
| **OPERATIONS:**                                       |                                                                                                  |
|                                                  | Net investment income                                                                                 |                       | $             | 1,860,935                      |   | $                                      | 2,759,425   |                           | $             | 11,283,676                               |   | $                             | 2,769,600 |   | $ | 13,783,464 |   | $ | 7,609,460 |
|                                                  | Net realized gain (loss) from investments and foreign currency transactions                           |                       |          | (98,665,523)                   |   |                                   | 266,942     |                           |          | –                                  |   |                          | (8,321,996) |   |   | (2,481,552) |   |   | (16,955,861) |
|                                                  | Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions |                       |          | (322,839,932)                  |   |                                   | 924,030     |                           |          | –                                  |   |                          | (434,667,201) |   |   | (320,576,140) |   |   | (255,911,728) |
|                                                  | Net increase (decrease) in net assets resulting from operations                                       |                       |          | (419,644,520)                  |   |                                   | 3,950,397   |                           |          | 11,283,676                               |   |                          | (440,219,597) |   |   | (309,274,228) |   |   | (265,258,129) |
|                                                  |                                                                                                  |
| **DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:** |                                                                                                  |
|                                                  | Net investment income:                                                                                |                       |
|                                                  | Class A                                                                                               |                       |          | –                        |   |                                   | (1,772,333) |                           |          | (10,253,371)                             |   |                          | (3,090,586) |   |   | (9,255,862) |   |   | (1,255,582) |
|                                                  | Class B                                                                                               |                       |          | –                        |   |                                   | (375,503)   |                           |          | (608,705)                                |   |                          | – |   |   | (416,018) |   |   | (29,482) |
|                                                  | Class C                                                                                               |                       |          | –                        |   |                                   | (673,420)   |                           |          | (418,899)                                |   |                          | – |   |   | (1,901,373) |   |   | (115,912) |
|                                                  | Class Y                                                                                               |                       |          | –                        |   |                                   | (29,328)    |                           |          | (2,701)                                  |   |                          | (80,009) |   |   | (1,997,373) |   |   | (196,252) |
|                                                  | Realized gains from investment transactions:                                                          |                       |
|                                                  | Class A                                                                                               |                       |          | –                        |   |                                   | –     |                           |          | –                                  |   |                          | (39,368,129) |   |   | – |   |   | (6,702,307) |
|                                                  | Class B                                                                                               |                       |          | –                        |   |                                   | –     |                           |          | –                                  |   |                          | (1,521,457) |   |   | – |   |   | (253,781) |
|                                                  | Class C                                                                                               |                       |          | –                        |   |                                   | –     |                           |          | –                                  |   |                          | (5,830,612) |   |   | – |   |   | (988,259) |
|                                                  | Class Y                                                                                               |                       |          | –                        |   |                                   | –     |                           |          | –                                  |   |                          | (788,404) |   |   | – |   |   | (911,087) |
|                                                  | Return of capital:                                                                                    |                       |
|                                                  | Class A                                                                                               |                       |          | (118,578)                      |   |                                   | –     |                           |          | –                                  |   |                          | – |   |   | – |   |   | (4,742,665) |
|                                                  | Class B                                                                                               |                       |          | –                        |   |                                   | –     |                           |          | –                                  |   |                          | – |   |   | – |   |   | (111,363) |
|                                                  | Class C                                                                                               |                       |          | –                        |   |                                   | –     |                           |          | –                                  |   |                          | – |   |   | – |   |   | (437,832) |
|                                                  | Class Y                                                                                               |                       |          | (196,448)                      |   |                                   | –     |                           |          | –                                  |   |                          | – |   |   | – |   |   | (741,294) |
|                                                  |                                                                                                  |
| **CAPITAL SHARE TRANSACTIONS:**                       |                                                                                                  |
|                                                  | Net increase (decrease) in net assets resulting from capital share transactions (Note 5):             |                       |
|                                                  | Class A                                                                                               |                       |          | (157,164,375)                  |   |                                   | 63,904,783  |                           |          | (227,850,483)                            |   |                          | 97,276,571 |   |   | (137,197,977) |   |   | (47,554,620) |
|                                                  | Class B                                                                                               |                       |          | (16,586,730)                   |   |                                   | 5,931,908   |                           |          | 7,499,297                                |   |                          | (17,969,985) |   |   | (12,486,997) |   |   | (8,560,035) |
|                                                  | Class C                                                                                               |                       |          | (57,227,835)                   |   |                                   | 24,245,470  |                           |          | 19,121,318                               |   |                          | 24,998,932 |   |   | (25,991,618) |   |   | (12,434,625) |
|                                                  | Class Y                                                                                               |                       |          | (1,762,606)                    |   |                                   | 1,209,297   |                           |          | (5,152)                                  |   |                          | 7,478,186 |   |   | (14,246,313) |   |   | 1,719,014 |
| Total increase (decrease) in net assets               |                                                                                                  |                       | (652,701,092) |                           |   | 96,391,271                             |        |                           | (201,235,020) |                                     |   | (379,115,090)                 |   |   | (512,767,759) |   |   | (348,574,211) |
|                                                  |                                                                                                  |
| **NET ASSETS:**                                       |                                                                                                  |
|                                                  | Beginning of year                                                                                     |                       |          | 1,102,972,075                  |   |                                   | 52,789,093  |                           |          | 596,446,007                              |   |                          | 886,636,964 |   |   | 886,611,183 |   |   | 617,103,916 |
|                                                  | End of year*                                                                                          |                       | $             | 450,270,983                    |   | $                                      | 149,180,364 |                           | $             | 395,210,987                              |   | $                             | 507,521,874 |   | $ | 373,843,424 |   | $ | 268,529,705 |
|                                                  |                                                                                                  |
| *Including undistributed                              |                                                                                                  | $                          | (262,212)     |                           | $      | –                                |        | $                              | –       |                                     | $      | 594,360                       |   | $ | 165,146 |   | $ | (16,911) |
|    (overdistributed) net investment         |
|    income of                                |
|                                                       |                                                                                                       |                            |               |                                |        |                                        |             |                                |               |                                          |        |                               |  |  |  |  |  |  |  |  |  |  |

 

 

 

***See Notes to Financial Statements***

 

66

 

----

**DAVIS SERIES,            INC.**                                                                                                                 **Statements of Changes in Net Assets**

|   | **For the year ended December 31, 2007** |
|--------|------------------------------------------|

 

|                                                  |                                                                                      | **Davis Opportunity Fund** |        | **Davis Government Bond Fund** |   | **Davis Government Money Market Fund** |        | **Davis****Financial****Fund** |       | **Davis Appreciation & Income Fund** |   | **Davis****Real Estate 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                         |                                                                                      | $                          | (7,161,629) |                           | $      | –                                |        | $                              | –    |                                     | $      | 1,174,639                     |   | $ | (47,692) |   | $ | (7,519,612) |
|    (overdistributed) net investment    |
|    income                                   |
|                                                       |                                                                                           |                            |             |                                |        |                                        |             |                                |            |                                          |        |                               |  |  |  |  |  |  |  |  |  |

 

 

 

 

 

***See Notes to Financial Statements***

 

67

 

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**DAVIS SERIES,            INC.**                                                                                                                              **Notes to Financial Statements**

|   | **December 31, 2008** |
|--------|-----------------------|

 

**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, insurance, and financial service 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 class are charged against the operations of that class. All classes have identical rights with respect to voting (exclusive of each Class’ distribution arrangement), liquidation, and distributions. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements.

