**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC  20549**

**FORM N-CSR**

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANANGEMENT INVESTMENT COMPANY

 

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

**DAVIS SERIES, INC.**

(Exact name of registrant as specified in charter)

2949 East Elvira Road, Suite 101

Tucson, AZ  85706

(Address of principal executive offices)

 

Thomas D. Tays

Davis Selected Advisers, L.P.

2949 East Elvira Road, Suite 101

Tucson, AZ  85706

(Name and address of agent for service)

 

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

**Date of fiscal year end: December 31, 2006**

**Date of reporting period: June 30, 2006**

 

____________________

 

 

 

 

**ITEM 1.  REPORT TO STOCKHOLDERS**

 

 

 

 

**Table of Contents**

 

Shareholder Letter

2

 

 

Management's Discussion and Analysis:

 

Davis Opportunity Fund

3

Davis Government Bond Fund

4

Davis Financial Fund

4

Davis Appreciation & Income Fund

5

Davis Real Estate Fund

6

 

 

Fund Overview:

 

Davis Opportunity Fund

11

Davis Government Bond Fund

12

Davis Government Money Market Fund

13

Davis Financial Fund

14

Davis Appreciation & Income Fund

15

Davis Real Estate Fund

16

 

 

Expense Example

17

 

 

Schedule of Investments:

 

Davis Opportunity Fund

20

Davis Government Bond Fund

25

Davis Government Money Market Fund

27

Davis Financial Fund

30

Davis Appreciation & Income Fund

32

Davis Real Estate Fund

36

 

 

Statements of Assets and Liabilities

39

 

 

Statements of Operations

41

 

 

Statements of Changes in Net Assets

42

 

 

Notes to Financial Statements

44

 

 

Financial Highlights

57

 

 

Fund Information

65

 

 

Director Approval of Advisory Agreements

66

 

 

Directors and Officers

71

 

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

Dear Fellow Shareholder,

 

As stewards of our customers’ savings, the management team and Directors of the Davis Funds recognize the importance of candid, thorough, and regular communication with our shareholders.  In our annual and semi-annual reports we include all of the required quantitative information such as financial statements, detailed footnotes, performance reports, fund holdings, and performance attribution. 

 

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

 

August 4, 2006

 

 

2

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**Management’s Discussion and Analysis**

 

**Market Environment**

 

During the six-month period ended June 30, 2006, the stock market, as measured by the Standard & Poor’s 500® Index1, increased by 2.71%. U.S. economic activity, as measured by the gross domestic product (“GDP”), increased 2.5% in the second quarter after increasing 5.6% in the first quarter. Interest rates, as measured by the 10-year Treasury bond, began 2006 a little above 4.4% and ended the second quarter at about 5.1%.

 

**Davis Opportunity Fund**

 

**Performance Overview**

 

Davis Opportunity Fund’s Class A shares delivered a total return on net asset value of 6.01% for the six-month period ended June 30 20062, compared with a return of 3.23% for the Russell 3000® Index1.In late 2005, the Board of Directors approved a change in benchmarks from the Dow Jones Wilshire 5000 Index1, which returned 3.51% for the six-month period ended June 30, 2006. Experience has demonstrated that Davis Opportunity Fund does not often invest in companies with very small market capitalization.  Thus, the Board determined that the Russell 3000 Index more closely approximates the companies which the Fund invests in.

 

Diversified financial companies were the most important contributors3 to the Fund’s performance over the six-month period. The Fund holds a significant investment in these companies and this sector out-performed the Russell 3000® Index. First Marblehead4 was among the top contributors to performance. 

 

Consumer discretionary companies also made important contributions to performance and represented the Fund’s largest investment in a single sector. Consumer discretionary companies included both contributors to and detractors from performance. Garmin, Hunter Douglas, Autoliv, and Office Depot were among the top contributors to performance. Advance Auto Parts, Expedia, Lear, Blount International, and Mohawk Industries were among the top detractors from performance.  The Fund no longer owns Autoliv and Lear.

 

Insurance companies were the most important detractors from the Fund’s performance over the six-month period. The Fund holds a significant investment in insurance companies and this sector under-performed the Russell 3000® Index. Transatlantic Holdings was among the top detractors from performance. 

 

The Fund had significant holdings in information technology companies and overall this sector under-performed the Russell 3000® Index. Molex and Lexmark International were among the top contributors to performance. Convera was among the top detractors from performance. 

 

Other individual companies making important contributions to performance included two telecommunication service companies, Covad Communications and Level 3 Communications, and Tenaris, an energy company. Other individual companies detracting from performance included Pacific Corp., a household and personal products company, Zimmer Holdings, a health care equipment and services company, and Sprint Nextel, a telecommunication services company. 

 

The Fund had approximately 17% of its assets invested in foreign companies at June 30, 2006. As a group, the foreign companies owned by the Fund out-performed the Russell 3000® Index over the six-month period.

 

3

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

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

 

**Davis Government Bond Fund**

 

**Performance Overview**

 

Davis Government Bond Fund’s Class A shares delivered a total return on net asset value of 1.02% for the six-month period ended June 30, 20062, compared with a return of 1.07% for the Citigroup U.S. Treasury/Agency 1-3 Year Index1. 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. 

 

The Fund maintained a slightly shorter weighted average maturity than the Index over the six-month period and this benefited performance in a rising rate environment. The Fund also benefited by investing in securities offering a higher current yield. 

 

**Davis Financial Fund**

 

**Performance Overview**

 

Davis Financial Fund’s Class A shares earned 1.30% on net asset value for the six-month period ended June 30, 20062, compared with its benchmark the Standard & Poor’s 500® Index1, which returned 2.71%. 

 

The financial sector turned in a stronger performance than the S&P 500® Index. The specific financial companies, which the Fund owned, under-performed the majority of financial companies in the Index. The Fund’s non-financial holdings overall detracted from performance over the six-month period.

 

Diversified financial companies were the most important contributors3 to the Fund’s performance over the six-month period. The Fund holds a significant investment in these companies and this sector out-performed the Index. First Marblehead4, American Express, JPMorgan Chase, and Ameriprise Financial were among the top contributors to performance. Moody’s was among the top detractors from performance.

 

Banking companies were also important contributors to the Fund’s performance over the six-month period. Golden West Financial and Commerce Bancorp were among the top contributors to performance. ICICI Bank was among the top detractors from performance.

 

Insurance companies were the most important detractors from the Fund’s performance over the six-month period. Insurance companies represent the Fund’s largest holdings and this sector under-performed the Index. While Loews, China Life, and Markel were among the Fund’s top contributors to performance, American International Group, Progressive, Transatlantic Holdings, and Everest Re Group were among the top detractors from performance. 

 

Among the Fund’s non-financial holdings, D&B Corp., a commercial service company, was among the top contributors to performance. Tyco International, a capital goods company, Sealed Air, a materials company, and H&R Block, a consumer services company, were among the top detractors from performance.

 

 

4

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

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

**Davis Appreciation & Income Fund**

**Performance Overview**

Davis Appreciation & Income Fund’s Class A shares earned 5.84% on net asset value for the six-month period ended June 30, 20062, compared with its benchmark the Standard & Poor’s 500® Index1, which returned 2.71%. 

The Fund’s investment strategy is to attempt to use stocks, bonds, convertible securities, and cash to structure a portfolio which will participate in at least 80% of the increase in the S&P 500® Index during market increases and not decline by more than 50% of the decrease in the Index during market declines. There can be no assurance that the Fund will actually perform in line with our strategy because there can be no assurance that the securities the Fund purchases will increase in value when the Index increases in value, or that they will provide downside protection when the Index declines in value. 

The Fund’s common stock holdings performed well, and were the primary reasonthat the Fund’s performance exceeded that of the S&P 500® Index. Stock holdings contributing3 to performance included J.C. Penney4, a retailing company, SL Green Realty, a real estate company, International Rectifier, a semiconductor company, SAP AG, a software and services company, Tyson Foods, a food company, and Avon Products, a household and personal products company.  Stock holdings detracting from performance included Universal Health Services, a health care equipment and services company, General Growth Properties, a real estate company, AutoZone*,*a retailing company, Coca-Cola, a beverage company, and American International Group, an insurance company.

The Fund’s convertible preferred stock holdings also out-performed the S&P 500® Index, but not by as large of a margin as the Fund’s common stocks. Convertible preferred securities contributingto performance included Continental Airlines*,*a transportation company, and AES Trust*,*a utilities company.  

The Fund’s convertible bond holdings performed in line with the S&P 500® Index over the six-month period.  Convertible bonds contributing to performance included Vornado Realty, a real estate company, and Quanta Services, a capital goods company.  Convertible bonds detracting from performance included School Specialty, a commercial services and supplies company, and Intel, a semiconductor company.

The Fund continues to hold a cash position while working to identify attractive long-term investment opportunities.

 

 

5

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

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

**Davis Real Estate Fund**

**Performance Overview**

Davis Real Estate Fund’s Class A shares delivered a total return on net asset value of 12.55% for the six-month period ended June 30, 20062, compared with a return of 14.08% for the Dow Jones Wilshire Real Estate Securities Index1 (“WRESI Index”). Real Estate companies as a whole did well, as reflected by the fact that the WRESI Index out-performed the Standard & Poor’s 500® Index1 by a significant margin. 

Office property REITs contributed3 the most to the Fund’s performance over the six-month period. The Fund had more invested in office property REITs than in any other sector, and office property REITs turned in the strongest performance of any sector in the WRESI Index. The specific office property REITs that the Fund owned out-performed the office property REITs included in the WRESI Index. Kilroy Realty4, SL Green Realty, Corporate Office Properties, CarrAmerica Realty, and Boston Properties were among the top contributors to the Fund’s performance. Columbia Equity was among the top detractors from performance.  The Fund no longer owns Kilroy Realty and CarrAmerica Realty.

Overall, real estate operation and development companies were important contributors to performance. While Forest City was among the top contributors to performance, St. Joe and Capital & Regional were among the top detractors from performance. 

Transportation companies detracted from performance. Alexander & Baldwin was among the top detractors from performance. 

Other individual companies contributing to performance included United Dominion, an apartment REIT, Vornado Realty, a diversified REIT, and Prologis, a warehouse and industrial REIT. Other individual companies detracting from performance included Spirit Finance, a diversified REIT, and two regional mall REITS, General Growth Properties and Mills Corp. The Fund no longer own Mills Corp.

The Fund maintained a cash position over the six-month period, and this hampered relative performance during the strong market for real estate companies. 

The Fund had approximately 8% of its assets invested in foreign companies at June 30, 2006. As a group, the foreign companies owned by the Fund out-performed the WARESI Index over the six-month period.

 

6

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

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

 

Davis Real Estate Fund is allowed under its charter 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.

 

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

 

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

 

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

 

III.    The Dow Jones Wilshire 5000 Index measures the performance of all U.S. headquartered equity securities with readily available price data. Over 5,000 capitalization weighted security returns are used to adjust the Index. The Wilshire 5000 is a broad measure of the entire U.S. stock market.

 

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

 

V.     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.

 

 

 

8

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

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

 

2      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 table lists the average annual total returns for the periods ended June 30, 2006:

 

 **

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

**FUNDNAME**

**1 YEAR**

**5-YEAR**

**10-YEAR**

**INCEPTION**

Davis Opportunity – A*

13.04%

8.18%

12.13%

14.35% - 12/01/94

Davis Government Bond – A

1.32%

2.93%

4.13%

4.49% - 12/01/94

Davis Financial – A 

12.99%

4.82%

12.72%

15.98% - 05/01/91

Davis Appreciation & Income – A 

10.06%

8.27%

9.58%

10.71% - 05/01/92

Davis Real Estate – A 

22.31%

19.83%

15.11%

14.75% - 01/03/94

 

 

 **

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

**FUND NAME**

**1 YEAR**

**5-YEAR**

**10-YEAR**

**INCEPTION**

Davis Opportunity – A*

7.65%

7.14%

11.59%

13.87% - 12/01/94

Davis Government Bond – A 

(3.54)%

1.93%

3.62%

4.05% - 12/01/94

Davis Financial – A 

7.62%

3.81%

12.17%

15.61% - 05/01/91

Davis Appreciation & Income – A 

4.84%

7.22%

9.05%

10.33% - 05/01/92

Davis Real Estate – A 

16.51%

18.67%

14.55%

14.30% - 01/03/94

 

 

**BENCHMARK INDEX**

**1 YEAR**

**5-YEAR**

**10-YEAR**

**FUND INCEPTION**

Russell 3000® Index

9.56%

3.53%

8.52%

11.31% - 12/01/94

Dow Jones Wilshire 5000 Index

10.03%

4.06%

8.47%

11.35% - 12/01/94

Citigroup U.S. Treasury/Agency 

 

 

 

 

1-3 Year Index

1.87%

3.24%

4.85%

5.25% - 12/01/94

Standard & Poor’s 500® Index

8.63%

2.49%

8.31%

10.47% - 05/01/91

 

 

 

 

10.37% - 05/01/92

Dow Jones Wilshire Real Estate

 

 

 

 

Securities Index

21.85%

19.96%

15.65%

14.44% - 01/03/94

 

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

 

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

 

9

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

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

 

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

 

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

 

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

 

 

10

 

 

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS OPPORTUNITY FUND**

At June 30, 2006*(Unaudited)*

 

**Portfolio Makeup**

 

**Sector Weightings**

**(% of Fund’s Net Assets)**

 

**(% of Long Term Portfolio)**

 

 

 

 

 

 

 

 

 

 

**Fund**

**Russell 3000**®

Common Stock

95.7%

 

Insurance

12.2%

4.1%

Convertible Bonds

1.0%

 

Retail

11.7%

3.8%

Short Term Investments

3.2%

 

Technology

11.7%

15.1%

Other Assets & Liabilities

0.1%

 

Consumer Durables & Apparel

10.3%

1.5%

 

100.0%

 

Media

7.8%

3.5%

 

 

 

Diversified Financials

7.7%

8.8%

 

 

 

Health Care

7.6%

12.4%

 

 

 

Other

5.8%

15.8%

 

 

 

Banks

5.5%

6.3%

 

 

 

Telecommunication Services

4.8%

3.2%

 

 

 

Capital Goods

4.4%

8.3%

 

 

 

Automobiles & Components

2.9%

0.6%

 

 

 

Energy

2.7%

9.0%

 

 

 

Materials

2.5%

3.4%

 

 

 

Food, Beverage & Tobacco

2.4%

4.2%

 

 

 

 

100.0%

100.0%

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

Garmin Ltd.

Consumer Durables & Apparel

4.07%

Markel Corp.

Property & Casualty Insurance

3.01%

Lagardere S.C.A.

Publishing

2.95%

Molex Inc., Class A

Technology Hardware & Equipment

2.87%

Harley-Davidson, Inc.

Automobiles & Components

2.78%

Hunter Douglas NV

Consumer Durables & Apparel

2.76%

E*TRADE Financial Corp.

Capital Markets

2.74%

Expedia, Inc.

Internet Retail

2.41%

Zimmer Holdings, Inc.

Health Care Equipment & Services

2.35%

Netflix Inc.

Internet Retail

2.33%

 

 

11

 

 

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS GOVERNMENT BOND FUND**

At June 30, 2006*(Unaudited)*

 

**Portfolio Makeup**

 

**Sector Weightings**

 

**(% of Fund’s Net Assets)**

 

**(% of Fixed Income)**

 

 

 

 

 

 

 

Fixed Income

97.1%

 

Government Agency Notes

41.7%

 

Short Term Investments

5.0%

 

Freddie Mac Mortgage Pools

28.8%

 

Other Assets & Liabilities

(2.1)%

 

Fannie Mae Mortgage Pools

22.0%

 

 

100.0%

 

Collateralized Mortgage 

 

 

 

 

 

Obligations 

7.5%

 

 

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Sector**

**Net Assets**

Fannie Mae, 6.00%,

 

 

09/01/17 Pool No. 665776

Fannie Mae Pools

11.29%

Fannie Mae, 7.125%, 03/15/07

Government Agency Notes

10.95%

Freddie Mac, 5.50%, 07/15/06

Government Agency Notes

10.83%

Freddie Mac, 4.50%,

 

 

03/01/08 Pool No. M90803

Freddie Mac Pools

6.32%

Freddie Mac, 4.00%,

 

 

03/01/08 Pool No. M90802

Freddie Mac Pools

5.18%

Fannie Mae, 6.00%, 05/15/08

Government Agency Notes

4.37%

Fannie Mae, 5.029%,

 

 

01/01/36 Pool No. 848973

Fannie Mae Pools

4.17%

Federal Home Loan Bank, 3.875%, 09/14/07

Government Agency Notes

4.04%

Fannie Mae, 4.743%,

 

 

05/01/35 Pool No. 826242

Fannie Mae Pools

3.75%

Freddie Mac, 3.00%,

 

 

04/01/10 Pool No. M90982

Freddie Mac Pools

3.69%

 

 

 

 

 

 

12

 

 

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS GOVERNMENT MONEY MARKET FUND**

At June 30, 2006*(Unaudited)*

 

 

**Portfolio Makeup**

 

**Maturity Diversification**

 

**(% of Fund’s Net Assets)**

 

**(% of Portfolio Holdings)**

 

 

 

 

 

 

 

Repurchase Agreements

49.2%

 

0-30 Days

75.2%

 

Federal Home Loan Bank

27.2%

 

31-90 Days

6.7%

 

FREDDIE MAC

8.5%

 

91-180 Days

9.3%

 

Federal Farm Credit Bank

7.5%

 

181-391 Days

8.8%

 

FANNIE MAE

6.7%

 

 

100.0%

 

Other Assets & Liabilities

0.9%

 

 

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

 

13

 

 

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS FINANCIAL FUND**

At June 30, 2006*(Unaudited)*

 

**Portfolio Makeup**

 

**Sector Weightings**

**(% of Fund’s Net Assets)**

 

**(% of Stock Holdings)**

 

 

 

 

**Fund**

**S&P 500**®

Common Stock

99.9%

 

Insurance 

33.2%

4.7%

Short Term Investments 

0.2%

 

Diversified Financials

31.0%

9.9%

Other Assets & Liabilities

(0.1)%

 

Banks

13.2%

5.9%

 

100.0%

 

Capital Goods

7.7%

8.9%

 

 

 

Commercial Services & Supplies

7.1%

0.7%

 

 

 

Food, Beverage & Tobacco

2.9%

4.8%

 

 

 

Materials

2.7%

3.1%

 

 

 

Consumer Services

2.2%

1.7%

 

 

 

Technology

–

14.9%

 

 

 

Health Care

–

12.3%

 

 

 

Energy

–

10.2%

 

 

 

Other

–

22.9%

 

 

 

 

100.0%

100.0%

 

 

 

 

 

 

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

American Express Co.