**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            available are valued at their fair value. Securities whose values have been materially affected by what Davis Selected Advisers, L.P. (“Davis Advisors” or “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.

 

68

 

----

**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

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

 

**Fair Value Measurements****-**The Funds adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective January 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Funds would receive upon selling an investment in an orderly            transaction to an independent buyer in the principal or most advantageous market of the investment. FAS 157 established a three-tier hierarchy for measuring fair value of assets and liabilities. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

|   | § | Level 1 – quoted prices in active markets for identical securities |
|--------|--------|--------------------------------------------------------------------------|

|   | § | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Level 3 – significant unobservable inputs (including Fund’s own assumptions in determining the fair value of investments) |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Money market securities are valued using amortized cost, in accordance with rules under the 40 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in            an active market, such securities are reflected as Level 2.

The following is a summary of the inputs used as of December 31, 2008 in valuing each Fund’s investments carried at value:

|                                     | **Investment in Securities at Value** |        |
|------------------------------------------|---------------------------------------|-------------|
|                                     |                                  |        |   |   | **Davis** |   |   |   | **Davis** |   |   |   |
|                                     | **Davis**                             |        | **Davis** |   | **Government** |   | **Davis** |   | **Appreciation** |   | **Davis** |   |
|                                     | **Opportunity**                       |        | **Government** |   | **Money Market** |   | **Financial** |   | **& Income** |   | **Real Estate** |   |
|                                     | **Fund**                              |        | **Bond Fund** |   | **Fund** |   | **Fund** |   | **Fund** |   | **Fund** |   |
| Valuation inputs                         |                                  |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Level 1 – Quoted prices            | $                                     | 386,221,439 |   | $ | – |   | $ | – |   | $ | 446,591,358 |   | $ | 196,442,948 |   | $ | 228,675,198 |   |
| Level 2 – Other Significant        |                                  |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Observable Inputs                        |                                  | 64,291,557  | * |   | 148,633,345 |   |   | 369,250,809 |   |   | 63,049,473 | * |   | 177,551,265 |   |   | 39,918,492 | * |
| Level 3 – Significant Unobservable |                                  |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Inputs                                   |                                  | –     |   |   | – |   |   | – |   |   | – |   |   | – |   |   | – |   |
| Total                                    | $                                     | 450,512,996 |   | $ | 148,633,345 |   | $ | 369,250,809 |   | $ | 509,640,831 |   | $ | 373,994,213 |   | $ | 268,593,690 |   |
|                                     |                                  |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

* Includes certain securities trading primarily outside the U.S. whose value the Fund adjusted as a result of significant market movements following the close of local trading.

 

**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.

 

69

 

----

**DAVIS SERIES,            INC.**                                                                           **Notes            to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

**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 Funds’ 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, 2008, no provision for income tax would be required in the Funds’ financial statements. The Funds’ federal and state (Arizona and Maryland) 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. The earliest tax year that remains subject to examination by these jurisdictions is 2005. At December 31, 2008, Davis Government Bond Fund had approximately $494,000 of capital loss carryforward expire unutilized. At December 31, 2008, each fund had available for federal income tax purposes unused capital loss carryforwards, post October 2008 capital losses, and post October 2008 foreign currency losses as follows:

|         | **Capital Loss Carryforwards** |       |
|--------------|--------------------------------|------------|
|         |                           |       |   |   |   |   | **Davis** |   |   |   |
|         | **Davis**                      |       | **Davis** |   | **Davis** |   | **Appreciation** |   | **Davis** |   |
|         | **Opportunity**                |       | **Government** |   | **Financial** |   | **& Income** |   | **Real Estate** |   |
|         | **Fund**                       |       | **Bond Fund** |   | **Fund** |   | **Fund** |   | **Fund** |   |
| **Expiring** |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |   | – |   |   | – |   |   | – |   |
| 12/31/2016   |                           | 86,853,000 |   |   | – |   |   | 8,312,000 |   |   | 430,000 |   |   | 8,689,000 |   |
|         | $                              | 86,853,000 |   | $ | 4,215,000 |   | $ | 8,312,000 |   | $ | 430,000 |   | $ | 8,689,000 |   |

 

|                                 | **Post October**

**2008 Capital Losses**

**(expire**

**December 31, 2017)** |       | **Post October**

**2008 Foreign**

**Currency Losses**

**(deferred)** |   |
|--------------------------------------|--------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|--------|
| Davis Opportunity Fund               | $                                                                              | 21,862,000 |                                                                    | $      | 37,000 |   |
| Davis Government Bond Fund           |                                                                           | 236,000    |                                                                    |   | – |   |
| Davis Appreciation & Income Fund |                                                                           | 4,214,000  |                                                                    |   | – |   |
| Davis Real Estate Fund               |                                                                           | 704,000    |                                                                    |   | 17,000 |   |
|                                 |                                                                           |       |                                                                    |   |   |   |

**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.

 

70

 

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**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

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

**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/loss. 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) on investments may differ for financial statement and tax purposes primarily due            to differing treatments of wash sales, paydowns 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 in which 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, 2008, for Davis Opportunity Fund, amounts have been reclassified to reflect a            decrease in overdistributed net investment income of $5,038,482, an increase in accumulated net realized losses of $435,477, and a decrease in additional paid in capital of $4,603,005; for Davis Government Bond Fund, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $91,159, a decrease in accumulated net realized losses of $403,186, and a decrease in additional paid in capital of $494,345; for Davis Financial Fund, amounts have been            reclassified to reflect a decrease in undistributed net investment income of $179,284 and a corresponding decrease in accumulated net realized losses; for Davis Real Estate Fund, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $1,490,469, a decrease in accumulated net realized losses of $47,868, and a decrease in additional paid in capital of $1,538,337. The Funds’ net assets have not been affected by these            reclassifications.