Consumer Finance

11.90%

Transatlantic Holdings, Inc.

Reinsurance

9.16%

Golden West Financial Corp.

Thrift & Mortgage Finance

8.06%

Tyco International Ltd.

Capital Goods

7.73%

D&B Corp.

Commercial Services & Supplies

7.06%

Loews Corp.

Multi-Line Insurance

5.98%

American International Group, Inc.

Multi-Line Insurance

5.60%

Moody’s Corp.

Diversified Financial Services

5.45%

First Marblehead Corp.

Consumer Finance

5.32%

Commerce Bancorp, Inc.  

Commercial Banks

4.94%

 

 

 

14

 

 

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS APPRECIATION & INCOME FUND**

At June 30, 2006 *(Unaudited)*

 

**Portfolio Makeup**

 

**Sector Weightings**

**(% of Fund’s Net Assets)**

 

**(% of Long Term Portfolio)**

 

 

 

 

 

**Fund**

 

**S&P 500**®

Convertible Bonds

39.0%

 

Real Estate

13.6%

1.0%

Common Stock

34.0%

 

Technology

12.1%

14.9%

Convertible Preferred Stocks

6.4%

 

Capital Goods

9.5%

8.9%

Corporate Bonds

3.3%

 

Commercial Services & Supplies

8.4%

0.7%

Short Term Investments

16.7%

 

Retailing

7.6%

3.4%

Other Assets & Liabilities

0.6%

 

Food, Beverage & Tobacco

7.5%

4.8%

 

100.0%

 

Insurance

6.8%

4.7%

 

 

 

Energy

6.0%

10.2%

 

 

 

Other

4.7%

16.9%

 

 

 

Materials

4.6%

3.1%

 

 

 

Diversified Financials

4.5%

9.9%

 

 

 

Health Care

4.5%

12.3%

 

 

 

Household & Personal Products

4.2%

2.4%

 

 

 

Media

3.2%

3.4%

 

 

 

Utilities

2.8%

3.4%

 

 

 

 

100.0%

100.0%

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

SL Green Realty Corp.

Real Estate

5.99%

Lehman Brothers Holdings Inc., Conv., Notes

 

 

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

Energy

4.30%

Intel Corp., Ser. 144A Conv. Sub. Deb., 2.95%, 12/15/35

Semiconductor & Semiconductor

 

 

Equipment

3.49%

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

 

 

Zero Cpn., 08/01/23

Commercial Services & Supplies

3.40%

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

Capital Goods

3.16%

American International Group, Inc., Conv. 

 

 

Sr. Notes, 0.50%, 05/15/07

Multi-Line Insurance

2.96%

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

Materials

2.91%

Universal Health Services, Inc., Class B

Health Care Equipment & Services

2.88%

Coca-Cola Co.

Food, Beverage & Tobacco

2.64%

American Express Co., Conv. Sub. Notes, 1.85%/

 

 

Zero Cpn., 12/01/33

Consumer Finance

2.55%

 

 

15

 

 

 

**DAVIS SERIES, INC.**

FUND OVERVIEW

**DAVIS REAL ESTATE FUND**

At June 30, 2006 *(Unaudited)*

 

**Portfolio Makeup**

 

**Sector Weightings**

 
**(% of Fund’s Net Assets)**

 

**(% of Stock Holdings)**

 
 

 

 

 

 

 

 

 

 

 

 

 

**Dow Jones Wilshire**

 

Common Stock

93.9%

 

 

 

**Real Estate**

 

Preferred Stocks

0.5%

 

 

**Fund**

**Securities Index**

 

Short Term Investments

5.5%

 

Office Property REITS

22.8%

20.1%

 

Other Assets & Liabilities

0.1%

 

Real Estate Operations/Development

16.1%

2.5%

 

 

100.0%

 

Shopping Center REITS

14.2%

12.8%

 

 

 

 

Diversified REITS

13.0%

10.7%

 

 

 

 

Regional Mall REITS

10.9%

14.4%

 

 

 

 

Warehouse & Industrial REITS

7.5%

6.9%

 

 

 

 

Apartment REITS

6.5%

18.9%

 

 

 

 

Health Care REITS

3.3%

–

 

 

 

 

Transportation

3.1%

–

 

 

 

 

Mortgage REITS

1.5%

–

 

 

 

 

Storage REITS

1.1%

5.0%

 

 

 

 

Hotel REITS

–

8.0%

 

 

 

 

Manufactured Home REITS

–

0.7%

 

 

 

 

 

100.0%

100.0%

 

 

 

**Top 10 Holdings**

 

 

**% of Fund’s**

**Security**

**Industry**

**Net Assets**

SL Green Realty Corp.  

Office Property REITS

7.30%

Forest City Enterprises, Inc., Class A 

Real Estate Operations/Development

5.73%

Alexandria Real Estate Equities, Inc.  

Office Property REITS

5.19%

General Growth Properties, Inc.  

Regional Mall REITS

5.13%

ProLogis 

Warehouse & Industrial REITS

4.85%

Corporate Office Properties Trust 

Office Property REITS

4.29%

Developers Diversified Realty Corp.  

Shopping Center REITS

4.09%

Boston Properties, Inc.  

Office Property REITS

3.87%

Kimco Realty Corp.  

Shopping Center REITS

3.73%

Duke Realty Corp.  

Diversified REITS

3.60%

 

 

16

 

 

 

**DAVIS SERIES, INC.**

EXPENSE EXAMPLE*(Unaudited)*

 

 

**Beginning**

**Ending**

**Expenses Paid**

 

**Account Value**

**Account Value**

**During Period***

 

**(01/01/06)**

**(06/30/06)**

**(01/01/06-06/30/06)**

**Davis Opportunity Fund**

 

 

 

**Class A**(annualized expense ratio 1.10%)

 

 

 

Actual

$1,000.00

$1,060.10

$5.62

Hypothetical

$1,000.00

$1,019.34

$5.51

**Class B**(annualized expense ratio 1.88%)

 

 

 

Actual

$1,000.00

$1,055.97

$9.58

Hypothetical

$1,000.00

$1,015.47

$9.39

**Class C**(annualized expense ratio 1.86%)

 

 

 

Actual

$1,000.00

$1,056.33

$9.48

Hypothetical

$1,000.00

$1,015.57

$9.30

**Class Y**(annualized expense ratio 0.81%)

 

 

 

Actual

$1,000.00

$1,061.32

$4.14

Hypothetical

$1,000.00

$1,020.78

$4.06

 

 

 

 

**Davis Government Bond Fund**

 

 

 

**Class A**(annualized expense ratio 1.05%)

 

 

 

Actual

$1,000.00

$1,010.17

$5.23

Hypothetical

$1,000.00

$1,019.59

$5.26

**Class B**(annualized expense ratio 1.73%)

 

 

 

Actual

$1,000.00

$1,006.73

$8.61

Hypothetical

$1,000.00

$1,016.22

$8.65

**Class C**(annualized expense ratio 1.80%)

 

 

 

Actual

$1,000.00

$1,004.75

$8.95

Hypothetical

$1,000.00

$1,015.87

$9.00

**Class Y**(annualized expense ratio 0.93%)

 

 

 

Actual

$1,000.00

$1,009.05

$4.63

Hypothetical

$1,000.00

$1,020.18

$4.66

 

 

 

 

**Davis Government Money Market Fund**

 

 

 

**Class A, B, & C**(annualized expense ratio 0.57%)

 

 

 

Actual

$1,000.00

$1,020.19

$2.86

Hypothetical

$1,000.00

$1,021.97

$2.86

 

 

 

 

**Davis Financial Fund**

 

 

 

**Class A**(annualized expense ratio 0.98%)

 

 

 

Actual

$1,000.00

$1,012.98

$4.89

Hypothetical

$1,000.00

$1,019.93

$4.91

**Class B**(annualized expense ratio 1.88%)

 

 

 

Actual

$1,000.00

$1,008.49

$9.36

Hypothetical

$1,000.00

$1,015.47

$9.39

**Class C**(annualized expense ratio 1.85%)

 

 

 

Actual

$1,000.00

$1,008.61

$9.21

Hypothetical

$1,000.00

$1,015.62

$9.25

**Class Y**(annualized expense ratio 0.84%)

 

 

 

Actual

$1,000.00

$1,013.70

$4.19

Hypothetical

$1,000.00

$1,020.63

$4.21

 

 

17

 

 

 

**DAVIS SERIES, INC.**

EXPENSE EXAMPLE*(Unaudited)* – (Continued)

 

 

**Beginning**

**Ending**

**Expenses Paid**

 

**Account Value**

**Account Value**

**During Period***

 

**(01/01/06)**

**(06/30/06)**

**(01/01/06-06/30/06)**

**Davis Appreciation & Income Fund**

 

 

 

**Class A**(annualized expense ratio 1.06%)

 

 

 

Actual

$1,000.00

$1,058.40

$5.41

Hypothetical

$1,000.00

$1,019.54

$5.31

**Class B**(annualized expense ratio 1.91%)

 

 

 

Actual

$1,000.00

$1,053.79

$9.73

Hypothetical

$1,000.00

$1,015.32

$9.54

**Class C**(annualized expense ratio 1.90%)

 

 

 

Actual

$1,000.00

$1,053.81

$9.68

Hypothetical

$1,000.00

$1,015.37

$9.49

**Class Y**(annualized expense ratio 0.81%)

 

 

 

Actual

$1,000.00

$1,059.60

$4.14

Hypothetical

$1,000.00

$1,020.78

$4.06

 

 

 

 

**Davis Real Estate Fund**

 

 

 

**Class A**(annualized expense ratio 1.07%)

 

 

 

Actual

$1,000.00

$1,125.49

$5.64

Hypothetical

$1,000.00

$1,019.49

$5.36

**Class B**(annualized expense ratio 1.88%)

 

 

 

Actual

$1,000.00

$1,120.62

$9.88

Hypothetical

$1,000.00

$1,015.47

$9.39

**Class C**(annualized expense ratio 1.86%)

 

 

 

Actual

$1,000.00

$1,121.03

$9.78

Hypothetical

$1,000.00

$1,015.57

$9.30

**Class Y**(annualized expense ratio 0.76%)

 

 

 

Actual

$1,000.00

$1,127.23

$4.01

Hypothetical

$1,000.00

$1,021.03

$3.81

 

 

Hypothetical assumes 5% annual return before expenses.

 

*Expenses are equal to each Class’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). See page 19 for a description of the “Expense Example”.   

 

 

18

 

 

 

**DAVIS SERIES, INC.**

EXPENSE EXAMPLE *(Unaudited)* – (Continued)

 

**The following disclosure provides important information regarding each Fund’s Expense Example. Please refer to this information when reviewing the Expense Example for each Class.**

 

**Example**

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including advisory and administrative fees, distribution and/or service  (12b-1) fees, and other Fund expenses.  The Expense Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  The Expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for each class is from 01/01/06 to 06/30/06. Please note that the Expense Example is general and does not reflect certain transaction or account specific costs, which may increase your total costs of investing in the Fund. If these transaction or account specific costs were included in the Expense Example, theexpenses would have been higher.

 

**Actual Expenses**

 

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

 

**Hypothetical Example for Comparison Purposes**

 

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

 

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

 

 

 

 

 

 

19

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS OPPORTUNITY FUND**

 

 

**Value**

**Shares**

**Security**

**(Note 1)**

**COMMON STOCK – (95.73%)**

 

**ADVERTISING – (1.30%)**

 

 

 

 

955,000

 

WPP Group PLC (United Kingdom)

$

11,558,387

 

**AUTOMOBILES & COMPONENTS – (2.78%)**

 

 

 

 

448,700

 

Harley-Davidson, Inc. 

 

24,629,143

 

**AUTOMOTIVE RETAIL – (2.45%)**

 

 

 

 

452,500

 

Advance Auto Parts, Inc. 

 

13,077,250

 

 

402,987

 

AutoNation, Inc.*

 

8,640,041

 

 

 

 

 

 

21,717,291

 

**BROADCASTING & CABLE TV – (3.25%)**

 

 

 

 

845,600

 

DIRECTV Group, Inc.*

 

13,952,400

 

 

597,310

 

NTL Inc. 

 

14,870,032

 

 

 

 

 

 

28,822,432

 

**CAPITAL GOODS – (4.28%)**

 

 

 

 

304,000

 

American Standard Cos, Inc. 

 

13,154,080

 

 

195,500

 

Franklin Electric Co., Inc. 

 

10,077,047

 

 

16,910

 

Tae Young Corp. (South Korea)

 

1,058,713

 

 

497,500

 

Tyco International Ltd. 

 

13,681,250

 

 

 

 

 

 

37,971,090

 

**CAPITAL MARKETS – (3.87%)**

 

 

 

 

1,065,500

 

E*TRADE Financial Corp.*

 

24,314,710

 

 

37,686

 

Julius Baer Holding, Ltd. AG (Switzerland)

 

3,273,693

 

 

67,600

 

Legg Mason, Inc. 

 

6,727,552

 

 

 

 

 

 

34,315,955

 

**COMMERCIAL BANKS – (3.18%)**

 

 

 

 

789,700

 

Anglo Irish Bank Corp. PLC (United Kingdom)

 

12,272,303

 

 

448,000

 

Commerce Bancorp, Inc. 

 

15,980,160

 

 

 

 

 

 

28,252,463

 

**COMMERCIAL SERVICES & SUPPLIES – (0.37%)**

 

 

 

 

47,500

 

D&B Corp.*

 

3,309,800

 

**CONSUMER DURABLES & APPAREL – (9.95%)**

 

 

 

 

949,000

 

Blount International, Inc.*

 

11,406,980

 

 

342,300

 

Garmin Ltd. 

 

36,133,188

 

 

363,764

 

Hunter Douglas NV (Netherlands)

 

24,496,597

 

 

173,300

 

Mohawk Industries, Inc.*

 

12,191,655

 

 

158,500

 

Toll Brothers, Inc.*

 

4,052,845

 

 

 

 

 

 

88,281,265

 

**CONSUMER FINANCE – (1.53%)**

 

 

 

 

237,700

 

First Marblehead Corp. 

 

13,534,638

 

**CONSUMER SERVICES – (1.79%)**

 

 

 

 

307,000

 

Apollo Group, Inc., Class A*

 

15,870,365

 

 

 

20

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS OPPORTUNITY FUND – (Continued)**

 

 

**Value**

**Shares**

**Security**

**(Note 1)**

**COMMON STOCK – (Continued)**

 

**DEPARTMENT STORES – (2.15%)**

 

 

 

 

122,900

 

Sears Holdings Corp.*

$

19,030,451

 

**DIVERSIFIED FINANCIAL SERVICES – (2.04%)**

 

 

 

 

190,741

 

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

 

18,082,599

 

**ENERGY – (2.64%)**

 

 

 

 

154,500

 

Tenaris S.A., ADR (Luxembourg)

 

6,255,705

 

 

213,500

 

Transocean Inc.*

 

17,148,320

 

 

 

 

 

 

23,404,025

 

**FOOD & STAPLES RETAILING – (0.86%)**

 

 

 

 

132,900

 

Costco Wholesale Corp. 

 

7,599,222

 

**FOOD, BEVERAGE & TOBACCO – (2.30%)**

 

 

 

 

157,625

 

Heineken Holding NV (Netherlands)

 

5,812,426

 

 

4,400

 

Lotte Chilsung Beverage Co., Ltd. (South Korea)

 

5,333,333

 

 

5,160

 

Lotte Confectionery Co., Ltd. (South Korea)

 

6,499,289

 

 

35,070

 

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

 

2,772,332

 

 

 

 

 

 

20,417,380

 

**HEALTH CARE EQUIPMENT & SERVICES – (6.33%)**

 

 

 

 

168,000

 

Cardinal Health, Inc. 

 

10,807,440

 

 

216,600

 

IDEXX Laboratories, Inc.*

 

16,282,905

 

 

217,000

 

Lincare Holdings Inc.*

 

8,205,855

 

 

367,800

 

Zimmer Holdings, Inc.*

 

20,861,616

 

 

 

 

 

 

56,157,816

 

**HOUSEHOLD & PERSONAL PRODUCTS – (0.55%)**

 

 

 

 

9,253

 

Amorepacific Corp.* (South Korea)

 

3,993,681

 

 

5,647

 

Pacific Corp. (South Korea)

 

928,558

 

 

 

 

 

 

4,922,239

 

**INSURANCE BROKERS – (2.85%)**

 

 

 

 

681,000

 

Brown & Brown, Inc. 

 

19,898,820

 

 

200,800

 

Marsh & McLennan Cos, Inc. 

 

5,399,512

 

 

 

 

 

 

25,298,332

 

**INTERNET RETAIL – (4.74%)**

 

 

 

 

1,427,900

 

Expedia, Inc.*

 

21,397,081

 

 

757,800

 

Netflix Inc.*

 

20,608,371

 

 

 

 

 

 

42,005,452

 

**LIFE & HEALTH INSURANCE – (2.15%)**

 

 

 

 

97,000

 

AFLAC Inc. 

 

4,495,950

 

 

551,900

 

Power Corp. of Canada (Canada)

 

14,540,338

 

 

 

 

 

 

19,036,288

 

 

 

21

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS OPPORTUNITY FUND – (Continued)**

 

 

**Value**

**Shares**

**Security**

**(Note 1)**

**COMMON STOCK – (Continued)**

 

**MATERIALS – (2.45%)**

 

 

 

 

113,000

 

Sealed Air Corp. 

$

5,885,040

 

 

218,500

 

Sigma-Aldrich Corp. 

 

15,866,378

 

 

 

 

 

 

21,751,418

 

**PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES – (1.02%)**

 

 

 

 

123,400

 

Fisher Scientific International, Inc.*

 

9,014,370

 

**PROPERTY & CASUALTY INSURANCE – (5.44%)**

 

 

 

 

197,100

 

Ambac Financial Group, Inc. 

 

15,984,810

 

 

78,150

 

Cincinnati Financial Corp. 

 

3,672,659

 

 

50,000

 

FPIC Insurance Group, Inc.*

 

1,932,500

 

 

76,915

 

Markel Corp.*

 

26,689,505

 

 

 

 

 

 

48,279,474

 

**PUBLISHING – (2.95%)**

 

 

 

 

354,000

 

Lagardere S.C.A. (France)

 

26,125,628

 

**REINSURANCE – (1.38%)**

 

 

 

 

48,500

 

Everest Re Group, Ltd. 

 

4,198,645

 

 

144,625

 

Transatlantic Holdings, Inc. 

 

8,084,538

 

 

 

 

 

 

12,283,183

 

**SOFTWARE & SERVICES – (5.53%)**

 

 

 

 

1,125,747

 

Convera Corp.*

 

8,015,319

 

 

289,800

 

Fiserv, Inc.*

 

13,151,124

 

 

253,700

 

Iron Mountain Inc.*

 

9,483,306

 

 

789,000

 

Microsoft Corp. 

 

18,387,645

 

 

 

 

 

 

49,037,394

 

**SPECIALTY STORES – (1.99%)**

 

 

 

 

464,000

 

Office Depot, Inc.*

 

17,632,000

 

**TECHNOLOGY HARDWARE & EQUIPMENT – (5.79%)**

 

 

 

 

450,900

 

Agilent Technologies, Inc.*

 

14,230,404

 

 

209,000

 

Lexmark International, Inc., Class A*

 

11,668,470

 

 

884,300

 

Molex Inc., Class A

 

25,428,046

 

 

 

 

 

 

51,326,920

 

**TELECOMMUNICATION SERVICES – (3.67%)**

 

 

 

 

203,000

 

American Tower Corp., Class A*

 

6,317,360

 

 

3,261,700

 

Covad Communications Group, Inc.*

 

6,556,017

 

 

343,300

 

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

 

8,040,086

 

 

580,500

 

Sprint Nextel Corp. 

 

11,604,195

 

 

 

 

 

 

32,517,658

 

**THRIFT & MORTGAGE FINANCE – (2.11%)**

 

 

 

 

252,000

 

Golden West Financial Corp. 

 

18,698,400

 

 

 

22

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS OPPORTUNITY FUND  – (Continued)**

 

 

**Value**

**Shares/Principal**

**Security**

**(Note 1)**

**COMMON STOCK – (Continued)**

 

**UTILITIES – (2.04%)**

 

 

 

 

397,000

 

Sempra Energy

$

18,055,560

 

 

 

 

 

Total Common Stock – (identified cost $672,774,508)

 

848,938,638

 

 

**STRIP VVPR – (0.00%)**

 

**DIVERSIFIED FINANCIAL SERVICES – (0.00%)**

 

 

 

 

4,906

 

Groupe Bruxelles Lambert S.A.* (Belgium)

 

 

 

 

 

 

(identified cost $48)

 

126

 

 

**CONVERTIBLE BONDS – (0.96%)**

 

**TELECOMMUNICATION SERVICES – (0.96%)**

 

 

 

$

5,600,000

 

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

 

 

 

 

 

 

(identified cost $5,600,000)

 

8,547,000

 

 

**SHORT TERM INVESTMENTS – (3.23%)**

 

 

7,752,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $7,755,411

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 5.00%, 07/01/35, total market value $7,907,040)

 

7,752,000

 

 

7,840,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $7,843,450

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account 5.00%-5.50%, 03/01/34-04/01/36, total market

 

 

 

 

 

 

value $7,996,800)

 

7,840,000

 

 

13,066,000

 

Nomura Securities International, Inc. Joint Repurchase Agreement, 5.35%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $13,071,825

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 4.815%-5.469%, 09/01/33-05/01/38, total market

 

 

 

 

 

 

value $13,327,320)

 

13,066,000

 

 

 

 

 

Total Short Term Investments – (identified cost $28,658,000)

 

28,658,000

 

 

 

 

 

Total Investments – (99.92%) – (identified cost $707,032,556) – (a)

 

886,143,764

 

 

 

 

Other Assets Less Liabilities – (0.08%)

 

711,031

 

 

 

 

Net Assets – (100.00%)

$

886,854,795

 

 

*Non-Income Producing Security.

 

ADR: American Depository Receipt

 

23

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS OPPORTUNITY FUND  – (Continued)**

 

 

 

 

 

 

 

(a)    Aggregate cost for Federal Income Tax purposes is $712,253,432.  At June 30, 2006 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

 

Unrealized appreciation

$

190,640,912

 

 

 

 

Unrealized depreciation

 

(16,750,580

)

 

 

 

Net unrealized appreciation

$

173,890,332

 

 

(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 six months ended June 30, 2006.  The Fund did not hold any affiliated companies as of June 30, 2006.

 

Transactions during the period in which the issuers were affiliates are as follows:

 

Security

Shares

December 31, 2005

Gross

Additions

Gross

Reductions

Shares

June 30, 2006

 

 

Dividend

Income

 

Robbins & Myers, 

Inc. (c)

 

 

754,500

 

–

 

754,500

 

–

 

 

$

 

41,498

 

 

(c)    Not an affiliate as of June 30, 2006.

 

 

***See Notes to Financial Statements***

 

 

 

 

 

 

 

24

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS GOVERNMENT BOND FUND**

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**MORTGAGES – (56.65%)**

 
 

 

 

 

**COLLATERALIZED MORTGAGE OBLIGATIONS – (7.32%)**

 

 

 

$

1,026,275

 

Fannie Mae, 3.50%, 03/25/16

$

997,733

 

 

1,048,633

 

Fannie Mae, 4.00%, 10/25/23

 

1,032,884

 

 

1,358,392

 

Freddie Mac, 5.00%, 06/15/16

 

1,349,701

 

 

 

 

 

 

 

 

 

 

 

Total collateralized mortgage obligations –

 

 

 

 

 

 

(identified cost $3,396,932)

 

3,380,318

 

 

**FANNIE MAE POOLS – (21.33%)**

 

 

 

 

405,742

 

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

 

406,637

 

 

5,183,789

 

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

 

5,212,138

 

 

572,302

 

4.672%, 01/01/33 Pool No. 681153 (b)

 

571,475

 

 

1,788,108

 

4.743%, 05/01/35 Pool No. 826242 (b)

 

1,731,234

 

 

1,988,072

 

5.029%, 01/01/36 Pool No. 848973 (b)

 

1,925,635

 

 

 

 

 

 

 

 

 

 

 

Total Fannie Mae Pools – (identified cost $10,137,372)

 

9,847,119

 

 

**FREDDIE MAC POOLS – (28.00%)**

 

 

 

 

111,124

 

5.50%, 10/01/06 Pool No. M90680

 

110,186

 

 

2,442,075

 

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

 

2,393,301

 

 

2,957,174

 

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

 

2,919,162

 

 

1,426,140

 

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

 

1,376,909

 

 

1,827,024

 

3.00%, 04/01/10 Pool No. M90982

 

1,705,527

 

 

743,187

 

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

 

690,050

 

 

995,756

 

3.50%, 04/01/11 Pool No. M91016

 

943,230

 

 

978,350

 

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

 

907,786

 

 

885,051

 

6.50%, 01/01/15 Pool No. G11063

 

895,201

 

 

984,564

 

6.00%, 10/01/16 Pool No. E01054

 

987,917

 

 

 

 

 

 

 

 

 

 

 

Total Freddie Mac Pools – (identified cost $13,219,857)

 

12,929,269

 

 

 

 

 

 

 

 

 

 

 

Total Mortgages – (identified cost $26,754,161)

 

26,156,706

 

 

**GOVERNMENT AGENCY NOTES – (40.47%)**

 

 

 

 

5,000,000

 

Fannie Mae, 7.125%, 03/15/07

 

5,054,882

 

 

2,000,000

 

Fannie Mae, 6.00%, 05/15/08

 

2,019,183

 

 

1,000,000

 

Federal Home Loan Bank, 2.60%, 09/26/06

 

993,659

 

 

1,900,000

 

Federal Home Loan Bank, 3.875%, 09/14/07

 

1,865,903

 

 

 

25

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

 

**Value**

 

**Principal**

 

**Security**

**(Note 1**

**)**

**GOVERNMENT AGENCY NOTES – (Continued)**

 

 

 

$

1,000,000

 

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

$

973,236

 

 

300,000

 

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

 

294,469

 

 

5,000,000

 

Freddie Mac, 5.50%, 07/15/06

 

5,000,243

 

 

1,500,000

 

Freddie Mac, 3.00%, 09/29/06

 

1,491,655

 

 

1,000,000

 

Freddie Mac, 3.00%, 11/17/06

 

991,206

 

 

 

 
 

 

 

Total Government Agency Notes – (identified cost $18,908,141)

 

18,684,436

 

 

**SHORT TERM INVESTMENTS – (4.96%)**

 

 

619,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $619,272 (collateralized

 

 

 

 

 

 

by: U.S. Government agency mortgage in a pooled cash account,

 

 

 

 

 

 

5.00%, 07/01/35, total market value $631,380)

 

619,000

 

 

626,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $626,275 (collateralized 

 

 

 

 

 

 

by: U.S. Government agency mortgages in a pooled cash account

 

 

 

 

 

 

5.00%-5.50%, 03/01/34-04/01/36, total market value $638,520)

 

626,000

 

 

1,044,000

 

Nomura Securities International, Inc. Joint Repurchase Agreement, 5.35%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $1,044,465 (collateralized

 

 

 

 

 

 

by: U.S. Government agency mortgages in a pooled cash account,

 

 

 

 

 

 

4.815%-5.469%, 09/01/33-05/01/38, total market value $1,064,880)

 

1,044,000

 

 

 

 

 

Total Short Term Investments – (identified cost $2,289,000)

 

2,289,000

 

 

 

 

 

Total Investments – (102.08%) – (identified cost $47,951,302) – (a)

 

47,130,142

 

 

 

 

Liabilities Less Other Assets – (2.08%)

 

(958,956

)

 

 

 

Net Assets – (100.00%)

$

46,171,186

 

 

(a)    Aggregate cost for Federal Income Tax purposes is $47,951,302. At June 30, 2006 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

 

Unrealized appreciation

$

15,391

 

 

 

 

Unrealized depreciation

 

(836,551

)

 

 

 

Net unrealized depreciation

$

(821,160

)

 

(b)    The interest rates on adjustable rate securities, shown as of June 30, 2006, may change daily or less frequently and are based on indices of market interests rates.

 

***See Notes to Financial Statements***

 

 

26

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS GOVERNMENT MONEY MARKET FUND**

 

 

**Value**

 
**Principal**

**Security**

**(Note 1)**

 
**FANNIE MAE – (6.75%)**

 
$

500,000

 

2.75%, 08/11/06

$

498,918

 

 

3,400,000

 

4.05%, 08/14/06

 

3,396,757

 

 

3,000,000

 

2.55%, 08/17/06

 

2,991,735

 

 

500,000

 

2.77%, 08/25/06

 

498,553

 

 

1,000,000

 

3.01%, 11/17/06

 

992,461

 

 

2,500,000

 

2.41%, 11/28/06

 

2,471,354

 

 

2,000,000

 

2.20%, 12/04/06

 

1,972,230

 

 

10,500,000

 

4.00%, 12/20/06 (c)

 

10,426,284

 

 

2,000,000

 

2.125%, 12/29/06

 

1,972,856

 

 

5,500,000

 

3.51%, 01/05/07

 

5,462,670

 

 

3,190,000

 

2.625%, 01/19/07

 

3,140,160

 

 

1,500,000

 

2.50%, 01/30/07

 

1,474,496

 

 

1,800,000

 

3.55%, 01/30/07

 

1,779,927

 

 

 

 

 

 

 

 

 

 

 

Total Fannie Mae – (identified cost $37,078,401)

 

37,078,401

 

 

**FEDERAL FARM CREDIT BANK – (7.46%)**

 
 

10,000,000

 

5.04375%, 07/14/06 (b)

 

10,000,000

 

 

11,000,000

 

2.35%, 07/24/06

 

10,979,315

 

 

20,000,000

 

5.02625%, 11/13/06 (b)

 

19,998,872

 

 

 

 

 

 

 

 

 

 

 

Total Federal Farm Credit Bank – (identified cost $40,978,187)

 

40,978,187

 

 

**FEDERAL HOME LOAN BANK – (27.17%)**

 
 

1,500,000

 

4.35%, 07/11/06 (c)

 

1,499,791

 

 

22,500,000

 

4.25%, 07/21/06 (c)

 

22,500,000

 

 

10,000,000

 

2.30%, 07/28/06

 

9,984,998

 

 

15,000,000

 

5.039%, 08/02/06 (b)

 

15,000,000

 

 

1,000,000

 

2.50%, 09/11/06

 

995,379

 

 

7,150,000

 

4.30%, 10/30/06

 

7,135,730

 

 

30,000,000

 

5.131%, 11/09/06 (b)

 

30,000,000

 

 

2,500,000

 

2.75%, 11/15/06

 

2,476,827

 

 

1,175,000

 

4.875%, 11/15/06

 

1,171,923

 

 

4,000,000

 

3.05%, 11/27/06

 

3,968,900

 

 

2,000,000

 

2.29%, 12/11/06

 

1,977,048

 

 

4,900,000

 

5.19%, 12/13/06 (b)

 

4,898,335

 

 

3,425,000

 

3.375%, 12/14/06

 

3,395,620

 

 

2,000,000

 

2.20%, 12/26/06

 

1,975,480

 

 

1,000,000

 

2.28%, 12/26/06

 

984,661

 

 

1,225,000

 

3.50%, 12/28/06

 

1,214,275

 

 

1,550,000

 

3.50%, 12/28/06

 

1,536,430

 

 

 

27

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

**Value**

 
**Principal**

**Security**

**(Note 1)**

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

 
$

1,500,000

 

2.04%, 12/29/06

$

1,475,080

 

 

1,675,000

 

3.40%, 12/29/06

 

1,659,455

 

 

3,400,000

 

3.375%, 02/15/07

 

3,353,553

 

 

4,000,000

 

4.80%, 02/26/07

 

3,994,821

 

 

28,000,000

 

5.258%, 07/05/07 (b)

 

28,000,000

 

 

 

 

 

 

 

 

 

 

 

Total Federal Home Loan Bank – (identified cost $149,198,306)

 

149,198,306

 

 

**FREDDIE MAC – (8.53%)**

 
 

3,000,000

 

2.09%, 07/06/06

 

2,999,000

 

 

1,000,000

 

2.03%, 07/07/06

 

999,620

 

 

2,000,000

 

2.00%, 07/14/06

 

1,998,333

 

 

8,000,000

 

4.00%, 08/11/06

 

7,993,536

 

 

500,000

 

2.50%, 08/24/06

 

498,392

 

 

750,000

 

2.75%, 10/06/06

 

745,154

 

 

8,000,000

 

2.75%, 10/15/06

 

7,945,651

 

 

2,000,000

 

3.00%, 11/17/06

 

1,983,040

 

 

1,000,000

 

2.45%, 12/11/06

 

989,942

 

 

4,000,000

 

4.72%, 01/12/07

 

3,989,501

 

 

17,000,000

 

2.375%, 02/15/07

 

16,665,977

 

 

 

 

 

 

 

 

 

 

 

Total Freddie Mac – (identified cost $46,808,146)

 

46,808,146

 

 

 

28

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

**Value**

**Principal**

**Security**

**(Note 1)**

**REPURCHASE AGREEMENTS – (49.20%)**

 

$

73,090,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $73,122,160

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 5.00%, 07/01/35, total market value $74,551,800)

$

73,090,000

 

 

73,918,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $73,950,524

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 5.00%-5.50%, 03/01/34-04/01/36, total market 

 

 

 

 

 

 

value $75,396,360)

 

73,918,000

 

 

123,197,000

 

Nomura Securities International, Inc. Joint Repurchase Agreement, 5.35%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $123,251,925

 

 

 

 

 

 

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

 

 

 

 

 

 

a pooled cash account, 4.815%-5.469%, 09/01/33-05/01/38, total 

 

 

 

 

 

 

market value $125,660,940)

 

123,197,000

 

 

 

 

 

Total Repurchase Agreements – (identified cost $270,205,000)

 

270,205,000

 

 

 

 

 

Total Investments – (99.11%) – (identified cost $544,268,040) – (a)

 

544,268,040

 

 

 

 

Other Assets Less Liabilities – (0.89%)

 

4,893,570

 

 

 

 

Net Assets – (100%)

$

549,161,610

 

 

(a)    Aggregate cost for Federal Income Tax Purposes is $544,268,040.

(b)    The interest rates on floating rate securities, shown as of June 30, 2006, may change daily or less frequently and are based on indices of market interests 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. 

(c)    Represents a step-up bond: a bond that pays one coupon rate for an initial period followed by a higher coupon rate.

***See Notes to Financial Statements***

 

29

 

 

 

**DAVIS SERIES, INC.**  

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS FINANCIAL FUND**

 

 

 

**Value**

 

**Shares**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (99.94%)**

 
 

**CAPITAL GOODS – (7.73%)**

 

 

 

 

2,450,000

 

Tyco International Ltd. 