 

71

 

----

**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

**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, 2008 and 2007, was as follows:

 

|                                 | **Ordinary****Income**                                                                                                     | **Long-Term****Capital Gain**                                                                                              | **Return of Capital**                                    |  

**Total**                                        |
|--------------------------------------|----------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|
|                                 |                                                                                                                       |                                                                                                                       |                                                     |                                                     |
| Davis Opportunity Fund               |                                                                                                                       |                                                                                                                       |                                                     |                                                     |
| 2008                                 | $                   – | $                   – | $        315,026 | $        315,026 |
| 2007                                 | 12,582,397                                                                                                                 | 68,648,185                                                                                                                 | –                                                  | 81,230,582                                               |
| Davis Government Bond Fund           |                                                                                                                       |                                                                                                                       |                                                     |                                                     |
| 2008                                 | 2,850,584                                                                                                                  | –                                                                                                                    | –                                                  | 2,850,584                                                |
| 2007                                 | 1,643,859                                                                                                                  | –                                                                                                                    | –                                                  | 1,643,859                                                |
| Davis Government Money Market Fund   |                                                                                                                       |                                                                                                                       |                                                     |                                                     |
| 2008                                 | 11,283,676                                                                                                                 | –                                                                                                                    | –                                                  | 11,283,676                                               |
| 2007                                 | 25,326,942                                                                                                                 | –                                                                                                                    | –                                                  | 25,326,942                                               |
| Davis Financial Fund                 |                                                                                                                       |                                                                                                                       |                                                     |                                                     |
| 2008                                 | 3,328,494                                                                                                                  | 47,350,703                                                                                                                 | –                                                  | 50,679,197                                               |
| 2007                                 | 1,674,670                                                                                                                  | 86,312,293                                                                                                                 | –                                                  | 87,986,963                                               |
| Davis Appreciation & Income Fund |                                                                                                                       |                                                                                                                       |                                                     |                                                     |
| 2008                                 | 13,570,626                                                                                                                 | –                                                                                                                    | –                                                  | 13,570,626                                               |
| 2007                                 | 28,017,614                                                                                                                 | 27,481,020                                                                                                                 | –                                                  | 55,498,634                                               |
| Davis Real Estate Fund               |                                                                                                                       |                                                                                                                       |                                                     |                                                     |
| 2008                                 | 2,908,014                                                                                                                  | 7,544,648                                                                                                                  | 6,033,154                                                | 16,485,816                                               |
| 2007                                 | 13,503,572                                                                                                                 | 137,902,182                                                                                                                | –                                                  | 151,405,754                                              |

 

 

As of December 31, 2008 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                                                 |   | $                               |  

–       |                                     | $      |  

–                    |   | $                                                       | 594,360      |                                 | $      | 165,146 |   | $ | – |   |
| Accumulated net realized

losses from investments and

foreign currency transactions |   |                            |  

(108,752,000) |                                     |   | (4,450,774)                        |   |                                                    | (8,312,394)  |                                 |   | (4,643,379) |   |   | (9,410,125) |   |
| Net unrealized appreciation

(depreciation) on investments                           |   |                            | (155,032,770)         |                                     |   | 1,389,921                          |   |                                                    | (55,324,365) |                                 |   | (291,923,884) |   |   | (208,312,528) |   |
| Total                                                                                |   | $                               | (263,784,770)         |                                     | $      | (3,060,853)                        |   | $                                                       | (63,042,399) |                                 | $      | (296,402,117) |   | $ | (217,722,653) |   |

 

 

72

 

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**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

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

Advisory fees are paid monthly to the Adviser. The annual rate 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 annual rate 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, 2008, approximated 0.65%, 0.47%, 0.65%, 0.66%, and 0.69% 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 annual rate for the Davis Government Bond Fund is 0.30% of average net assets.

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, 2008 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 $73,121, $9,779, $15,208, $75,939, $51,061, and $45,877, 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 also serves as the Funds’ custodian. The Adviser is also paid for certain accounting services. The fee for these services for the year ended December 31, 2008 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 $9,504, $2,832, $17,836, $10,168, $9,164, and $7,832, 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.

**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, 2008, Davis Distributors, LLC, the Funds’ Underwriter (“Underwriter” or “Distributor”) received $234,034, $82,951, $1,267,228, $302,789, and $261,679 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 $34,219, $10,008, $194,123, $47,696, and $40,738 were retained by the Underwriter and the remaining $199,815, $72,943, $1,073,105, $255,093, and $220,941 were 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, 2008 was $1,094,774, $129,973, $1,243,476, $919,416, and $892,564, respectively.

 

 

73

 

 

----

| **DAVIS SERIES, INC.** | **Notes to Financial Statements – (Continued)** |
|------------------------|-------------------------------------------------------|

|   | **December 31, 2008** |
|--------|-----------------------|

 

**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**

 

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) pays 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 Financial Industry Regulatory Authority, Inc. ("FINRA"), 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 FINRA rule also limits the aggregate amount each Fund may pay for distribution to 6.25% of gross Fund sales since inception of the            Distribution Plan, plus interest at 1.00% 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, 2008, 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 $291,097, $107,410, $223,274, $231,168, and $122,424, respectively and service fees of $96,509, $36,123, $73,658,            $76,905, and $40,601, respectively.

Commission advances by the Distributor during the year ended December 31, 2008 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 $52,890, $15,926, $221,830, $62,436, and $22,238, respectively, all of which were 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 $2,646,005, $5,792,706, $29,800,160, $8,979,425, and $17,149,306, 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 chargesand the amounts, if any, timing and condition of such payments are solely within the discretion of the Directors who are not 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, 2008, 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 $103,850, $40,488, $54,014, $113,122, and $34,372, 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) pays 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 FINRA, 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.

 

74

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**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

| **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)**

During the year ended December 31, 2008, 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 $1,470,586, $190,214, $594,363, $985,913, and $433,847, respectively, and service fees of $490,195, $63,404,            $198,121, $328,637, and $144,615, respectively.