$

67,375,000

 

**CAPITAL MARKETS – (3.38%)**

 

 

 

 

660,300

 

Ameriprise Financial, Inc. 

 

29,495,601

 

**COMMERCIAL BANKS – (5.15%)**

 

 

 

 

1,208,000

 

Commerce Bancorp, Inc. 

 

43,089,360

 

 

75,700

 

ICICI Bank Ltd., ADR (India)

 

1,790,305

 

 

 

 

 

 

44,879,665

 

**COMMERCIAL SERVICES & SUPPLIES – (7.06%)**

 

 

 

 

883,750

 

D&B Corp.*

 

61,579,700

 

**CONSUMER FINANCE – (17.22%)**

 

 

 

 

1,949,000

 

American Express Co. 

 

103,725,780

 

 

815,000

 

First Marblehead Corp. 

 

46,406,100

 

 

 

 

 

 

150,131,880

 

**CONSUMER SERVICES – (2.17%)**

 

 

 

 

791,000

 

H&R Block, Inc. 

 

18,873,260

 

**DIVERSIFIED FINANCIAL SERVICES – (10.36%)**

 

 

 

 

1,019,560

 

JPMorgan Chase & Co. 

 

42,821,520

 

 

872,600

 

Moody’s Corp. 

 

47,521,796

 

 

 

 

 

 

90,343,316

 

**FOOD, BEVERAGE & TOBACCO – (2.91%)**

 

 

 

 

345,000

 

Altria Group, Inc. 

 

25,333,350

 

**LIFE & HEALTH INSURANCE – (1.52%)**

 

 

 

 

208,700

 

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

 

13,210,710

 

**MATERIALS – (2.74%)**

 

 

 

 

459,000

 

Sealed Air Corp. 

 

23,904,720

 

**MULTI-LINE INSURANCE – (11.58%)**

 

 

 

 

826,796

 

American International Group, Inc. 

 

48,822,304

 

 

1,470,600

 

Loews Corp. 

 

52,132,770

 

 

 

 

 

 

100,955,074

 

**PROPERTY & CASUALTY INSURANCE – (8.67%)**

 

 

 

 

337,300

 

FPIC Insurance Group, Inc.*

 

13,036,645

 

 

88,200

 

Markel Corp.*

 

30,605,400

 

 

1,244,000

 

Progressive Corp. (Ohio)

 

31,983,240

 

 

 

 

 

 

75,625,285

 

**REINSURANCE – (11.39%)**

 

 

 

 

225,000

 

Everest Re Group, Ltd. 

 

19,478,250

 

 

1,428,187

 

Transatlantic Holdings, Inc. 

 

79,835,653

 

 

 

 

 

 

99,313,903

 

 

 

30

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS FINANCIAL FUND – (Continued)**

 

 

 

**Value**

 

**Shares/Principal**

 

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**THRIFT & MORTGAGE FINANCE – (8.06%)**

 

 

 

 

947,400

 

Golden West Financial Corp. 

$

70,297,080

 

 

 

 

 

Total Common Stock – (identified cost $423,248,758)

 

871,318,544

 

 

**SHORT TERM INVESTMENTS – (0.15%)**

 

$

355,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $355,156

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 5.00%, 07/01/35, total market value $362,100)

 

355,000

 

 

360,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $360,158

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 5.00%-5.50%, 03/01/34-04/01/36, total market 

 

 

 

 

 

 

value $367,200)

 

360,000

 

 

600,000

 

Nomura Securities International, Inc. Joint Repurchase Agreement, 5.35%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $600,268

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 4.815%-5.469%, 09/01/33-05/01/38, total market 

 

 

 

 

 

 

value $612,000)

 

600,000

 

 

 

 

 

Total Short Term Investments – (identified cost $1,315,000)

 

1,315,000

 

 

 

 

 

Total Investments – (100.09%) – (identified cost $424,563,758) – (a)

 

872,633,544

 

 

 

 

Liabilities Less Other Assets – (0.09%)

 

(791,696

)

 

 

 

Net Assets – (100%)

$

871,841,848

 

 

*Non-Income Producing Security.

 

ADR: American Depository Receipt 

 

(a)    Aggregate cost for Federal Income Tax purposes is $424,563,758.  At June 30, 2006 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

 

Unrealized appreciation

$

448,304,476

 

 

 

 

Unrealized depreciation

 

(234,690

)

 

 

 

Net unrealized appreciation

$

448,069,786

 

 

 

***See Notes to Financial Statements***

 

31

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS APPRECIATION & INCOME FUND**

 

 

**Value**

 

**Shares/Principal**

**Security**

**(Note 1**

**)**

**CONVERTIBLE PREFERRED STOCK – (6.42%)**

 
 

**CAPITAL GOODS – (1.77%)**

 

 

 

 

166,700

 

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

$

7,918,250

 

**PROPERTY & CASUALTY INSURANCE – (1.05%)**

 

 

 

 

192,920

 

Travelers Property Casualty Corp., 4.50%, 04/15/32, Conv. Pfd. 

 

4,730,398

 

**TRANSPORTATION – (1.27%)**

 

 

 

 

161,300

 

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

 

5,685,825

 

**UTILITIES – (2.33%)**

 

 

 

 

221,310

 

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

 

10,459,111

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Preferred Stock – (identified cost $22,730,684)

 

28,793,584

 

 

**CONVERTIBLE BONDS – (38.99%)**

 

**CAPITAL GOODS – (4.99%)**

 

 

 

$

17,600,000

 

Masco Corp., Series B Conv. Sr. Notes, Zero Cpn., 2.98%,

 

 

 

 

 

 

07/20/31 (c)(d)

 

8,162,000

 

 

8,500,000

 

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

 

14,184,375

 

 

 

 

 

 

22,346,375

 

**COMMERCIAL SERVICES & SUPPLIES – (5.56%)**

 

 

 

 

15,710,000

 

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

 

15,258,337

 

 

10,000,000

 

Waste Connections, Inc., Ser. 144A Conv. Sr. Notes, 3.75%, 04/01/26 (b)

 

9,675,000

 

 

 

 

 

 

24,933,337

 

**CONSUMER FINANCE – (2.55%)**

 

 

 

 

11,100,000

 

American Express Co., Conv. Sub. Notes, 1.85%/Zero Cpn., 12/01/33 (e)

 

11,419,125

 

**ENERGY – (4.30%)**

 

 

 

 

12,400,000

 

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

 

 

 

 

 

 

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

 

19,282,000

 

**FOOD & STAPLES RETAILING – (0.81%)**

 

 

 

 

2,800,000

 

Costco Wholesale Corp., Conv. Sub. Notes, Zero Cpn., 1.03%,

 

 

 

 

 

 

08/19/17 (c)(d)

 

3,650,500

 

**INTERNET RETAIL – (1.50%)**

 

 

 

 

7,000,000

 

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

 

6,746,250

 

**MATERIALS – (2.91%)**

 

 

 

 

13,500,000

 

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

 

13,027,500

 

**MOVIES & ENTERTAINMENT – (2.14%)**

 

 

 

 

16,050,000

 

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

 

9,589,875

 

**MULTI-LINE INSURANCE – (3.35%)**

 

 

 

 

2,500,000

 

American International Group, Inc., Conv. Sr. Deb., Zero Cpn., 1.76%,

 

 

 

 

 

 

11/09/31 (c)(d)

 

1,743,750

 

 

13,895,000

 

American International Group, Inc., Conv. Sr. Notes, 0.50%, 05/15/07

 

13,269,725

 

 

 

 

 

 

15,013,475

 

 

 

32

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

**Value**

 

**Principal/Shares**

**Security**

**(Note 1**

**)**

**CONVERTIBLE BONDS – (Continued)**

 
 

**PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES – (0.85%)**

 

 

 

$

4,400,000

 

Valeant Pharmaceuticals International, Conv. Sub. Notes,

 

 

 

 

 

 

4.00%, 11/15/13

$

3,828,000

 

**REAL ESTATE – (2.15%)**

 

 

 

 

8,500,000

 

Vornado Realty L.P., Conv. Sr. Deb., 3.875%, 04/15/25

 

9,626,250

 

**RESIDENTIAL/COMMERCIAL BUILDING – (0.69%)**

 

 

 

 

3,100,000

 

WCI Communities, Inc., Conv. Sr. Sub. Notes, 4.00%, 08/05/23

 

3,072,875

 

**SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT – (7.19%)**

 

 

 

 

5,260,000

 

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

 

5,213,975

 

 

1,500,000

 

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

 

1,269,375

 

 

18,500,000

 

Intel Corp., Ser. 144A Conv. Sub. Deb., 2.95%, 12/15/35 (b)

 

15,655,625

 

 

10,220,000

 

International Rectifier Corp., Conv. Sub. Notes, 4.25%, 07/15/07

 

10,092,250

 

 

 

 

 

 

32,231,225

 

 

 

 

 

Total Convertible Bonds – (identified cost $166,097,468)

 

174,766,787

 

 

**CORPORATE BONDS – (3.34%)**

 

**AUTOMOTIVE RETAIL – (0.38%)**

 

 

 

 

1,900,000

 

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

 

1,716,817

 

**ENERGY – (0.31%)**

 

 

 

 

1,300,000

 

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

 

1,369,410

 

**FOOD, BEVERAGE & TOBACCO – (1.53%)**

 

 

 

 

7,000,000

 

Tyson Foods, Inc., Sr. Notes, 6.60%, 04/01/16

 

6,854,337

 

**HOUSEHOLD & PERSONAL PRODUCTS – (1.12%)**

 

 

 

 

6,000,000

 

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

 

5,008,974

 

 

 

 

 

Total Corporate Bonds  – (identified cost $15,648,049)

 

14,949,538

 

 

**COMMON STOCK – (33.97%)**

 

**AUTOMOTIVE RETAIL – (1.24%)**

 

 

 

 

62,900

 

AutoZone, Inc.*

 

5,547,780

 

**CAPITAL GOODS – (1.11%)**

 

 

 

 

140,400

 

Masco Corp. 

 

4,161,456

 

 

47,700

 

Quanta Services, Inc.*

 

826,641

 

 

 

 

 

 

4,988,097

 

**COMMERCIAL BANKS – (0.94%)**

 

 

 

 

240,723

 

HSBC Holdings PLC (United Kingdom)

 

4,235,557

 

**COMMERCIAL SERVICES & SUPPLIES – (1.36%)**

 

 

 

 

168,000

 

Waste Connections, Inc.*

 

6,115,200

 

 

 

33

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

**Value**

 

**Shares**

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**DEPARTMENT STORES – (3.12%)**

 

 

 

 

140,350

 

J. C. Penney Co., Inc. 

$

9,475,029

 

 

76,000

 

Kohl’s Corp.*

 

4,493,120

 

 

 

 

 

 

13,968,149

 

**DIVERSIFIED FINANCIAL SERVICES – (1.20%)**

 

 

 

 

111,500

 

Citigroup Inc. 

 

5,378,760

 

**ENERGY – (0.33%)**

 

 

 

 

14,500

 

Occidental Petroleum Corp. 

 

1,486,975

 

**FOOD & STAPLES RETAILING – (0.83%)**

 

 

 

 

64,900

 

Costco Wholesale Corp. 

 

3,710,982

 

**FOOD, BEVERAGE & TOBACCO – (4.69%)**

 

 

 

 

275,000

 

Coca-Cola Co. 

 

11,830,500

 

 

617,300

 

Tyson Foods, Inc., Class A

 

9,173,078

 

 

 

 

 

 

21,003,578

 

**HEALTH CARE EQUIPMENT & SERVICES – (2.88%)**

 

 

 

 

256,600

 

Universal Health Services, Inc., Class B

 

12,896,716

 

**HOUSEHOLD & PERSONAL PRODUCTS – (2.35%)**

 

 

 

 

339,200

 

Avon Products, Inc. 

 

10,515,200

 

**MATERIALS – (0.93%)**

 

 

 

 

80,000

 

Sealed Air Corp. 

 

4,166,400

 

**MOVIES & ENTERTAINMENT – (0.52%)**

 

 

 

 

115,000

 

News Corp., Class B

 

2,320,700

 

**MULTI-LINE INSURANCE – (1.17%)**

 

 

 

 

89,100

 

American International Group, Inc. 

 

5,261,355

 

**REAL ESTATE – (8.46%)**

 

 

 

 

245,667

 

General Growth Properties, Inc. 

 

11,069,755

 

 

245,160

 

SL Green Realty Corp. 

 

26,837,665

 

 

 

 

 

 

37,907,420

 

**SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT– (1.63%)**

 

 

 

 

120,000

 

Fairchild Semiconductor International, Inc.*

 

2,180,400

 

 

131,700

 

International Rectifier Corp.*

 

5,146,836

 

 

 

 

 

 

7,327,236

 

**SOFTWARE & SERVICES – (1.21%)**

 

 

 

 

103,000

 

SAP AG, ADR (Germany)

 

5,409,560

 

 

 

 

 

Total Common Stock – (identified cost $103,289,966)

 

152,239,665

 

 

 

34

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

**Value**

 

**Principal**

**Security**

**(Note 1**

**)**

**SHORT TERM INVESTMENTS – (16.72%)**

 
 

$

20,276,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $20,284,921 

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 5.00%, 07/01/35, total market value $20,681,520)

$

20,276,000

 

 

20,506,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 5.28%, 

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $20,515,023 

 

 

 

 

 

 

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

 

 

 

 

 

 

pooled cash account, 5.00%-5.50%, 03/01/34-04/01/36, total 

 

 

 

 

 

 

market value $20,916,120)

 

20,506,000

 

 

34,176,000

 

Nomura Securities International, Inc. Joint Repurchase Agreement, 5.35%

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $34,191,237 

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 4.815%-5.469%, 09/01/33-05/01/38, total market

 

 

 

 

 

 

value $34,859,520)

 

34,176,000

 

 

 

 

 

Total Short Term Investments – (identified cost $74,958,000)

 

74,958,000

 

 

 

 

 

Total Investments – (99.44%) – (identified cost $382,724,167) – (a)

 

445,707,574

 

 

 

 

Other Assets Less Liabilities – (0.56%)

 

2,495,131

 

 

 

 

Net Assets – (100.00%)

$

448,202,705

 

 

*Non-Income Producing Security.

ADR:  American Depository Receipt

(a)    Aggregate cost for Federal Income Tax purposes is $382,846,182.  At June 30, 2006 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

Unrealized appreciation

$

68,962,345

 

 

 

 

Unrealized depreciation

 

(6,100,953

)

 

 

 

Net unrealized appreciation

$

62,861,392

 

 

(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 $38,358,125, or 8.56% of the Fund’s net assets, as of June 30, 2006.

(c)    As of June 30, 2006, zero coupon bonds represented $23,146,125, or 5.16% of the Fund’s net assets. Because zero coupon bonds pay no interest their value is generally more volatile than the value of other debt securities.

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

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

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

***See Notes to Financial Statements***

 

35

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

**DAVIS REAL ESTATE FUND**

 

 

**Value**

 

**Shares**

**Security**

**(Note 1**

**)**

**COMMON STOCK – (93.94%)**

 
 

**APARTMENT REITS – (5.66%)**

 

 

 

 

604,800

 

American Campus Communities, Inc. 

$

15,029,280

 

 

910,721

 

United Dominion Realty Trust, Inc. 

 

25,509,295

 

 

 

 

 

 

40,538,575

 

**DIVERSIFIED REITS – (12.24%)**

 

 

 

 

799,300

 

Cousins Properties, Inc. 

 

24,722,349

 

 

734,073

 

Duke Realty Corp. 

 

25,802,666

 

 

1,054,900

 

Spirit Finance Corp. 

 

11,878,174

 

 

258,662

 

Vornado Realty Trust

 

25,232,478

 

 

 

 

 

 

87,635,667

 

**HEALTH CARE REITS – (3.17%)**

 

 

 

 

670,800

 

Ventas, Inc. 

 

22,726,704

 

**MORTGAGE REITS – (1.39%)**

 

 

 

 

384,300

 

Gramercy Capital Corp. 

 

9,953,370

 

**OFFICE PROPERTY REITS – (21.53%)**

 

 

 

 

419,013

 

Alexandria Real Estate Equities, Inc. 

 

37,158,073

 

 

306,242

 

Boston Properties, Inc. 

 

27,684,277

 

 

415,400

 

Columbia Equity Trust, Inc. 

 

6,380,544

 

 

729,238

 

Corporate Office Properties Trust

 

30,686,335

 

 

477,658

 

SL Green Realty Corp. 

 

52,289,221

 

 

 

 

 

 

154,198,450

 

**REAL ESTATE OPERATIONS/DEVELOPMENT – (15.18%)**

 

 

 

 

1,644,983

 

Brixton PLC (United Kingdom)

 

14,578,329

 

 

371,700

 

Capital & Regional PLC (United Kingdom)

 

6,952,526

 

 

330,819

 

Derwent Valley Holdings PLC (United Kingdom)

 

9,592,255

 

 

821,884

 

Forest City Enterprises, Inc., Class A

 

41,020,230

 

 

433,100

 

Hammerson PLC (United Kingdom)

 

9,482,527

 

 

553,800

 

Liberty International PLC (United Kingdom)

 

10,906,534

 

 

259,500

 

St. Joe Company

 

12,077,130

 

 

360,600

 

Slough Estates PLC (United Kingdom)

 

4,077,617

 

 

 

 

 

 

108,687,148

 

**REGIONAL MALL REITS – (10.30%)**

 

 

 

 

815,557

 

General Growth Properties, Inc. 

 

36,748,998

 

 

190,600

 

Macerich Co. 

 

13,380,120

 

 

135,200

 

Pennsylvania REIT

 

5,458,024

 

 

218,853

 

Simon Property Group, Inc. 

 

18,151,668

 

 

 

 

 

 

73,738,810

 

 

 

36

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

**Value**

 

**Shares**

**Security**

**(Note 1**

**)**

**COMMON STOCK – (Continued)**

 
 

**SHOPPING CENTER REITS – (13.41%)**

 

 

 

 

560,708

 

Developers Diversified Realty Corp. 

$

29,257,743

 

 

732,590

 

Kimco Realty Corp. 

 

26,732,209

 

 

229,600

 

Pan Pacific Retail Properties, Inc. 

 

15,927,352

 

 

387,978

 

Regency Centers Corp. 

 

24,112,833

 

 

 

 

 

 

96,030,137

 

**STORAGE REITS – (1.04%)**

 

 

 

 

393,500

 

U-Store-It Trust

 

7,421,410

 

**TRANSPORTATION – (2.91%)**

 

 

 

 

370,000

 

Alexander & Baldwin, Inc. 

 

16,379,900

 

 

85,700

 

Florida East Coast Industries, Inc. 

 

4,484,681

 

 

 

 

 

 

20,864,581

 

**WAREHOUSE & INDUSTRIAL REITS – (7.11%)**

 

 

 

 

319,700

 

AMB Property Corp. 

 

16,160,835

 

 

666,792

 

ProLogis

 

34,753,199

 

 

 

 

 

 

50,914,034

 

 

 

 

 

Total Common Stock – (identified cost $452,441,483)

 

672,708,886

 

 

**PREFERRED STOCK – (0.45%)**

 

**APARTMENT REITS – (0.45%)**

 

 

 

 

43,700

 

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

 

2,185,000

 

 

32,000

 

Equity Residential, 8.60%, Series D, Cum. Pfd. 

 

819,680

 

 

10,000

 

Equity Residential, 9.125%, Series C, Cum. Pfd. 

 

250,700

 

 

 

 

 

Total Preferred Stock – (identified cost $2,204,017)

 

3,255,380

 

 

 

37

 

 

 

**DAVIS SERIES, INC.**

SCHEDULE OF INVESTMENTS AT JUNE 30, 2006 *(Unaudited)*

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

 

 

**Value**

 

**Principal**

**Security**

**(Note 1**

**)**

**SHORT TERM INVESTMENTS – (5.52%)**

 
 

$

10,699,000

 

Banc of America Securities LLC Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $10,703,708 

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 5.00%, 07/01/35, total market value $10,912,980)

$

10,699,000

 

 

10,819,000

 

Goldman, Sachs & Co. Joint Repurchase Agreement, 5.28%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $10,823,760 

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account 5.00%-5.50%, 03/01/34-04/01/36, total market

 

 

 

 

 

 

value $11,035,380)

 

10,819,000

 

 

18,032,000

 

Nomura Securities International, Inc. Joint Repurchase Agreement, 5.35%,

 

 

 

 

 

 

07/03/06, dated 06/30/06, repurchase value of $18,040,039 

 

 

 

 

 

 

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

 

 

 

 

 

 

cash account, 4.815%-5.469%, 09/01/33-05/01/38, total market

 

 

 

 

 

 

value $18,392,640)

 

18,032,000

 

 

 

 

 

Total Short Term Investments – (identified cost $39,550,000)

 

39,550,000

 

 

 

 

 

Total Investments – (99.91%) – (identified cost $494,195,500) – (a)

 

715,514,266

 

 

 

 

Other Assets Less Liabilities– (0.09%)

 

618,108

 

 

 

 

Net Assets – (100.00%)

$

716,132,374

 

 

(a)    Aggregate cost for Federal Income Tax purposes is $495,718,135.  At June 30, 2006 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:

 

 

 

 

Unrealized appreciation

$

226,598,150

 

 

 

 

Unrealized depreciation

 

(6,802,019

)

 

 

 

Net unrealized appreciation

$

219,796,131

 

 

 

 

 

 

 

***See Notes to Financial Statements***

 

 

 

38

 

 

 

**DAVIS SERIES, INC.**

STATEMENTS OF ASSETS AND LIABILITIES

At June 30, 2006 *(Unaudited)*

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**ASSETS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in securities,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at value* (see accompanying

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of Investments) 

$

886,143,764

 

$

47,130,142

 

$

544,268,040

 

$

872,633,544

 

$

445,707,574

 

$

715,514,266

 

Cash

 

5,036

 

 

4,521

 

 

14,174

 

 

16,336

 

 

3,723

 

 

7,206

 

Cash – Foreign currencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(cost $83,410)

 

83,047

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

Receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and interest

 

1,480,837

 

 

404,411

 

 

1,794,625

 

 

817,115

 

 

1,651,031

 

 

1,799,709

 

Capital stock sold

 

5,043,162

 

 

305,638

 

 

33,605,620

 

 

4,502,351

 

 

3,067,378

 

 

3,809,693

 

Investment securities sold

 

1,673,542

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

Prepaid expenses

 

32,100

 

 

2,250

 

 

16,420

 

 

19,325

 

 

20,000

 

 

7,970

 

Total assets

 

894,461,488

 

 

47,846,962

 

 

579,698,879

 

 

877,988,671

 

 

450,449,706

 

 

721,138,844

 

**LIABILITIES:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital stock redeemed

 

2,268,757

 

 

1,511,291

 

 

1,186,186

 

 

4,913,375

 

 

1,566,740

 

 

3,968,176

 

Investment securities purchased

 

3,978,577

 

 

–

 

 

28,985,104

 

 

–

 

 

35,803

 

 

–

 

Distributions payable

 

–

 

 

43,197

 

 

12,593

 

 

–

 

 

–

 

 

–

 

Accrued expenses

 

323,417

 

 

71,231

 

 

141,628

 

 

248,121

 

 

133,760

 

 

239,525

 

Accrued management fees

 

469,070

 

 

12,086

 

 

211,758

 

 

468,997

 

 

260,460

 

 

387,954

 

Distribution and service plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fees (Note 3)

 

566,872

 

 

37,971

 

 

–

 

 

516,330

 

 

250,238

 

 

410,815

 

Total liabilities

 

7,606,693

 

 

1,675,776

 

 

30,537,269

 

 

6,146,823

 

 

2,247,001

 

 

5,006,470

 

**NET ASSETS**

$

886,854,795

 

$

46,171,186

 

$

549,161,610

 

$

871,841,848

 

$

448,202,705

 

$

716,132,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**NET ASSETS CONSISTS OF:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par value of shares of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

capital stock

$

355,261

 

$

84,497

 

$

5,491,616

 

$

207,510

 

$

152,613

 

$

158,748

 

Additional paid-in capital

 

701,670,070

 

 

53,835,742

 

 

543,669,994

 

 

397,023,687

 

 

366,623,631

 

 

410,798,307

 

Undistributed net investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income (loss)

 

(4,336,253

)

 

–

 

 

–

 

 

(1,001,482

)

 

1,922,307

 

 

(1,918,374

)

Accumulated net realized gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(losses) from investments and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

foreign currency  transactions

 

10,039,907

 

 

(6,927,893

)

 

–

 

 

27,542,347

 

 

16,520,747

 

 

85,777,940

 

Net unrealized appreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transactions

 

179,125,810

 

 

(821,160

)

 

–

 

 

448,069,786

 

 

62,983,407

 

 

221,315,753

 

Net Assets

$

886,854,795

 

$

46,171,186

 

$

549,161,610

 

$

871,841,848

 

$

448,202,705

 

$

716,132,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Including repurchase agreements of $270,205,000 and $74,958,000 for Davis Government Money Market Fund and Davis Appreciation & Income Fund, respectively, and cost of $707,032,556, $47,951,302, $544,268,040, $424,563,758, $382,724,167, and $494,195,500 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.

 

39

 

 

 

**DAVIS SERIES, INC.**

STATEMENTS OF ASSETS AND LIABILITIES – (Continued)

At June 30, 2006 *(Unaudited)*

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**CLASS A SHARES**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

546,632,905

 

$

19,640,829

 

$

508,223,018

 

$

642,702,750

 

$

279,062,782

 

$

451,258,077

 

Shares outstanding

 

21,228,380

 

 

3,590,294

 

 

508,223,018

 

 

14,963,208

 

 

9,493,407

 

 

10,007,823

 

Net asset value and redemption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets/shares outstanding)

$

25.75

 

$

5.47

 

$

1.00

 

$

42.95

 

$

29.40

 

$

45.09

 

Maximum offering price per

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share (100/95.25 of net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

asset value)

$

27.03

 

$

5.74

 

$

1.00

 

$

45.09

 

$

30.87

 

$

47.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS B SHARES**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

88,858,288

 

$

20,326,422

 

$

32,760,327

 

$

131,060,127

 

$

61,934,925

 

$

71,960,935

 

Shares outstanding

 

3,925,520

 

 

3,725,990

 

 

32,760,327

 

 

3,347,044

 

 

2,132,119

 

 

1,606,992

 

Net asset value, offering, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

redemption price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets/shares outstanding)

$

22.64

 

$

5.46

 

$

1.00

 

$

39.16

 

$

29.05

 

$

44.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS C SHARES**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

193,059,879

 

$

6,119,997

 

$

8,178,265

 

$

87,417,259

 

$

65,386,880

 

$

102,731,511

 

Shares outstanding

 

8,170,714

 

 

1,118,191

 

 

8,178,265

 

 

2,196,688

 

 

2,219,688

 

 

2,276,147

 

Net asset value, offering, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

redemption price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets/shares outstanding)

$

23.63

 

$

5.47

 

$

1.00

 

$

39.80

 

$

29.46

 

$

45.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS Y SHARES**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

$

58,303,723

 

$

83,938

 

$

–

 

$

10,661,712

 

$

41,818,118

 

$

90,181,851

 

Shares outstanding

 

2,201,460

 

 

15,221

 

 

–

 

 

244,032

 

 

1,416,107

 

 

1,983,809

 

Net asset value, offering, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

redemption price per share (net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets/shares outstanding)

$

26.48

 

$

5.51

 

$

–

 

$

43.69

 

$

29.53

 

$

45.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

***See Notes to Financial Statements***

 

40

 

 

 

**DAVIS SERIES, INC.**

STATEMENTS OF OPERATIONS

For the six months ended June 30, 2006 *(Unaudited)*

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**INVESTMENT INCOME (LOSS):**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated companies*

$

4,247,478

 

$

**–**

 

$

–

 

$

4,478,600

 

$

2,052,889

 

$

10,616,540

 

Affiliated companies

 

41,498

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

Interest

 

1,149,289

 

 

991,012

 

 

11,142,491

 

 

8,257

 

 

5,591,588

 

 

1,414,749

 

Total income

 

5,438,265

 

 

991,012

 

 

11,142,491

 

 

4,486,857

 

 

7,644,477

 

 

12,031,289

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees (Note 2)

 

2,660,486

 

 

70,824

 

 

1,148,573

 

 

2,823,604

 

 

1,488,342

 

 

2,263,715

 

Custodian fees

 

81,315

 

 

15,329

 

 

28,931

 

 

48,907

 

 

31,340

 

 

54,666

 

Transfer agent fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

366,294

 

 

25,529

 

 

61,315

 

 

294,608

 

 

92,218

 

 

198,368

 

Class B

 

82,292

 

 

19,584

 

 

4,369

 

 

150,577

 

 

44,133

 

 

57,899

 

Class C

 

130,552

 

 

6,786

 

 

832

 

 

70,945

 

 

34,983

 

 

60,449

 

Class Y

 

28,503

 

 

181

 

 

–

 

 

7,867

 

 

5,891

 

 

9,992

 

Audit fees

 

9,000

 

 

6,600

 

 

10,200

 

 

16,200

 

 

9,000

 

 

10,800

 

Legal fees

 

7,228

 

 

412

 

 

3,922

 

 

7,529

 

 

3,664

 

 

5,956

 

Accounting fees (Note 2)

 

3,252

 

 

1,248

 

 

18,750

 

 

7,248

 

 

3,750

 

 

4,752

 

Reports to shareholders

 

89,980

 

 

6,248

 

 

35,497

 

 

98,032

 

 

40,471

 

 

105,001

 

Directors’ fees and expenses

 

41,748

 

 

2,263

 

 

22,620

 

 

42,994

 

 

20,868

 

 

34,282

 

Registration and filing fees

 

52,495

 

 

26,251

 

 

37,037

 

 

32,500

 

 

44,997

 

 

46,062

 

Interest expense

 

–

 

 

–

 

 

–

 

 

22,620

 

 

–

 

 

–

 

Miscellaneous

 

5,731

 

 

2,498

 

 

4,529

 

 

7,988

 

 

3,964

 

 

7,588

 

Distribution plan payments (Note 3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

633,993

 

 

21,138

 

 

–

 

 

593,895

 

 

257,253

 

 

495,379

 

Class B

 

476,982

 

 

112,263

 

 

–

 

 

808,730

 

 

343,723

 

 

406,484

 

Class C

 

869,865

 

 

27,538

 

 

–

 

 

454,153

 

 

301,727

 

 

507,306

 

Total expenses

 

5,539,716

 

 

344,692

 

 

1,376,575

 

 

5,488,397

 

 

2,726,324

 

 

4,268,699

 

Expenses paid indirectly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Note 6)

 

(4,333

)

 

(34

)

 

(100

)

 

(58

)

 

(6,140

)

 

(196

)

Net expenses

 

5,535,383

 

 

344,658

 

 

1,376,475

 

 

5,488,339

 

 

2,720,184

 

 

4,268,503

 

Net investment income (loss)

 

(97,118

)

 

646,354

 

 

9,766,016

 

 

(1,001,482

)

 

4,924,293

 

 

7,762,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Net realized gain (loss) from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated companies

 

18,461,167

 

 

(184,236

)

 

–

 

 

23,492,521

 

 

10,359,975

 

 

44,396,696

 

Affiliated companies

 

(1,244,178

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

Foreign currency transactions

 

(36,161

)

 

–

 

 

–

 

 

–

 

 

–

 

 

10,156

 

Net change in unrealized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

appreciation (depreciation) on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investments

 

26,134,861

 

 

(113,332

)

 

–

 

 

(11,766,237

)

 

7,785,404

 

 

26,637,586

 

Net realized and unrealized gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(loss) on investments and foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

currency

 

43,315,689

 

 

(297,568

)

 

–

 

 

11,726,284

 

 

18,145,379

 

 

71,044,438

 

Net increase in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

resulting from operations

$

43,218,571

 

$

348,786

 

$

9,766,016

 

$

10,724,802

 

$

23,069,672

 

$

78,807,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Net of foreign taxes withheld

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as follows

$

334,816

 

$

**–**

 

$

**–**

 

$

–

 

$

7,118

 

$

–

 

 

***See Notes to Financial Statements***

 

41

 

 

 

**DAVIS SERIES, INC.**

STATEMENTS OF CHANGES IN NET ASSETS

For the six months ended June 30, 2006 *(Unaudited)*

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**OPERATIONS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

$

(97,118

)

$

646,354

 

$

9,766,016

 

$

(1,001,482

)

$

4,924,293

 

$

7,762,786

 

Net realized gain (loss) from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investments and foreign 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

currency transactions

 

17,180,828

 

 

(184,236

)

 

–

 

 

23,492,521

 

 

10,359,975

 

 

44,406,852

 

Net change in unrealized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

appreciation (depreciation) on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investments

 

26,134,861

 

 

(113,332

)

 

–

 

 

(11,766,237

)

 

7,785,404

 

 

26,637,586

 

Net increase in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

resulting from operations

 

43,218,571

 

 

348,786

 

 

9,766,016

 

 

10,724,802

 

 

23,069,672

 

 

78,807,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DIVIDENDS AND**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DISTRIBUTIONS TO**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**SHAREHOLDERS FROM:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

–

 

 

(300,971

)

 

(9,003,717

)

 

–

 

 

(1,505,793

)

 

(1,840,558

)

Class B

 

–

 

 

(276,987

)

 

(639,617

)

 

–

 

 

(253,466

)

 

(187,048

)

Class C

 

–

 

 

(66,778

)

 

(122,682

)

 

–

 

 

(228,423

)

 

(245,648

)

Class Y

 

–

 

 

(1,618

)

 

–

 

 

–

 

 

(261,594

)

 

(448,595

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CAPITAL SHARE**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**TRANSACTIONS**:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets resulting from capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share transactions (Note 5) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

73,424,967

 

 

422,220

 

 

36,162,350

 

 

21,098,670

 

 

42,037,253

 

 

33,034,781

 

Class B

 

(13,126,896

)

 

(4,741,009

)

 

(2,492,322

)

 

(62,817,191

)

 

(16,875,461

)

 

(24,782,657

)

Class C

 

33,910,376

 

 

796,970

 

 

2,270,939

 

 

(7,902,909

)

 

7,114,278

 

 

(3,557,538

)

Class Y

 

5,147,054

 

 

(30,027

)

 

–

 

 

(1,320,517

)

 

2,712,902

 

 

1,357,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total increase (decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in net assets

 

142,574,072

 

 

(3,849,414

)

 

35,940,967

 

 

(40,217,145

)

 

55,809,368

 

 

82,137,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**NET ASSETS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

744,280,723

 

 

50,020,600

 

 

513,220,643

 

 

912,058,993

 

 

392,393,337

 

 

633,994,730

 

End of period*

$

886,854,795

 

$

46,171,186

 

$

549,161,610

 

$

871,841,848

 

$

448,202,705

 

$

716,132,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Including undistributed net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income (loss) of

$

(4,336,253

)

$

–

 

$

**–**

 

$

(1,001,482

)

$

1,922,307

 

$

(1,918,374

)

 

 

***See Notes to Financial Statements***

 

42

 

 

 

**DAVIS SERIES, INC.**

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended December 31, 2005

 

 

 

 

 

 

**Davis**

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Government**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Money Market**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

**OPERATIONS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

$

(422,821

)

$

1,145,235

 

$

14,583,614

 

$

(1,943,026

)

$

6,294,705

 

$

7,583,552

 

Net realized gain (loss) from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investments, options, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transactions

 

20,697,247

 

 