Commission advances by the Distributor during the year ended December 31, 2008, 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 $134,727, $23,478, $364,479, $143,292, and $53,756, respectively, all of which were 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 $18,015,134, $239,864, $22,565,179, $13,089,798, and $11,393,600, 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 chargesand the amounts, if any, timing and condition of such payments are solely within the discretion of the Directors who are not 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, 2008, the Distributor received $38,177, $10,207, $41,611, $44,692, and $7,010 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, 2008 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 | $               | 218,931,677 |           | $      | 168,472,854   |   | $                | 136,978,250 |            | $      | 182,042,330 |   | $ | 209,552,667 |   |
| Proceeds of sales |            | 459,621,749 |           |   | 58,130,380    |   |             | 67,100,056  |            |   | 333,254,654 |   |   | 276,489,990 |   |

 

 

75

 

 

----

**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

**NOTE 5 – CAPITAL STOCK**

At December 31, 2008, 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 4.2 billion shares are designated to the Davis Government Money Market Fund.            Transactions in capital stock were as follows:

 

| **CLASS A**                    | **Year ended December 31, 2008** |
|--------------------------------|----------------------------------|
|                           |                             |   |   |   | **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                    |                             | 4,241,650 |   |   | 14,185,191 |   |   | 716,678,185 |   |   | 6,570,444 |   |   | 3,720,547 |   |   | 2,538,842 |   |
| Shares issued in reinvestment  |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of distributions               |                             | 9,151 |   |   | 284,542 |   |   | 10,176,283 |   |   | 1,850,106 |   |   | 328,720 |   |   | 717,064 |   |
|                           |                             | 4,250,801 |   |   | 14,469,733 |   |   | 726,854,468 |   |   | 8,420,550 |   |   | 4,049,267 |   |   | 3,255,906 |   |
| Shares redeemed                |                             | (11,981,317 | ) |   | (3,081,760 | ) |   | (954,704,951 | ) |   | (5,010,033 | ) |   | (10,063,513 | ) |   | (5,084,748 | ) |
| Net increase (decrease)        |                             | (7,730,516 | ) |   | 11,387,973 |   |   | (227,850,483 | ) |   | 3,410,517 |   |   | (6,014,246 | ) |   | (1,828,842 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from shares sold      | $                                | 77,804,558 |   | $ | 79,604,585 |   | $ | 716,678,185 |   | $ | 212,189,593 |   | $ | 88,397,474 |   | $ | 67,179,339 |   |
| Proceeds from shares issued in |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment of distributions  |                             | 111,144 |   |   | 1,597,296 |   |   | 10,176,283 |   |   | 32,061,220 |   |   | 7,822,616 |   |   | 11,673,045 |   |
|                           |                             | 77,915,702 |   |   | 81,201,881 |   |   | 726,854,468 |   |   | 244,250,813 |   |   | 96,220,090 |   |   | 78,852,384 |   |
| Cost of shares redeemed        |                             | (235,080,077 | ) |   | (17,297,098 | ) |   | (954,704,951 | ) |   | (146,974,242 | ) |   | (233,418,067 | ) |   | (126,407,004 | ) |
| Net increase (decrease)        | $                                | (157,164,375 | ) | $ | 63,904,783 |   | $ | (227,850,483 | ) | $ | 97,276,571 |   | $ | (137,197,977 | ) | $ | (47,554,620 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

| **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 | ) |
| Net increase                   | $                                | 55,965,384 |   | $ | 4,710,947 |   | $ | 31,712,702 |   | $ | 35,957,027 |   | $ | 210,820,392 |   | $ | 86,325,671 |   |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

 

76

 

 

----

**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

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

 

| **CLASS B**                    | **Year ended December 31, 2008** |
|--------------------------------|----------------------------------|
|                           |                             |   |   |   | **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                    |                             | 219,868 |   |   | 3,058,175 |   |   | 21,248,189 |   |   | 235,172 |   |   | 211,372 |   |   | 46,718 |   |
| Shares issued in reinvestment  |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of distributions               |                             | – |   |   | 54,171 |   |   | 550,582 |   |   | 96,189 |   |   | 14,925 |   |   | 25,502 |   |
|                           |                             | 219,868 |   |   | 3,112,346 |   |   | 21,798,771 |   |   | 331,361 |   |   | 226,297 |   |   | 72,220 |   |
| Shares redeemed                |                             | (1,148,802 | ) |   | (2,057,821 | ) |   | (14,299,474 | ) |   | (899,439 | ) |   | (750,157 | ) |   | (392,479 | ) |
| Net increase (decrease)        |                             | (928,934 | ) |   | 1,054,525 |   |   | 7,499,297 |   |   | (568,078 | ) |   | (523,860 | ) |   | (320,259 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from shares sold      | $                                | 3,188,326 |   | $ | 17,143,110 |   | $ | 21,248,189 |   | $ | 6,841,592 |   | $ | 4,693,748 |   | $ | 1,286,389 |   |
| Proceeds from shares issued in |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment of distributions  |                             | – |   |   | 303,337 |   |   | 550,582 |   |   | 1,453,409 |   |   | 357,368 |   |   | 372,479 |   |
|                           |                             | 3,188,326 |   |   | 17,446,447 |   |   | 21,798,771 |   |   | 8,295,001 |   |   | 5,051,116 |   |   | 1,658,868 |   |
| Cost of shares redeemed        |                             | (19,775,056 | ) |   | (11,514,539 | ) |   | (14,299,474 | ) |   | (26,264,986 | ) |   | (17,538,113 | ) |   | (10,218,903 | ) |
| Net increase (decrease)        | $                                | (16,586,730 | ) | $ | 5,931,908 |   | $ | 7,499,297 |   | $ | (17,969,985 | ) | $ | (12,486,997 | ) | $ | (8,560,035 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

| **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 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

 

 

77

 

 

----

**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

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

 

| **CLASS C**                    | **Year ended December 31, 2008** |
|--------------------------------|----------------------------------|
|                           |                             |   |   |   | **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                    |                             | 2,384,398 |   |   | 7,456,659 |   |   | 40,767,262 |   |   | 1,494,450 |   |   | 1,459,878 |   |   | 283,618 |   |
| Shares issued in reinvestment  |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of distributions               |                             | – |   |   | 105,433 |   |   | 390,667 |   |   | 354,966 |   |   | 68,834 |   |   | 97,645 |   |
|                           |                             | 2,384,398 |   |   | 7,562,092 |   |   | 41,157,929 |   |   | 1,849,416 |   |   | 1,528,712 |   |   | 381,263 |   |
| Shares redeemed                |                             | (5,384,999 | ) |   | (3,252,106 | ) |   | (22,036,611 | ) |   | (895,809 | ) |   | (2,598,830 | ) |   | (904,882 | ) |
| Net increase (decrease)        |                             | (3,000,601 | ) |   | 4,309,986 |   |   | 19,121,318 |   |   | 953,607 |   |   | (1,070,118 | ) |   | (523,619 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from shares sold      | $                                | 35,167,600 |   | $ | 41,908,139 |   | $ | 40,767,262 |   | $ | 42,628,926 |   | $ | 30,224,222 |   | $ | 7,614,962 |   |
| Proceeds from shares issued in |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment of distributions  |                             | – |   |   | 592,176 |   |   | 390,667 |   |   | 5,487,859 |   |   | 1,661,484 |   |   | 1,433,968 |   |
|                           |                             | 35,167,600 |   |   | 42,500,315 |   |   | 41,157,929 |   |   | 48,116,785 |   |   | 31,885,706 |   |   | 9,048,930 |   |
| Cost of shares redeemed        |                             | (92,395,435 | ) |   | (18,254,845 | ) |   | (22,036,611 | ) |   | (23,117,853 | ) |   | (57,877,324 | ) |   | (21,483,555 | ) |
| Net increase (decrease)        | $                                | (57,227,835 | ) | $ | 24,245,470 |   | $ | 19,121,318 |   | $ | 24,998,932 |   | $ | (25,991,618 | ) | $ | (12,434,625 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

| **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 | ) |
|                           |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