(244,163

)

 

–

 

 

61,134,819

 

 

16,194,444

 

 

76,881,565

 

Net change in unrealized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

appreciation (depreciation) on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investments

 

31,135,605

 

 

(599,392

)

 

–

 

 

3,880,395

 

 

(1,220,091

)

 

(11,583,489

)

Net increase in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

resulting from operations

 

51,410,031

 

 

301,680

 

 

14,583,614

 

 

63,072,188

 

 

21,269,058

 

 

72,881,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DIVIDENDS AND**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**DISTRIBUTIONS TO**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**SHAREHOLDERS FROM:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

(4,251,216

)

 

(538,167

)

 

(13,274,630

)

 

–

 

 

(4,274,477

)

 

(7,183,940

)

Class B

 

(191,375

)

 

(639,096

)

 

(1,117,620

)

 

–

 

 

(1,068,191

)

 

(1,291,175

)

Class C

 

(294,601

)

 

(128,274

)

 

(191,364

)

 

–

 

 

(603,910

)

 

(1,225,122

)

Class Y

 

(406,750

)

 

(5,297

)

 

 

 

 

–

 

 

(816,652

)

 

(1,796,648

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains from investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

(10,852,744

)

 

–

 

 

–

 

 

(26,383,354

)

 

(4,940,686

)

 

(29,108,094

)

Class B

 

(2,666,107

)

 

–

 

 

–

 

 

(9,364,918

)

 

(1,739,725

)

 

(7,151,456

)

Class C

 

(3,817,725

)

 

–

 

 

–

 

 

(4,396,808

)

 

(1,206,649

)

 

(7,518,099

)

Class Y

 

(756,743

)

 

–

 

 

–

 

 

(498,295

)

 

(817,068

)

 

(6,148,349

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CAPITAL SHARE**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**TRANSACTIONS**:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets resulting from capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share transactions (Note 5) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

114,647,740

 

 

659,343

 

 

(46,589,118

)

 

12,529,196

 

 

71,612,560

 

 

52,659,611

 

Class B

 

(12,821,053

)

 

(9,161,956

)

 

(11,729,691

)

 

(87,496,299

)

 

(6,725,200

)

 

(40,170,726

)

Class C

 

52,699,956

 

 

(1,219,277

)

 

(841,326

)

 

(11,642,782

)

 

20,055,306

 

 

6,381,004

 

Class Y

 

31,541,664

 

 

(101,512

)

 

–

 

 

1,419,527

 

 

6,345,866

 

 

8,661,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total increase (decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in net assets

 

214,241,077

 

 

(10,832,556

)

 

(59,160,135

)

 

(62,761,545

)

 

97,090,232

 

 

38,990,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**NET ASSETS:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

530,039,646

 

 

60,853,156

 

 

572,380,778

 

 

974,820,538

 

 

295,303,105

 

 

595,004,250

 

End of year*

$

744,280,723

 

$

50,020,600

 

$

513,220,643

 

$

912,058,993

 

$

392,393,337

 

$

633,994,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Including overdistributed net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income of

$

(4,239,135

)

$

–

 

$

**–**

 

$

**–**

 

$

(752,710

)

$

(6,959,311

)

 

***See Notes to Financial Statements***

 

 

43

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS

June 30, 2006 *(Unaudited)*

 

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

 

Davis Series, Inc. (the “Company”) is registered under the Investment Company Act of 1940 (the “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 “the Funds”):

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

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

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

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

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

 

44

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

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

 

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

 

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

 

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

 

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

 

 

45

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

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

 

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. Dollar equivalent of the amounts actually received or paid.  Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. The Funds include foreign currency gains and losses realized on the sale of investments together with market gains and losses on such investments in the statement 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.  At June 30, 2006, Davis Government Bond Fund had approximately $91,000 of post October 2005 losses available to offset future capital gains, if any, which expire in 2014. At June 30, 2006, Davis Opportunity Fund had approximately $5,831,000 of post October 2005 losses available to offset future capital gains, if any, which expire in 2014.  At June 30, 2006, Davis Government Bond Fund had available for Federal Income Tax purposesunused capital loss carryforwards as follows:

 

 

 

**DAVIS**

 

 

 

 

 

 

 

**GOVERNMENT**

 

 

 

 

 

 

 

**BOND**

 

 

 

 

 

 

 

**FUND**

 

 

 

 

 

**Expiring**

 

 

 

 

 

 

 

 

 

 

12/31/2007

 

$

1,973,000

 

 

 

 

 

 

 

12/31/2008

 

 

906,000

 

 

 

 

 

 

 

12/31/2009

 

 

–

 

 

 

 

 

 

 

12/31/2010

 

 

–

 

 

 

 

 

 

 

12/31/2011

 

 

2,128,000

 

 

 

 

 

 

 

12/31/2012

 

 

1,243,000

 

 

 

 

 

 

 

12/31/2013

 

 

403,000

 

 

 

 

 

 

 

**Total**

 

$

6,653,000

 

 

 

 

 

 

 

 

**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.

 

46

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

**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.  Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.

 

**I.**     **DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -** Dividends and distributions to shareholders are recorded on the ex-dividend date. Net investment income (loss), net realized gains (losses), and net unrealized appreciation (depreciation) of investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales, paydowns on fixed income securities, foreign currency transactions, net operating losses, passive foreign investment company shares, distributions from real estate investment trusts, and distributions in connection with redemption of Fund shares. 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 taxpurposes.  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. 

 

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

 

Advisory fees are paid monthly to Davis Advisors, the Funds’ investment adviser (the “Adviser”).  The fee for the Davis Government Money Market Fund is 0.50% of the first $250 million of average net assets, 0.45% of the next $250 million, and 0.40% of average net assets in excess of $500 million. The fee for each of the Davis Opportunity Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund is 0.75% for the first $250 million of average net assets, 0.65% on the next $250 million, and 0.55% of the average net assets in excess of $500 million.  Advisory fees paid during the six months ended June 30, 2006, approximated 0.64%, 0.48%,0.63%, 0.71%, and 0.66% of average net assets for the Davis Opportunity Fund, Davis Government Money Market Fund, Davis Financial Fund,Davis Appreciation & Income Fund, and Davis Real Estate Fund, respectively. The fee for the Davis Government Bond Fund is 0.30%.

 

Boston Financial Data Services, Inc. (“BFDS”) is the Funds’ primary transfer agent.  The Adviser is also paid for certain transfer agent services. The fee for these services for the six months ended June 30, 2006 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 $26,553,$2,719,$4,670, $34,619, $12,693, and $19,185, 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 forcertain accounting services.  The fee for these services for the six months ended June 30, 2006 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 $3,252,$1,248,$18,750,$7,248, $3,750, and $4,752, 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.

 

47

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

**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 six months ended June 30, 2006, Davis Distributors, LLC, the Funds’ Underwriter (the “Underwriter” or “Distributor”) received $934,656,$14,495, $185,818, 369,526, and $437,079 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 $142,843, $2,094, $27,419, $57,076, and $68,502 was retained by the Underwriter and the remaining $791,813, $12,401, $158,399, $312,450, and $368,577 was re-allowed to investment dealers. The Underwriter paid the costs of prospectuses, in excess of those required to be filed as part of the Funds’ registration statement, sales literature, and other expenses assumed or incurred in connectionwith 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 six months ended June 30, 2006 was $633,993, $21,138, $593,895, $257,253, and $495,379, respectively.

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

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

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

 

48

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

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

 

During the six months ended June 30, 2006, 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 $358,629,$84,308, $608,930, $258,316, and $305,806, respectively and service fees of $118,353, $27,955, $199,800, $85,407, and $100,678, respectively.

 

Commission advances by the Distributor during the six months ended June 30, 2006 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 $174,521, $1,728, $46,800, $70,501, and $56,551, respectively, all of which was re-allowed to qualified selling dealers.

 

The Distributor intends to seek payment from Class B shares of the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund in the amounts of $2,652,299, $5,012,868, $25,202,651, $7,504,395, and $14,564,969, respectively, representing the cumulative commission advances by the Distributor on the sale of the Funds’ Class B shares, plus interest, reduced by cumulative distribution fees paid by the Funds and cumulative contingent deferred sales charges paid by redeeming shareholders.  The Funds have no contractual obligation to pay any such distribution charges****and the amounts, if any, timing and condition of such payments are solely within the discretion of the Directors who 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 six months ended June 30, 2006, 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 $52,515, $33,453, $85,846, $37,895, and $33,955, respectively.

 

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

 

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

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

 

49

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

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

 

During the six month period ended June 30, 2006, 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 fees of$652,399,$20,654,$340,615, $226,295, and $380,480, respectively, and service fees of $217,466,$6,884, $113,538, $75,432, and $126,826, respectively.  

 

Commission advances by the Distributor during the six months ended June 30, 2006, 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 $429,534, $5,198, $29,150, $97,487, $120,685, respectively, all of which was re-allowed to qualified selling dealers.

 

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 six months ended June 30, 2006, the Distributor received $11,615, $592, $3,680, $4,520, and $9,379 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 six months ended June 30, 2006 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

$

286,492,378

 

$

15,538,129

 

$

–

 

$

116,365,586

 

$

187,132,059

 

Proceeds of sales

$

201,235,379

 

$

14,036,938

 

$

53,839,558

 

$

54,063,613

 

$

128,935,606

 

 

 

50

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

**NOTE 5 – CAPITAL STOCK**

 

At June 30, 2006, there were 10 billion shares of capital stock ($0.01 par value per share) authorized, of which 550 million shares each are designated to the Davis Opportunity Fund, Davis Government Bond Fund, Davis Financial Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund, and 4.1 billion shares are designated to the Davis Government Money Market Fund. Transactions in capital stock were as follows: 

 

**CLASS A**

**Six months ended June 30, 2006**

 

**(Unaudited)**

 

 

 

 

 

**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

 

4,554,810

 

 

966,219

 

 

331,483,716

 

 

1,739,689

 

 

2,064,346

 

 

1,729,493

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

–

 

 

44,326

 

 

8,971,812

 

 

–

 

 

42,461

 

 

38,467

 

 

 

4,554,810

 

 

1,010,545

 

 

340,455,528

 

 

1,739,689

 

 

2,106,807

 

 

1,767,960

 

Shares redeemed

 

(1,720,472

)

 

(933,859

)

 

(304,293,178

)

 

(1,249,902

)

 

(653,108

)

 

(1,020,325

)

Net increase

 

2,834,338

 

 

76,686

 

 

36,162,350

 

 

489,787

 

 

1,453,699

 

 

747,635

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

117,761,806

 

$

5,297,927

 

$

331,483,716

 

$

74,822,566

 

$

59,626,373

 

$

76,028,571

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

–

 

 

243,048

 

 

8,971,812

 

 

–

 

 

1,233,924

 

 

1,747,205

 

 

 

117,761,806

 

 

5,540,975

 

 

340,455,528

 

 

74,822,566

 

 

60,860,297

 

 

77,775,776

 

Cost of shares redeemed

 

(44,336,839

)

 

(5,118,755

)

 

(304,293,178

)

 

(53,723,896

)

 

(18,823,044

)

 

(44,740,995

)

Net increase

$

73,424,967

 

$

422,220

 

$

36,162,350

 

$

21,098,670

 

$

42,037,253

 

$

33,034,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS A**

**Year ended December 31, 2005**

 

 

 

 

 

**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

 

7,474,120

 

 

1,195,213

 

 

523,985,374

 

 

2,416,490

 

 

3,262,203

 

 

2,626,293

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

614,243

 

 

80,966

 

 

13,239,222

 

 

590,153

 

 

269,698

 

 

863,281

 

 

 

8,088,363

 

 

1,276,179

 

 

537,224,596

 

 

3,006,643

 

 

3,531,901

 

 

3,489,574

 

Shares redeemed

 

(3,250,613

)

 

(1,157,922

)

 

(583,813,714

)

 

(2,761,678

)

 

(934,775

)

 

(2,158,861

)

Net increase (decrease)

 

4,837,750

 

 

118,257

 

 

(46,589,118

)

 

244,965

 

 

2,597,126

 

 

1,330,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

177,189,366

 

$

6,626,788

 

$

523,985,374

 

$

99,045,919

 

$

89,889,050

 

$

103,892,344

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

14,784,827

 

 

448,555

 

 

13,239,222

 

 

25,234,942

 

 

7,503,464

 

 

34,735,967

 

 

 

191,974,193

 

 

7,075,343

 

 

537,224,596

 

 

124,280,861

 

 

97,392,514

 

 

138,628,311

 

Cost of shares redeemed

 

(77,326,453

)

 

(6,416,000

)

 

(583,813,714

)

 

(111,751,665

)

 

(25,779,954

)

 

(85,968,700

)

Net increase (decrease)

$

114,647,740

 

$

659,343

 

$

(46,589,118

)

$

12,529,196

 

$

71,612,560

 

$

52,659,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS  – (Continued)

June 30, 2006 *(Unaudited)*

 

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

 

**CLASS B**

**Six months ended June 30, 2006**

 

**(Unaudited)**

 

 

 

 

 

**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

 

433,089

 

 

671,130

 

 

7,975,363

 

 

47,188

 

 

184,395

 

 

69,658

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

–

 

 

38,655

 

 

576,772

 

 

–

 

 

7,325

 

 

3,603

 

 

 

433,089

 

 

709,785

 

 

8,552,135

 

 

47,188

 

 

191,720

 

 

73,261

 

Shares redeemed

 

(1,009,332

)

 

(1,575,608

)

 

(11,044,457

)

 

(1,646,047

)

 

(780,749

)

 

(639,743

)

Net decrease

 

(576,243

)

 

(865,823

)

 

(2,492,322

)

 

(1,598,859

)

 

(589,029

)

 

(566,482

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

9,870,297

 

$

3,668,105

 

$

7,975,363

 

$

1,856,136

 

$

5,266,557

 

$

3,050,493

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

–

 

 

211,531

 

 

576,772

 

 

–

 

 

210,746

 

 

162,867

 

 

 

9,870,297

 

 

3,879,636

 

 

8,552,135

 

 

1,856,136

 

 

5,477,303

 

 

3,213,360

 

Cost of shares redeemed

 

(22,997,193

)

 

(8,620,645

)

 

(11,044,457

)

 

(64,673,327

)

 

(22,352,764

)

 

(27,996,017

)

Net decrease

$

(13,126,896

)

$

(4,741,009

)

$

(2,492,322

)

$

(62,817,191

)

$

(16,875,461

)

$

(24,782,657

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS B**

**Year ended December 31, 2005**

 

 

 

 

 

**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

 

804,095

 

 

1,397,765

 

 

19,867,409

 

 

123,761

 

 

550,055

 

 

204,563

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

123,661

 

 

89,776

 

 

1,001,610

 

 

218,032

 

 

88,627

 

 

187,101

 

 

 

927,756

 

 

1,487,541

 

 

20,869,019

 

 

341,793

 

 

638,682

 

 

391,664

 

Shares redeemed

 

(1,539,731

)

 

(3,144,641

)

 

(32,598,710

)

 

(2,678,426

)

 

(880,536

)

 

(1,408,247

)

Net decrease

 

(611,975

)

 

(1,657,100

)

 

(11,729,691

)

 

(2,336,633

)

 

(241,854

)

 

(1,016,583

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

16,836,360

 

$

7,737,383

 

$

19,867,409

 

$

4,689,609

 

$

14,970,621

 

$

7,966,899

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

2,629,047

 

 

496,196

 

 

1,001,610

 

 

8,544,698

 

 

2,439,268

 

 

7,479,288

 

 

 

19,465,407

 

 

8,233,579

 

 

20,869,019

 

 

13,234,307

 

 

17,409,889

 

 

15,446,187

 

Cost of shares redeemed

 

(32,286,460

)

 

(17,395,535

)

 

(32,598,710

)

 

(100,730,606

)

 

(24,135,089

)

 

(55,616,913

)

Net decrease

$

(12,821,053

)

$

(9,161,956

)

$

(11,729,691

)

$

(87,496,299

)

$

(6,725,200

)

$

(40,170,726

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

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

 

**CLASS C**

**Six months ended June 30, 2006**

 

**(Unaudited)**

 

 

 

 

 

**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

 

1,892,944

 

 

391,091

 

 

5,718,515

 

 

102,575

 

 

383,679

 

 

288,314

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

–

 

 

10,297

 

 

115,253

 

 

–

 

 

6,754

 

 

4,813

 

 

 

1,892,944

 

 

401,388

 

 

5,833,768

 

 

102,575

 

 

390,433

 

 

293,127

 

Shares redeemed

 

(464,415

)

 

(256,089

)

 

(3,562,829

)

 

(301,015

)

 

(145,201

)

 

(376,944

)

Net increase (decrease)

 

1,428,529

 

 

145,299

 

 

2,270,939

 

 

(198,440

)

 

245,232

 

 

(83,817

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

44,905,866

 

$

2,145,172

 

$

5,718,515

 

$

4,086,166

 

$

11,119,216

 

$

12,798,710

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

–

 

 

56,475

 

 

115,253

 

 

–

 

 

197,088

 

 

219,204

 

 

 

44,905,866

 

 

2,201,647

 

 

5,833,768

 

 

4,086,166

 

 

11,316,304

 

 

13,017,914

 

Cost of shares redeemed

 

(10,995,490

)

 

(1,404,677

)

 

(3,562,829

)

 

(11,989,075

)

 

(4,202,026

)

 

(16,575,452

)

Net increase (decrease)

$

33,910,376

 

$

796,970

 

$

2,270,939

 

$

(7,902,909

)

$

7,114,278

 

$

(3,557,538

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS C**

**Year ended December 31, 2005**

 

 

 

 

 

**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

 

2,929,518

 

 

543,976

 

 

7,107,917

 

 

227,352

 

 

893,529

 

 

492,010

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

173,609

 

 

18,894

 

 

166,947

 

 

102,004

 

 

58,122

 

 

193,759

 

 

 

3,103,127

 

 

562,870

 

 

7,274,864

 

 

329,356

 

 

951,651

 

 

685,769

 

Shares redeemed

 

(709,529

)

 

(782,833

)

 

(8,116,190

)

 

(640,443

)

 

(230,964

)

 

(516,717

)

Net increase (decrease)

 

2,393,598

 

 

(219,963

)

 

(841,326

)

 

(311,087

)

 

720,687

 

 

169,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

64,264,886

 

$

3,015,124

 

$

7,107,917

 

$

8,691,343

 

$

24,810,716

 

$

19,333,702

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

3,852,380

 

 

104,752

 

 

166,947

 

 

4,062,791

 

 

1,624,027

 

 

7,811,945

 

 

 

68,117,266

 

 

3,119,876

 

 

7,274,864

 

 

12,754,134

 

 

26,434,743

 

 

27,145,647

 

Cost of shares redeemed

 

(15,417,310

)

 

(4,339,153

)

 

(8,116,190

)

 

(24,396,916

)

 

(6,379,437

)

 

(20,764,643

)

Net increase (decrease)

$

52,699,956

 

$

(1,219,277

)

$

(841,326

)

$

(11,642,782

)

$

20,055,306

 

$

6,381,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

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

 

**CLASS Y**

**Six months ended June 30, 2006**

 

**(Unaudited)**

 

 

 

 

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

518,143

 

 

1,468

 

 

35,870

 

 

194,342

 

 

83,643

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

–

 

 

243

 

 

–

 

 

8,498

 

 

9,449

 

 

 

518,143

 

 

1,711

 

 

35,870

 

 

202,840

 

 

93,092

 

Shares redeemed

 

(326,723

)

 

(7,143

)

 

(65,965

)

 

(109,831

)

 

(62,375

)

Net increase (decrease)

 

191,420

 

 

(5,432

)

 

(30,095

)

 

93,009

 

 

30,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

13,748,293

 

$

8,090

 

$

1,567,723

 

$

5,663,462

 

$

3,694,212

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

–

 

 

1,344

 

 

–

 

 

247,897

 

 

432,389

 

 

 

13,748,293

 

 

9,434

 

 

1,567,723

 

 

5,911,359

 

 

4,126,601

 

Cost of shares redeemed

 

(8,601,239

)

 

(39,461

)

 

(2,888,240

)

 

(3,198,457

)

 

(2,768,918

)

Net increase (decrease)

$

5,147,054

 

$

(30,027

)

$

(1,320,517

)

$

2,712,902

 

$

1,357,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**CLASS Y**

**Year ended December 31, 2005**

 

 

 

 

 

 

 

**Davis**

 

 

 

 

**Davis**

 

**Davis**

 

**Davis**

 

**Appreciation**

 

**Davis**

 

 

**Opportunity**

 

**Government**

 

**Financial**

 

**& Income**

 

**Real Estate**

 

 

**Fund**

 

**Bond Fund**

 

**Fund**

 

**Fund**

 

**Fund**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

1,498,422

 

 

4,262

 

 

109,142

 

 

217,671

 

 

164,400

 

Shares issued in reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of distributions

 

43,992

 

 

816

 

 

10,606

 

 

56,309

 

 

195,883

 

 

 

1,542,414

 

 

5,078

 

 

119,748

 

 

273,980

 

 

360,283

 

Shares redeemed

 

(258,467

)

 

(23,255

)

 

(85,605

)

 

(46,900

)

 

(147,583

)

Net increase (decrease)

 

1,283,947

 

 

(18,177

)

 

34,143

 

 

227,080

 

 

212,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold

$

36,772,410

 

$

23,808

 

$

4,500,930

 

$

6,074,519

 

$

6,759,625

 

Proceeds from shares issued in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinvestment of distributions

 

1,087,489

 

 

4,560

 

 

460,920

 

 

1,571,611

 

 

7,940,229

 

 

 

37,859,899

 

 

28,368

 

 

4,961,850

 

 

7,646,130

 

 

14,699,854

 

Cost of shares redeemed

 

(6,318,235

)

 

(129,880

)

 

(3,542,323

)

 

(1,300,264

)

 

(6,038,008

)

Net increase (decrease)

$

31,541,664

 

$

(101,512

)

$

1,419,527

 

$

6,345,866

 

$

8,661,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

**NOTE 6 - EXPENSES PAID INDIRECTLY**

 

Under an agreement with State Street Bank, custody fees are reduced for earnings on cash balances. Such reductions amounted to $4,333, $34, $100,$58, $6,140, and $196 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 six months ended June 30, 2006.

 

**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 June 30, 2006, Davis Financial Fund had no borrowings outstanding.  For the six months ended June 30, 2006, the average daily loan balance was $828,182 at an average interest rate of 5.47111%.  Davis Financial Fund had gross borrowings and gross repayments of $34,017,000 for each, during the six months ended June 30, 2006.  The maximum amount ofborrowings outstanding at any month end was $2,308,000. Davis Opportunity Fund, Davis Government Bond Fund, Davis Government Money Market Fund, Davis Appreciation & Income Fund, and Davis Real Estate Fund had no borrowings outstanding for the six months ended June 30, 2006.

 

**NOTE 8 – OPTION ACTIVITY**

 

Each Fund may purchase or sell options (including “put options”) to pursue its investment objective or for hedging purposes. When selling a put option, the purchaser receives the right to sell, and the writer (the Fund) the obligation to buy, the underlying investment at the exercise price during the option period.

 

When writing a put option on a security, to secure its obligation to pay for the underlying security, each Fund will deposit, in escrow, liquid assets with a value equal to or greater than the exercise price of the underlying securities. Each Fund therefore, foregoes the opportunity of investing the segregated assets. The premium each Fund receives from writing a put option represents a profit, as long as the price of the underlying investment remains equal to or above the exercise price of the put. However, each Fund also assumes the obligation, during the option period, to buy the underlying investment from the buyer of the put at the exercise price, even if the value of the investment falls below the exercise price. See the Statement of Additional Information for more information concerning the Funds’ use of options. 

 

Options are valued daily based upon the Funds’ valuation procedures (Note 1) and unrealized appreciation or depreciation is recorded. Each Fund will realize a gain or loss upon the expiration or closing of the option transaction. Put options written are reported as a liability in the Statement of Assets and Liabilities.  Realized and unrealized gains and losses are reported in the Statement of Operations.

 

 

There was no written put option activity for the six months ended June 30, 2006.

 

 

55

 

 

 

**DAVIS SERIES, INC.**

NOTES TO FINANCIAL STATEMENTS – (Continued)

June 30, 2006 *(Unaudited)*

 

**NOTE 9 - ILLIQUID 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.  The aggregate value of illiquid securities in Davis Appreciation & Income Fund amounted to $28,871,875 or 6.44% of the Fund’s net assets as of June 30, 2006.

 

Fund

 

Security

 

Acquisition

Date

 

Principal

 

Units

 

Cost per

Unit

 

Valuation per Unit as of 

June 30, 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis Appreciation & Income Fund

 

Lehman Brothers Holdings Inc., Conv. Notes, (Convertible into Devon Energy Corp.), 0.25%, 08/23/11

 

8/16/04

 

$

12,400,000

 

124,000

 

$

100.00

 

$

155.50

Davis Appreciation & Income Fund

 

News America Inc., Conv. Notes, Zero Cpn., 3.38%, 02/28/21

 

10/07/03

 

$

16,050,000

 

160,500

 

$

61.16

 

$

59.75

 

**NOTE 10 – LITIGATION MATTERS**

 

On June 2, 2004, a proposed class action lawsuit was filed in the United States District Court for the Southern District of New York on behalf of investors in certain mutual funds (“Funds”) managed by Davis Selected Advisers L.P. (“Davis Advisors”) including the Davis Funds. The plaintiffs claim that Davis Advisors and its affiliates, and the individual directors of the Funds (collectively the “Defendants”) used Fund assets to pay brokers to market the Funds and that the Defendants disguised such payments as brokerage commissions and further failed to disclose such payments in public filings or elsewhere. The lawsuit seeks damages of unspecified amounts. Three substantially identical proposed class action lawsuits were filed against the Defendants later in June and July 2004 in the United States District Court for the Southern District of New York. All foursuits were consolidated into a single action. In October 2005, the District Court issued an order dismissing the consolidated amended class action complaint.  The plaintiffs subsequently sought a motion for reconsideration, which was denied in November 2005.  In December 2005, the plaintiffs filed an appeal with the United States Court of Appeals for the Second Circuit.   The appeal was withdrawn in March 2006.

 

 

 

56

 

 

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS 

 

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

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Opportunity Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

$

24.29

$

0.03

3

$

1.43

 

$

1.46

 

 

Year ended 12/31/2005

 

23.20

 

0.05

3

 

1.88

 

 

1.93

 

 

Year ended 12/31/2004

 

20.47

 

0.08

 

 

2.65

 

 

2.73

 

 

Year ended 12/31/2003

 

14.53

 

(0.07

)

 

6.01

 

 

5.94

 

 

Year ended 12/31/2002

 

16.81

 

(0.07

)

 

(2.21

)

 

(2.28

)

 

Year ended 12/31/2001

 

18.60

 

(0.07

)

 

(1.44

)

 

(1.51

)

**Davis Opportunity Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

21.44

 

(0.07

)3

 

1.27

 

 

1.20

 

 

Year ended 12/31/2005

 

20.55

 

(0.13

)3

 

1.66

 

 

1.53

 

 

Year ended 12/31/2004

 

18.28

 

(0.08

)

 

2.35

 

 

2.27

 

 

Year ended 12/31/2003

 

13.07

 

(0.19

)

 

5.40

 

 

5.21

 

 

Year ended 12/31/2002

 

15.24

 

(0.17

)

 

(2.00

)

 

(2.17

)

 

Year ended 12/31/2001

 

17.05

 

(0.18

)

 

(1.35

)

 

(1.53

)

**Davis Opportunity Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

22.37

 

(0.06

)3

 

1.32

 

 

1.26

 

 

Year ended 12/31/2005

 

21.42

 

(0.13

)3

 

1.73

 

 

1.60

 

 

Year ended 12/31/2004

 

19.05

 

(0.06

)

 

2.43

 

 

2.37

 

 

Year ended 12/31/2003

 

13.62

 

(0.17

)

 

5.60

 

 

5.43

 

 

Year ended 12/31/2002

 

15.89

 

(0.16

)

 

(2.11

)

 

(2.27

)

 

Year ended 12/31/2001

 

17.76

 

(0.13

)

 

(1.46

)

 

(1.59

)

**Davis Opportunity Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

24.95

 

0.07

3

 

1.46

 

 

1.53

 

 

Year ended 12/31/2005

 

23.81

 

0.13

3

 

1.93

 

 

2.06

 

 

Year ended 12/31/2004

 

20.93

 

0.17

 

 

2.71

 

 

2.88

 

 

Year ended 12/31/2003

 

14.80

 

(0.02

)

 

6.15

 

 

6.13

 

 

Year ended 12/31/2002

 

17.07

 

(0.02

)

 

(2.25

)

 

(2.27

)

 

Year ended 12/31/2001

 

18.83

 

(0.03

)

 

(1.45

)

 

(1.48

)

**Davis Government Bond Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

5.50

 

0.09

 

 

(0.03

)

 

0.06

 

 

Year ended 12/31/2005

 

5.60

 

0.15

 

 

(0.10

)

 

0.05

 

 

Year ended 12/31/2004

 

5.73

 

0.14

 

 

(0.13

)

 

0.01

 

 

Year ended 12/31/2003

 

5.92

 

0.09

 

 

(0.08

)

 

0.01

 

 

Year ended 12/31/2002

 

5.68

 

0.21

 

 

0.27

 

 

0.48

 

 

Year ended 12/31/2001

 

5.60

 

0.26

 

 

0.08

 

 

0.34

 

**Davis Government Bond Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

5.49

 

0.07

 

 

(0.03

)

 

0.04

 

 

Year ended 12/31/2005

 

5.59

 

0.12

 

 

(0.10

)

 

0.02

 

 

Year ended 12/31/2004

 

5.71

 

0.10

 

 

(0.12

)

 

(0.02

)

 

Year ended 12/31/2003

 

5.91

 

0.03

 

 

(0.08

)

 

(0.05

)

 

Year ended 12/31/2002

 

5.66

 

0.17

 

 

0.28

 

 

0.45

 

 

Year ended 12/31/2001

 

5.58

 

0.23

 

 

0.07

 

 

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

–

 

$

–

 

$

–

 

$

–

 

$

–

 

$

–

 

$

25.75

6.01

%

$

546,633

1.10

%7

1.10

%7

0.21

%7

 

(0.24

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.84

)

 

24.29

8.33

 

 

446,794

1.15

 

1.15

 

0.18

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

23.20

13.34

 

 

314,526

1.20

 

1.20

 

0.39

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

20.47

40.88

 

 

204,015

1.30

 

1.30

 

(0.47

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

14.53

(13.56

)

 

111,685

1.31

 

1.31

 

(0.49

)

 

–

 

 

(0.27

)

 

–

 

 

(0.01

)

 

–

 

 

(0.28

)

 

16.81

(8.06

)

 

101,057

1.23

 

1.23

 

(0.50

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

22.64

5.60

 

 

88,858

1.88

7

1.88

7

(0.57

)7

 

(0.04

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.64

)

 

21.44

7.49

 

 

96,501

1.92

 

1.90

 

(0.57

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

20.55

12.42

 

 

105,077

1.97

 

1.97

 

(0.38

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

18.28

39.86

 

 

96,854

2.06

 

2.06

 

(1.23

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

13.07

(14.24

)

 

68,895

2.09

 

2.09

 

(1.27

)

 

–

 

 

(0.27

)

 

–

 

 

(0.01

)

 

–

 

 

(0.28

)

 

15.24

(8.92

)

 

69,903

2.06

 

2.06

 

(1.33

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

23.63

5.63

 

 

193,060

1.86

7

1.86

7

(0.55

)7

 

(0.05

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.65

)

 

22.37

7.48

 

 

150,844

1.91

 

1.90

 

(0.57

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

21.42

12.44

 

 

93,149

1.97

 

1.97

 

(0.38

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

19.05

39.87

 

 

59,174

2.05

 

2.05

 

(1.22

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

13.62

(14.29

)

 

38,793

2.06

 

2.06

 

(1.24

)

 

–

 

 

(0.27

)

 

–

 

 

(0.01

)

 

–

 

 

(0.28

)

 

15.89

(8.90

)

 

30,879

2.08

 

2.08

 

(1.35

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

26.48

6.13

 

 

58,304

0.81

7

0.81

7

0.50

7

 

(0.32

)

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

(0.92

)

 

24.95

8.70

 

 

50,142

0.85

 

0.85

 

0.48

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

23.81

13.76

 

 

17,287

0.86

 

0.86

 

0.73

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

20.93

41.42

 

 

6,577

0.93

 

0.93

 

(0.10

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

14.80

(13.30

)

 

4,353

0.93

 

0.93

 

(0.11

)

 

–

 

 

(0.27

)

 

–

 

 

(0.01

)

 

–

 

 

(0.28

)

 

17.07

(7.81

)

 

4,309

0.91

 

0.91

 

(0.18

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.09

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.09

)

 

5.47

1.02

 

 

19,641

1.05

7

1.05

7

3.15

7

 

(0.15

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.15

)

 

5.50

0.98

 

 

19,340

1.10

 

1.08

 

2.52

 

 

(0.14

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.14

)

 

5.60

0.17

 

 

19,025

1.25

 

1.25

 

1.84

 

 

(0.17

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.20

)

 

5.73

0.10

 

 

25,168

1.13

 

1.13

 

1.96

 

 

(0.23

)

 

–

 

 

(0.01

)

 

–

 

 

–

 

 

(0.24

)

 

5.92

8.66

 

 

29,892

1.08

 

1.08

 

3.40

 

 

(0.26

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.26

)

 

5.68

6.27

 

 

18,198

1.22

 

1.22

 

4.59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.07

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.07

)

 

5.46

0.67

 

 

20,326

1.73

7

1.73

7

2.47

7

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.12

)

 

5.49

0.33

 

 

25,208

1.79

 

1.77

 

1.83

 

 

(0.10

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.10

)

 

5.59

(0.33

)

 

34,921

1.89

 

1.89

 

1.20

 

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.15

)

 

5.71

(0.80

)

 

62,549

1.82

 

1.82

 

1.27

 

 

(0.19

)

 

–

 

 

(0.01

)

 

–

 

 

–

 

 

(0.20

)

 

5.91

8.05

 

 

99,461

1.82

 

1.82

 

2.66

 

 

(0.22

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.22

)

 

5.66

5.48

 

 

37,541

1.94

 

1.94

 

3.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58

 

 

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS – (Continued)

 

 

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Government Bond Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

$

5.51

$

0.07

 

$

(0.04

)

$

0.03

 

 

Year ended 12/31/2005

 

5.61

 

0.12

 

 

(0.10

)

 

0.02

 

 

Year ended 12/31/2004

 

5.73

 

0.10

 

 

(0.12

)

 

(0.02

)

 

Year ended 12/31/2003

 

5.93

 

0.01

 

 

(0.06

)

 

(0.05

)

 

Year ended 12/31/2002

 

5.68

 

0.17

 

 

0.28

 

 

0.45

 

 

Year ended 12/31/2001

 

5.60

 

0.23

 

 

0.07

 

 

0.30

 

**Davis Government Bond Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

5.55

 

0.09

 

 

(0.04

)

 

0.05

 

 

Year ended 12/31/2005

 

5.65

 

0.17

 

 

(0.10

)

 

0.07

 

 

Year ended 12/31/2004

 

5.77

 

0.15

 

 

(0.12

)

 

0.03

 

 

Year ended 12/31/2003

 

5.97

 

0.11

 

 

(0.10

)

 

0.01

 

 

Year ended 12/31/2002

 

5.72

 

0.22

 

 

0.28

 

 

0.50

 

 

Year ended 12/31/2001

 