 

78

 

 

----

**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

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

 

| **CLASS Y**                   | **Year ended December 31, 2008** |
|-------------------------------|----------------------------------|
|                          |                             |   |   |   | **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                   |                             | 1,761,724 |   |   | 311,451 |   |   | 67,227 |   |   | 320,379 |   |   | 1,032,931 |   |   | 531,932 |   |
| Shares issued in reinvestment |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of distributions              |                             | 11,355 |   |   | 4,518 |   |   | 2,541 |   |   | 45,708 |   |   | 79,066 |   |   | 108,453 |   |
|                          |                             | 1,773,079 |   |   | 315,969 |   |   | 69,768 |   |   | 366,087 |   |   | 1,111,997 |   |   | 640,385 |   |
| Shares redeemed               |                             | (1,857,819 | ) |   | (102,944 | ) |   | (74,920 | ) |   | (134,581 | ) |   | (1,789,496 | ) |   | (628,372 | ) |
| Net increase (decrease)       |                             | (84,740 | ) |   | 213,025 |   |   | (5,152 | ) |   | 231,506 |   |   | (677,499 | ) |   | 12,013 |   |
|                          |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from shares sold     | $                                | 34,500,987 |   | $ | 1,764,983 |   | $ | 67,227 |   | $ | 10,700,917 |   | $ | 25,566,795 |   | $ | 13,298,230 |   |
| Proceeds from shares          |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| issued in reinvestment        |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of distributions              |                             | 141,710 |   |   | 25,562 |   |   | 2,541 |   |   | 809,954 |   |   | 1,856,195 |   |   | 1,821,122 |   |
|                          |                             | 34,642,697 |   |   | 1,790,545 |   |   | 69,768 |   |   | 11,510,871 |   |   | 27,422,990 |   |   | 15,119,352 |   |
| Cost of shares redeemed       |                             | (36,405,303 | ) |   | (581,248 | ) |   | (74,920 | ) |   | (4,032,685 | ) |   | (41,669,303 | ) |   | (13,400,338 | ) |
| Net increase (decrease)       | $                                | (1,762,606 | ) | $ | 1,209,297 |   | $ | (5,152 | ) | $ | 7,478,186 |   | $ | (14,246,313 | ) | $ | 1,719,014 |   |
|                          |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

| **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 | ) |
|                          |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

**NOTE 6 – EXPENSES PAID INDIRECTLY**

Under an agreement with State Street Bank, custodian fees are reduced for earnings on cash balances maintained at the custodian by the Funds. Such reductions amounted to $711, $269, $27, $1,698, $975, and $1,160 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, 2008.

**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, 2008, Davis Financial Fund had no borrowings outstanding. For the year ended December 31, 2008, the average daily loan balance was $606,175 at an average interest rate of 1.38%. Davis Financial Fund had gross borrowings of $19,057,000 and gross repayments of $37,578,000 during the year ended December 31,            2008. The maximum amount of borrowing outstanding at any month end was $3,760,000 during the year ended December 31, 2008. 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, 2008.

 

79

 

 

----

**DAVIS SERIES,            INC.**                                                                                                     **Notes to Financial Statements – (Continued)**

|   | **December 31, 2008** |
|--------|-----------------------|

 

**NOTE 8 – 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 $9,413,550 or 2.09% of the Fund’s net assets as of December 31, 2008. The aggregate value of illiquid securities in Davis Financial Fund amounted to $18,468,000 or 3.64% of the Fund’s net assets as of December 31, 2008. The aggregate value of restricted securities in Davis Financial Fund amounted to $1,918,271 or 0.38% of the Fund’s net assets as of December 31, 2008. The aggregate value of illiquid securities in            Davis Appreciation & Income Fund amounted to $12,837,459 or 3.43% of the Fund’s net assets as of December 31, 2008. Information regarding illiquid and restricted securities is as follows:

 

| Fund               |   | Security                   | Acquisition

Date | Principal |       | Units/

Shares |    | Cost per

Unit/

Share |   | Valuation per Unit/Share

as of

December 31, 2008 |
|--------------------|--------|----------------------------|-------------------|-----------|------------|----------------|---------|------------------------|--------|----------------------------------------------------|
|               |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Davis              |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Opportunity        |   | Oaktree Capital Group      |              |      |       |           |    |                   |   |                                               |   |   |   |
| Fund               |   | LLC, Class A               | 05/21/07          |      | NA         |           | 495,450 |                   | $      | 33.41                                              |   | $ | 19.00 |
|               |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Davis Financial    |   | Oaktree Capital Group      |              |      |       |           |    |                   |   |                                               |   |   |   |
| Fund               |   | LLC, Class A               | 05/21/07          |      | NA         |           | 972,000 |                   | $      | 24.20                                              |   | $ | 19.00 |
|               |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Davis Financial    |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Fund               |   | RHJ International, 144A    | 06/04/07          |      | NA         |           | 396,550 |                   | $      | 19.64                                              |   | $ | 4.84 |
|               |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Davis              |   | News America Inc.,         |              |      |       |           |    |                   |   |                                               |   |   |   |
| Appreciation & |   | Conv. Notes, Zero          |              |      |       |           |    |                   |   |                                               |   |   |   |
| Income Fund        |   | coupon, 3.38%, 02/28/21    | 10/07/03          | $         | 16,050,000 |           | 160,500 |                   | $      | 66.52                                              |   | $ | 60.36 |
|               |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Davis              |   |                       |              |      |       |           |    |                   |   |                                               |   |   |   |
| Appreciation & |   | Thornburg Mortgage, Inc.,  |              |      |       |           |    |                   |   |                                               |   |   |   |
| Income Fund        |   | Sr. Notes, 8.00%, 05/15/13 | 10/22/07          | $         | 14,000,000 |           | 140,000 |                   | $      | 87.20                                              |   | $ | 22.50 |

 

 

80

 

 

----

**DAVIS SERIES, INC.**

 

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 12/31/2008 | $                                                     | 25.19                                    | $ | 0.09 | 3 | $ | (11.35) |   | $ | (11.26 | ) |
|                                    | 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 |   |
| **Davis Opportunity Fund Class B:**     |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                    | Year ended 12/31/2008 |                                                  | 21.89                                    |   | (0.07 | )3 |   | (9.82) |   |   | (9.89 | ) |
|                                    | 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 |   |
| **Davis Opportunity Fund Class C:**     |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                    | Year ended 12/31/2008 |                                                  | 22.97                                    |   | (0.05 | )3 |   | (10.32) |   |   | (10.37 | ) |
|                                    | 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 |   |
| **Davis Opportunity Fund Class Y:**     |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                    | Year ended 12/31/2008 |                                                  | 25.94                                    |   | 0.17 | 3 |   | (11.73) |   |   | (11.56 | ) |
|                                    | 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 |   |
| **Davis Government Bond Fund Class A:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                    | Year ended 12/31/2008 |                                                  | 5.60                                     |   | 0.19 |   |   | 0.05 |   |   | 0.24 |   |
|                                    | 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 |   |
| **Davis Government Bond Fund Class B:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                    | Year ended 12/31/2008 |                                                  | 5.58                                     |   | 0.15 |   |   | 0.06 |   |   | 0.21 |   |
|                                    | 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 | ) |
|                                    |                  |                                                  |                                     |   |   |   |   |   |   |   |   |   |

 

81

 

 

----

|   | **Financial Highlights** |
|--------|--------------------------|

 

 

 

| 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                              |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $                                    | –                           |                                             | $                                             | –           |                | $ | – |   | $ | – |   | $ | (0.01 | ) | $ | (0.01) |   | $ | 13.92 | (44.71 | )% | $ | 266,525 | 1.15 | % | 1.15 | % | 0.47 | % |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | –                           |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | – |   |   | 12.00 | (45.18 | ) |   | 21,951 | 2.00 |   | 2.00 |   | (0.38 | ) |
|                                 | –                           |                                             |                                          | (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 | ) |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | –                           |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | – |   |   | 12.60 | (45.15 | ) |   | 119,676 | 1.91 |   | 1.91 |   | (0.29 | ) |
|                                 | –                           |                                             |                                          | (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 | ) |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | –                           |                                             |                                          | –           |                |   | – |   |   | – |   |   | (0.07 | ) |   | (0.07) |   |   | 14.31 | (44.54 | ) |   | 42,119 | 0.85 |   | 0.85 |   | 0.77 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.19)                            |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.19) |   |   | 5.65 | 4.38 |   |   | 91,852 | 0.87 |   | 0.87 |   | 3.29 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.15)                            |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.15) |   |   | 5.64 | 3.77 |   |   | 16,442 | 1.69 |   | 1.69 |   | 2.47 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

 

82

 

 

----

**DAVIS SERIES, INC.**

 

 

 

|                                                          |                  |                                                  | 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 12/31/2008 | $                                                     | 5.60                                     | $ | 0.15 |   | $ | 0.05 |   | $ | 0.20 |   |
|                                                          | 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 | ) |
| **Davis Government Bond Fund Class Y:**                       |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                                          | Year ended 12/31/2008 |                                                  | 5.64                                     |   | 0.20 |   |   | 0.05 |   |   | 0.25 |   |
|                                                          | 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 |   |
| **Davis Government Money Market Fund Class A, B, C & Y:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                                          | Year ended 12/31/2008 |                                                  | 1.000                                    |   | 0.022 |   |   | – |   |   | 0.022 |   |
|                                                          | 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 |   |
| **Davis Financial Fund Class A:**                             |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                                          | Year ended 12/31/2008 |                                                  | 40.71                                    |   | 0.16 | 3 |   | (19.02) |   |   | (18.86 | ) |
|                                                          | 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 |   |
| **Davis Financial Fund Class B:**                             |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                                          | Year ended 12/31/2008 |                                                  | 36.03                                    |   | (0.14 | ) 3 |   | (16.75) |   |   | (16.89 | ) |
|                                                          | 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 |   |
| **Davis Financial Fund Class C:**                             |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                                          | Year ended 12/31/2008 |                                                  | 36.77                                    |   | (0.11 | )3 |   | (17.11) |   |   | (17.22 | ) |
|                                                          | 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 |   |
|                                                          |                  |                                                  |                                     |   |   |   |   |   |   |   |   |   |

 

83

 

 

----

|   | **Financial Highlights – (Continued)** |
|--------|----------------------------------------------|

 

 

 

| 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                              |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $                                    | (0.15)                            |                                             | $                                             | –           |                | $ | – |   | $ | – |   | $ | – |   | $ | (0.15) |   | $ | 5.65 | 3.63 | % | $ | 39,261 | 1.63 | % | 1.63 | % | 2.53 | % |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.20)                            |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.20) |   |   | 5.69 | 4.43 |   |   | 1,626 | 0.82 |   | 0.82 |   | 3.34 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.022)                           |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.022) |   |   | 1.000 | 2.26 |   |   | 395,211 | 0.57 |   | 0.57 |   | 2.30 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.16)                            |                                             |                                          | (1.97)            |                |   | – |   |   | – |   |   | – |   |   | (2.13) |   |   | 19.72 | (45.62 | ) |   | 425,854 | 1.06 |   | 1.06 |   | 0.50 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | –                           |                                             |                                          | (1.97)            |                |   | – |   |   | – |   |   | – |   |   | (1.97) |   |   | 17.17 | (46.13 | ) |   | 14,236 | 2.08 |   | 2.08 |   | (0.52 | ) |
|                                 | –                           |                                             |                                          | (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 | ) |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | –                           |                                             |                                          | (1.97)            |                |   | – |   |   | – |   |   | – |   |   | (1.97) |   |   | 17.58 | (46.09 | ) |   | 58,474 | 1.94 |   | 1.94 |   | (0.38 | ) |
|                                 | –                           |                                             |                                          | (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 | ) |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

 

 

84

 

 

 

----

**DAVIS SERIES, INC.**

 

 

 

|                                              |                  |                                                  | 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 12/31/2008 | $                                                     | 41.57                                    | $ | 0.20 | 3 | $ | (19.44) |   | $ | (19.24) |   |
|                                              | 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 |   |
| **Davis Appreciation & Income Fund Class A:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                              | Year ended 12/31/2008 |                                                  | 28.21                                    |   | 0.54 | 3 |   | (12.06) |   |   | (11.52) |   |
|                                              | 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 |   |
| **Davis Appreciation & Income Fund Class B:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                              | Year ended 12/31/2008 |                                                  | 27.90                                    |   | 0.33 | 3 |   | (11.92) |   |   | (11.59) |   |
|                                              | 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 |   |
| **Davis Appreciation & Income Fund Class C:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                              | Year ended 12/31/2008 |                                                  | 28.34                                    |   | 0.35 | 3 |   | (12.10) |   |   | (11.75) |   |
|                                              | 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 |   |
| **Davis Appreciation & Income Fund Class Y:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                              | Year ended 12/31/2008 |                                                  | 28.33                                    |   | 0.61 | 3 |   | (12.11) |   |   | (11.50) |   |
|                                              | 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 |   |
| **Davis Real Estate Fund Class A:**               |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                              | Year ended 12/31/2008 |                                                  | 30.50                                    |   | 0.42 | 3 |   | (14.70) |   |   | (14.28) |   |
|                                              | 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 |   |
|                                              |                  |                                                  |                                     |   |   |   |   |   |   |   |   |   |

 

 

85

 

 

----

|   | **Financial Highlights – (Continued)** |
|--------|----------------------------------------------|

 

 

 

| 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                              |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $                                    | (0.20)                            |                                             | $                                             | (1.97)            |                | $ | – |   | $ | – |   | $ | – |   | $ | (2.17) |   | $ | 20.16 | (45.56) | % | $ | 8,958 | 0.97 | % | 0.97 | % | 0.59 | % |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.54)                            |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.54) |   |   | 16.15 | (41.43) |   |   | 227,940 | 1.07 |   | 1.07 |   | 2.24 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.33)                            |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.33) |   |   | 15.98 | (41.92) |   |   | 16,891 | 1.93 |   | 1.93 |   | 1.38 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.35)                            |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.35) |   |   | 16.24 | (41.85) |   |   | 79,699 | 1.87 |   | 1.87 |   | 1.44 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.61)                            |                                             |                                          | –           |                |   | – |   |   | – |   |   | – |   |   | (0.61) |   |   | 16.22 | (41.25) |   |   | 49,314 | 0.79 |   | 0.79 |   | 2.52 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.09)                            |                                             |                                          | (0.51)            |                |   | – |   |   | – |   |   | (0.33) |   |   | (0.93) |   |   | 15.29 | (46.89) |   |   | 202,878 | 1.23 |   | 1.23 |   | 1.62 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

 

86

 

 

----

**DAVIS SERIES, INC.**

 

 

 

|                                |                  |                                                  | 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 12/31/2008 | $                                                     | 30.29                                    | $ | 0.21 | 3 | $ | (14.63) |   | $ | (14.42) |   |
|                                | 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 |   |
| **Davis Real Estate Fund Class C:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                | Year ended 12/31/2008 |                                                  | 30.63                                    |   | 0.24 | 3 |   | (14.79) |   |   | (14.55) |   |
|                                | 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 |   |
| **Davis Real Estate Fund Class Y:** |                  |                                                  |                                     |   |   |   |   |   |   |   |   |
|                                | Year ended 12/31/2008 |                                                  | 30.82                                    |   | 0.50 | 3 |   | (14.85) |   |   | (14.35) |   |
|                                | 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 |   |

 

 

 

 

| **Portfolio Turnover2**              |   |   |                        |   |
|--------------------------------------|--------|--------|-----------------------------|--------|
| (for all classes of shares)          |   |   | **Year ended December 31,** |   |
|                                 |   |   | **2008**                    |   | **2007** |   | **2006** |   | **2005** |   | **2004** |   |
| Davis Opportunity Fund               |   |   | 29.36                       | %      |   | 37.05 | % |   | 40.26 | % |   | 35.77 | % |   | 22.22 | % |   |
| Davis Government Bond Fund           |   |   | 66.56                       |   |   | 60.23 |   |   | 64.94 |   |   | 55.46 |   |   | 165.17 |   |   |
| Davis Financial Fund                 |   |   | 9.02                        |   |   | 15.11 |   |   | 4.20 |   |   | 5.17 |   |   | – |   |   |
| Davis Appreciation & Income Fund |   |   | 27.60                       |   |   | 23.26 |   |   | 25.33 |   |   | 16.64 |   |   | 21.26 |   |   |
| Davis Real Estate Fund               |   |   | 43.68                       |   |   | 46.37 |   |   | 37.97 |   |   | 24.86 |   |   | 31.37 |   |   |
|                                 |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

 

 

87

 

 

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                                                                                                                                                                       **Financial Highlights – (Continued)**

 

 

 

| 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                              |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $                                    | (0.05)                            |                                             | $                                             | (0.51)            |                | $ | – |   | $ | – |   | $ | (0.18) |   | $ | (0.74) |   | $ | 15.13 | (47.41) | % | $ | 7,581 | 2.13 | % | 2.13 | % | 0.72 | % |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.05)                            |                                             |                                          | (0.51)            |                |   | – |   |   | – |   |   | (0.20) |   |   | (0.76) |   |   | 15.32 | (47.33) |   |   | 28,789 | 2.00 |   | 2.00 |   | 0.85 |   |
|                                 | (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 |   |
|                                 |                              |                                             |                                          |              |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 | (0.10)                            |                                             |                                          | (0.51)            |                |   | – |   |   | – |   |   | (0.40) |   |   | (1.01) |   |   | 15.46 | (46.75) |   |   | 29,282 | 0.89 |   | 0.89 |   | 1.96 |   |
|                                 | (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  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***

88

 

 

----

| **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, 2008, 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, 2008, 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, 2008, 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 24, 2009

 

89

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                                     **Fund Information**

 

**Federal Income Tax Information*****(Unaudited)***

In early 2009, shareholders will receive information regarding all dividends and distributions paid to them by the Funds during calendar year 2008. 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 2008 with their 2008 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**

None of the dividends paid by the Fund during the calendar year ended 2008 are eligible for the corporate dividend-received deduction.

For the calendar year ended 2008, none of the dividends paid by the Fund constitute qualified dividend income for federal income tax purposes.

**Davis Government Bond Fund**

During the calendar year 2008, $2,850,584 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 2008 are eligible for the corporate dividend-received deduction.

For the calendar year ended 2008, 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 2008, $11,283,676 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 2008 are eligible for the corporate dividend-received deduction.

For the calendar year ended 2008, none of the dividends paid by the Fund constitute qualified dividend income for federal income tax purposes.

**Davis Financial Fund**

During the calendar year 2008, the Fund declared and paid long-term capital gain distributions in the amount of $47,350,703.

During the calendar year 2008, $3,328,494 of dividends paid by the Fund constituted income dividends for federal income tax purposes. The Fund designates $3,328,494 or 100% as income qualifying for the corporate dividends-received deduction.

For the calendar year 2008, certain dividends paid by the Fund constitute qualified dividend income for federal income tax purposes. The Fund designates $3,328,494 or 100% as qualified dividend income.

**Davis Appreciation & Income Fund**

During the calendar year 2008, $13,570,626 of dividends paid by the Fund constituted income dividends for federal income tax purposes. The Fund designates $7,714,443 or 57% as income qualifying for the corporate dividends-received deduction.

For the calendar year 2008, certain dividends paid by the Fund constitute qualified dividend income for federal income tax purposes. The Fund designates $7,827,267 or 58% as qualified dividend income.

 

90

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                           **Fund Information – (Continued)**

 

**Federal Income Tax Information*****(Unaudited)*****– (Continued)**

**Davis Real Estate Fund**

During the calendar year 2008, the Fund declared and paid long-term capital gain distributions in the amount of $7,544,648.

During the calendar year 2008, $2,908,014 of dividends paid by the Fund constituted income dividends for federal income tax purposes. The Fund designates $1,667,746 or 57% as income qualifying for the corporate dividends-received deduction.

For the calendar year 2008, certain dividends paid by the Fund constitute qualified dividend income for federal income tax purposes. The Fund designates $1,928,595 or 66% as qualified dividend income.

 

**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 information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

91

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                                           **Directors and Officers**

 

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 85756. Each Director serves until their retirement, resignation, death or removal. Subject to exceptions and exemptions, which may be granted by the Independent Directors, 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).

 

| **Name**

(birthdate) | **Position(s) Held With Fund** | **Term of Office and Length of Time Served** | **Principal Occupation(s) During Past Five Years** | **Number of Portfolios in Fund Complex Overseen by Director** | **Other Directorships 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 & 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 (a REIT); 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

(retired 12/31/08) | Director since 1986 | Chairman, Santa Fe Center Enterprises, Inc. (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                                                                                                                                                                                                                          |
|                                |                         |                |                                                                                                                                                                                                                                            |       |                                                                                                                                                                                                                          |
| **Samuel H. Iapalucci**

(7/19/52)  | Director                     | Director since 2006 | Former 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, 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-services provider); former Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a REIT).                                     | 13         | Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering); Director, Fifth Third Bancorp (diversified financial services). |

 

|   |  |
|--------|--|

 

 

 

92

 

 

----

**DAVIS SERIES,            INC.                                                                                                                 **Directors and Officers – (Continued)****

** **

| **Name**

(birthdate) | **Position(s) Held With Fund** | **Term of Office and Length of Time Served** | **Principal Occupation(s) During Past Five Years** | **Number of Portfolios in Fund Complex Overseen by Director** | **Other Directorships 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.                                                                      | 9      | Director, the Selected Funds (consisting of three portfolios) since 1998. |

 

*    Jeremy H. Biggs and Andrew A. 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.

 

93

 

 

----

**DAVIS SERIES,            INC.**                                                                                                                 **Directors and Officers – (Continued)**

 

***Officers***

 

**Andrew A. Davis (born 6/25/63, Davis Funds officer since 1997).**See description in the section on Inside Directors.

**Christopher C. Davis (born 7/13/65, Davis Funds officer since 1997).**President or Vice President of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Chairman, Davis Selected Advisers, L.P., 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); Director of the Selected Funds (consisting of three portfolios), Davis Variable Account Fund, Inc. (consisting of three portfolios), Davis New York Venture Fund, Inc. (consisting of four portfolios); Director of Washington Post Co. (newspaper publisher).

**Kenneth C. Eich (born 8/14/53, Davis Funds officer since 1997).**Executive Vice President and Principal Executive Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Chief Operating Officer, Davis Selected Advisers, L.P., and also serves as an executive            officer in certain companies affiliated with the Adviser.

**Douglas A. Haines (born 3/4/71, Davis Funds officer since 2004).**Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Director of            Fund Accounting, Davis Selected Advisers, L.P.

**Sharra L. Haynes (born 9/25/66, Davis Funds officer since 1997).**Vice President, Chief Compliance Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Chief Compliance Officer, Davis Selected Advisers, L.P., and also serves as an executive            officer in certain companies affiliated with the Adviser.

**Thomas D. Tays (born 3/7/57, Davis Funds officer since 1997).**Vice President and Secretary of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President, Chief Legal Officer and Secretary, Davis Selected Advisers, L.P., and also serves as an executive officer            in certain companies affiliated with the Adviser.

**Arthur Don (born 9/24/53, Davis Funds officer since 1991).**Assistant Secretary (for clerical purposes only) of each of the Davis Funds and Selected Funds; Partner, Seyfarth Shaw LLP (a law firm); counsel to the Independent Directors and the Davis Funds.

 

 

 

94

 

 

----

**DAVIS SERIES, INC.**

 

 

| **Investment Adviser**                                                         |   |
|--------------------------------------------------------------------------------|--------|
| Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”) |   |
| 2949 East Elvira Road, Suite 101                                               |   |
| Tucson, Arizona 85756                                                          |   |
| (800) 279-0279                                                                 |   |
|                                                                           |   |
| **Distributor**                                                                |   |
| Davis Distributors, LLC                                                        |   |
| 2949 East Elvira Road, Suite 101                                               |   |
| Tucson, Arizona 85756                                                          |   |
|                                                                           |   |
| **Transfer Agent**                                                             |   |
| Boston Financial Data Services, Inc                                            |   |
| c/o The Davis Funds                                                            |   |
| P.O. Box 8406                                                                  |   |
| Boston, Massachusetts 02266-8406                                               |   |
|                                                                           |   |
| Overnight Address:                                                             |   |
| 30 Dan Road                                                                    |   |
| Canton, Massachusetts 02021-2809                                               |   |
|                                                                           |   |
| **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.***

 

 

 

 

 

 

 

 

----

**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.

 

No waivers were granted to this code of ethics during the period covered by this report.

 

**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, 2008 and December 31, 2007 were $147,600                            and $138,000, 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, 2008 and December 31, 2007 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, 2008 and December 31, 2007 were $41,700 and $40,320, 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, 2008 and December 31, 2007 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 December 31, 2008 and December 31, 2007. 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-3 (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 6, 2009

 

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 6, 2009

 

| By | /s/ Douglas A. Haines |
|----|-----------------------|

|   | Douglas A. Haines |
|--------|-------------------|

|   | Principal Financial Officer |
|--------|-----------------------------|

 

Date: March 6, 2009