5.64

 

0.29

 

 

0.07

 

 

0.36

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

1.000

 

0.020

 

 

–

 

 

0.020

 

 

Year ended 12/31/2005

 

1.000

 

0.026

 

 

–

 

 

0.026

 

 

Year ended 12/31/2004

 

1.000

 

0.008

 

 

–

 

 

0.008

 

 

Year ended 12/31/2003

 

1.000

 

0.006

 

 

–

 

 

0.006

 

 

Year ended 12/31/2002

 

1.000

 

0.014

 

 

–

 

 

0.014

 

 

Year ended 12/31/2001

 

1.000

 

0.037

 

 

–

 

 

0.037

 

**Davis Financial Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

42.40

 

0.01

 

 

0.54

 

 

0.55

 

 

Year ended 12/31/2005

 

41.00

 

0.04

 

 

3.27

 

 

3.31

 

 

Year ended 12/31/2004

 

36.57

 

0.02

 

 

4.41

 

 

4.43

 

 

Year ended 12/31/2003

 

26.72

 

0.08

 

 

9.77

 

 

9.85

 

 

Year ended 12/31/2002

 

32.98

 

0.06

 

 

(6.32

)

 

(6.26

)

 

Year ended 12/31/2001

 

36.30

 

(0.06

)

 

(3.26

)

 

(3.32

)

**Davis Financial Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

38.83

 

(0.17

)3

 

0.50

 

 

0.33

 

 

Year ended 12/31/2005

 

38.03

 

(0.29

)3

 

3.00

 

 

2.71

 

 

Year ended 12/31/2004

 

34.22

 

(0.33

)

 

4.14

 

 

3.81

 

 

Year ended 12/31/2003

 

25.21

 

(0.18

)

 

9.19

 

 

9.01

 

 

Year ended 12/31/2002

 

31.39

 

(0.21

)

 

(5.97

)

 

(6.18

)

 

Year ended 12/31/2001

 

34.85

 

(0.33

)

 

(3.13

)

 

(3.46

)

**Davis Financial Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

39.46

 

(0.17

)3

 

0.51

 

 

0.34

 

 

Year ended 12/31/2005

 

38.62

 

(0.30

)3

 

3.05

 

 

2.75

 

 

Year ended 12/31/2004

 

34.75

 

(0.32

)

 

4.19

 

 

3.87

 

 

Year ended 12/31/2003

 

25.61

 

(0.18

)

 

9.32

 

 

9.14

 

 

Year ended 12/31/2002

 

31.88

 

(0.21

)

 

(6.06

)

 

(6.27

)

 

Year ended 12/31/2001

 

35.40

 

(0.32

)

 

(3.20

)

 

(3.52

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

59

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.07

)

$

–

 

$

–

 

$

–

 

$

–

 

$

(0.07

)

$

5.47

0.47

%

$

6,120

1.80

%7

1.80

%7

2.40

%7

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.12

)

 

5.51

0.29

 

 

5,358

1.84

 

1.82

 

1.78

 

 

(0.10

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.10

)

 

5.61

(0.34

)

 

6,688

1.93

 

1.93

 

1.16

 

 

(0.12

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.15

)

 

5.73

(0.80

)

 

12,955

1.85

 

1.85

 

1.24

 

 

(0.19

)

 

–

 

 

(0.01

)

 

–

 

 

–

 

 

(0.20

)

 

5.93

8.03

 

 

25,107

1.83

 

1.83

 

2.65

 

 

(0.22

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.22

)

 

5.68

5.44

 

 

12,335

1.96

 

1.96

 

3.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.09

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.09

)

 

5.51

0.90

 

 

84

0.93

7

0.93

7

3.27

7

 

(0.17

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.17

)

 

5.55

1.22

 

 

115

0.98

 

0.97

 

2.63

 

 

(0.15

)

 

–

 

 

–

 

 

–

 

 

–

5

 

(0.15

)

 

5.65

0.61

 

 

219

1.02

 

1.02

 

2.07

 

 

(0.18

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.21

)

 

5.77

0.17

 

 

263

0.92

 

0.92

 

2.17

 

 

(0.25

)

 

–

 

 

–

5

 

–

 

 

–

 

 

(0.25

)

 

5.97

9.05

 

 

296

0.88

 

0.88

 

3.60

 

 

(0.28

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.28

)

 

5.72

6.54

 

 

438

0.96

 

0.96

 

4.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.020

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.020

)

 

1.000

2.02

 

 

549,162

0.57

7

0.57

7

4.04

7

 

(0.026

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.026

)

 

1.000

2.68

 

 

513,221

0.57

 

0.56

 

2.65

 

 

(0.008

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.008

)

 

1.000

0.83

 

 

572,381

0.58

 

0.58

 

0.83

 

 

(0.006

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.006

)

 

1.000

0.62

 

 

571,431

0.60

 

0.60

 

0.62

 

 

(0.014

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.014

)

 

1.000

1.38

 

 

600,912

0.59

 

0.59

 

1.35

 

 

(0.037

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.037

)

 

1.000

3.77

 

 

505,713

0.59

 

0.59

 

3.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

42.95

1.30

 

 

642,703

0.98

7

0.98

7

0.03

7

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

42.40

8.03

 

 

613,683

0.99

 

0.98

 

0.10

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

41.00

12.11

 

 

583,387

1.01

 

1.01

 

0.05

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

36.57

36.86

 

 

535,300

1.10

 

1.10

 

0.27

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

26.72

(18.98

)

 

415,641

1.11

 

1.11

 

0.18

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

32.98

(9.15

)

 

600,540

1.08

 

1.08

 

(0.20

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

39.16

0.85

 

 

131,060

1.88

7

1.88

7

(0.87

)7

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

38.83

7.08

 

 

192,049

1.88

 

1.85

 

(0.77

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

38.03

11.13

 

 

276,945

1.88

 

1.88

 

(0.82

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

34.22

35.74

 

 

304,513

1.98

 

1.98

 

(0.61

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

25.21

(19.69

)

 

270,645

1.95

 

1.95

 

(0.66

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

31.39

(9.93

)

 

415,607

1.90

 

1.90

 

(1.02

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

39.80

0.86

 

 

87,417

1.85

7

1.85

7

(0.84

)7

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

39.46

7.07

 

 

94,512

1.87

 

1.85

 

(0.77

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

38.62

11.14

 

 

104,508

1.89

 

1.89

 

(0.83

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

34.75

35.69

 

 

108,557

1.99

 

1.99

 

(0.62

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

25.61

(19.67

)

 

94,557

1.96

 

1.96

 

(0.67

)

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

31.88

(9.94

)

 

145,817

1.90

 

1.90

 

(1.02

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60

 

 

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS – (Continued)

 

 

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Financial Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

$

43.10

$

0.04

 

$

0.55

 

$

0.59

 

 

Year ended 12/31/2005

 

41.59

 

0.09

 

 

3.33

 

 

3.42

 

 

Year ended 12/31/2004

 

37.03

 

0.09

 

 

4.47

 

 

4.56

 

 

Year ended 12/31/2003

 

27.00

 

0.17

 

 

9.86

 

 

10.03

 

 

Year ended 12/31/2002

 

33.27

 

0.14

 

 

(6.41

)

 

(6.27

)

 

Year ended 12/31/2001

 

36.56

 

–

5

 

(3.29

)

 

(3.29

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

27.94

 

0.36

 

 

1.27

 

 

1.63

 

 

Year ended 12/31/2005

 

27.50

 

0.59

 

 

1.11

 

 

1.70

 

 

Year ended 12/31/2004

 

24.95

 

0.65

 

 

2.57

 

 

3.22

 

 

Year ended 12/31/2003

 

20.30

 

0.74

 

 

4.65

 

 

5.39

 

 

Year ended 12/31/2002

 

21.36

 

0.80

 

 

(1.06

)

 

(0.26

)

 

Year ended 12/31/2001

 

23.96

 

0.76

 

 

(2.57

)

 

(1.81

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

27.67

 

0.24

3

 

1.25

 

 

1.49

 

 

Year ended 12/31/2005

 

27.25

 

0.35

 

 

1.08

 

 

1.43

 

 

Year ended 12/31/2004

 

24.72

 

0.41

 

 

2.54

 

 

2.95

 

 

Year ended 12/31/2003

 

20.13

 

0.52

 

 

4.59

 

 

5.11

 

 

Year ended 12/31/2002

 

21.16

 

0.60

 

 

(1.03

)

 

(0.43

)

 

Year ended 12/31/2001

 

23.74

 

0.54

 

 

(2.55

)

 

(2.01

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

28.06

 

0.25

 

 

1.26

 

 

1.51

 

 

Year ended 12/31/2005

 

27.62

 

0.36

 

 

1.10

 

 

1.46

 

 

Year ended 12/31/2004

 

25.06

 

0.42

 

 

2.57

 

 

2.99

 

 

Year ended 12/31/2003

 

20.40

 

0.53

 

 

4.66

 

 

5.19

 

 

Year ended 12/31/2002

 

21.45

 

0.61

 

 

(1.05

)

 

(0.44

)

 

Year ended 12/31/2001

 

24.06

 

0.55

 

 

(2.58

)

 

(2.03

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

28.05

 

0.40

 

 

1.27

 

 

1.67

 

 

Year ended 12/31/2005

 

27.61

 

0.66

 

 

1.11

 

 

1.77

 

 

Year ended 12/31/2004

 

25.04

 

0.71

 

 

2.58

 

 

3.29

 

 

Year ended 12/31/2003

 

20.38

 

0.78

 

 

4.66

 

 

5.44

 

 

Year ended 12/31/2002

 

21.43

 

0.84

 

 

(1.05

)

 

(0.21

)

 

Year ended 12/31/2001

 

24.05

 

0.82

 

 

(2.61

)

 

(1.79

)

**Davis Real Estate Fund Class A:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

40.23

 

0.55

 

 

4.50

 

 

5.05

 

 

Year ended 12/31/2005

 

39.52

 

0.59

 

 

4.37

 

 

4.96

 

 

Year ended 12/31/2004

 

30.32

 

0.64

 

 

9.32

 

 

9.96

 

 

Year ended 12/31/2003

 

22.79

 

0.90

 

 

7.53

 

 

8.43

 

 

Year ended 12/31/2002

 

22.29

 

0.82

 

 

0.50

 

 

1.32

 

 

Year ended 12/31/2001

 

22.06

 

0.77

 

 

0.45

 

 

1.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

–

 

$

–

 

$

–

 

$

–

 

$

–

 

$

–

 

$

43.69

1.37

%

$

10,662

0.84

%7

0.84

%7

0.17

%7

 

–

 

 

(1.91

)

 

–

 

 

–

 

 

–

 

 

(1.91

)

 

43.10

8.18

 

 

11,815

0.85

 

0.84

 

0.24

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

41.59

12.31

 

 

9,980

0.85

 

0.85

 

0.21

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

37.03

37.15

 

 

11,563

0.91

 

0.91

 

0.46

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

27.00

(18.85

)

 

12,727

0.88

 

0.88

 

0.41

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

–

 

 

33.27

(9.00

)

 

23,266

0.87

 

0.87

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.17

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.17

)

 

29.40

5.84

 

 

279,063

1.06

7

1.06

7

2.58

7

 

(0.62

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.26

)

 

27.94

6.29

 

 

224,600

1.07

 

1.07

 

2.12

 

 

(0.67

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.67

)

 

27.50

13.08

 

 

149,687

1.08

 

1.08

 

2.52

 

 

(0.74

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.74

)

 

24.95

26.94

 

 

114,003

1.10

 

1.10

 

3.38

 

 

(0.80

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.80

)

 

20.30

(1.21

)

 

80,751

1.09

 

1.09

 

3.69

 

 

(0.76

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.79

)

 

21.36

(7.56

)

 

89,077

1.09

 

1.09

 

3.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.11

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.11

)

 

29.05

5.38

 

 

61,935

1.91

7

1.91

7

1.73

7

 

(0.37

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.01

)

 

27.67

5.30

 

 

75,289

1.94

 

1.93

 

1.26

 

 

(0.42

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.42

)

 

27.25

12.06

 

 

80,729

1.99

 

1.99

 

1.61

 

 

(0.52

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.52

)

 

24.72

25.71

 

 

72,181

2.03

 

2.03

 

2.45

 

 

(0.60

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.60

)

 

20.13

(2.01

)

 

53,326

2.03

 

2.03

 

2.75

 

 

(0.54

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.57

)

 

21.16

(8.47

)

 

57,692

2.01

 

2.00

 

2.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.11

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.11

)

 

29.46

5.38

 

 

65,387

1.90

7

1.90

7

1.74

7

 

(0.38

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.02

)

 

28.06

5.34

 

 

55,395

1.93

 

1.93

 

1.26

 

 

(0.43

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.43

)

 

27.62

12.05

 

 

34,627

1.98

 

1.98

 

1.62

 

 

(0.53

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.53

)

 

25.06

25.75

 

 

24,531

2.02

 

2.02

 

2.46

 

 

(0.61

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.61

)

 

20.40

(2.04

)

 

14,428

2.05

 

2.04

 

2.74

 

 

(0.55

)

 

–

 

 

–

 

 

–

 

 

(0.03

)

 

(0.58

)

 

21.45

(8.44

)

 

12,717

2.02

 

2.02

 

2.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.19

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.19

)

 

29.53

5.96

 

 

41,818

0.81

7

0.81

7

2.83

7

 

(0.69

)

 

(0.64

)

 

–

 

 

–

 

 

–

 

 

(1.33

)

 

28.05

6.52

 

 

37,110

0.83

 

0.83

 

2.36

 

 

(0.72

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.72

)

 

27.61

13.35

 

 

30,260

0.86

 

0.86

 

2.74

 

 

(0.78

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.78

)

 

25.04

27.13

 

 

25,892

0.88

 

0.88

 

3.60

 

 

(0.84

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.84

)

 

20.38

(0.96

)

 

19,445

0.88

 

0.88

 

3.90

 

 

(0.82

)

 

–

 

 

–

 

 

–

 

 

(0.01

)

 

(0.83

)

 

21.43

(7.43

)

 

20,865

0.88

 

0.88

 

3.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.19

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.19

)

 

45.09

12.55

 

 

451,258

1.07

7

1.07

7

2.43

7

 

(0.83

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(4.25

)

 

40.23

12.76

 

 

372,571

1.10

 

1.09

 

1.48

 

 

(0.76

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.76

)

 

39.52

33.22

 

 

313,378

1.26

 

1.26

 

1.93

 

 

(0.90

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.90

)

 

30.32

37.52

 

 

190,505

1.30

 

1.30

 

3.40

 

 

(0.82

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.82

)

 

22.79

5.89

 

 

143,585

1.28

 

1.28

 

3.17

 

 

(0.77

)

 

–

 

 

(0.22

)

 

–

 

 

–

 

 

(0.99

)

 

22.29

5.66

 

 

167,043

1.19

 

1.19

 

3.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62

 

 

 

**DAVIS SERIES, INC.**

FINANCIAL HIGHLIGHTS – (Continued)

 

 

 

 

 

Income (Loss) from Investment Operations

 

 

 

 

 

Net Asset Value, Beginning

of Period

Net Investment Income (Loss)

Net Realized and Unrealized Gains (Losses)

Total from Investment Operations

**Davis Real Estate Fund Class B:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

$

40.05

$

0.33

3

$

4.50

 

$

4.83

 

 

Year ended 12/31/2005

 

39.36

 

0.30

 

 

4.34

 

 

4.64

 

 

Year ended 12/31/2004

 

30.20

 

0.43

 

 

9.26

 

 

9.69

 

 

Year ended 12/31/2003

 

22.71

 

0.72

 

 

7.49

 

 

8.21

 

 

Year ended 12/31/2002

 

22.21

 

0.65

 

 

0.50

 

 

1.15

 

 

Year ended 12/31/2001

 

21.99

 

0.56

 

 

0.45

 

 

1.01

 

**Davis Real Estate Fund Class C:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

40.35

 

0.34

 

 

4.54

 

 

4.88

 

 

Year ended 12/31/2005

 

39.63

 

0.31

 

 

4.37

 

 

4.68

 

 

Year ended 12/31/2004

 

30.41

 

0.43

 

 

9.33

 

 

9.76

 

 

Year ended 12/31/2003

 

22.87

 

0.72

 

 

7.54

 

 

8.26

 

 

Year ended 12/31/2002

 

22.37

 

0.65

 

 

0.50

 

 

1.15

 

 

Year ended 12/31/2001

 

22.14

 

0.56

 

 

0.47

 

 

1.03

 

**Davis Real Estate Fund Class Y:**

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended 06/30/20066

 

40.53

 

0.61

 

 

4.55

 

 

5.16

 

 

Year ended 12/31/2005

 

39.78

 

0.74

 

 

4.42

 

 

5.16

 

 

Year ended 12/31/2004

 

30.51

 

0.82

 

 

9.37

 

 

10.19

 

 

Year ended 12/31/2003

 

22.93

 

1.02

 

 

7.58

 

 

8.60

 

 

Year ended 12/31/2002

 

22.42

 

0.91

 

 

0.51

 

 

1.42

 

 

Year ended 12/31/2001

 

22.20

 

0.85

 

 

0.44

 

 

1.29

 

 

 

 

 

**Portfolio Turnover2** 

(for all classes of shares)

**Six months****ended****June 30,**

 

**Year ended December 31,**

 

 

**20066**

 

**2005**

 

**2004**

 

**2003**

 

**2002**

 

**2001**

 

Davis Opportunity Fund

24.95

%

 

35.77

%

 

22.22

%

 

42.34

%

 

42.74

%

 

40.96

%

 

Davis Government Bond Fund

31.17

 

 

55.46

 

 

165.17

 

 

121.61

 

 

69.89

 

 

149.03

 

 

Davis Financial Fund

**–**

 

 

5.17

 

 

–

 

 

9.29

 

 

14.88

 

 

17.80

 

 

Davis Appreciation & Income Fund

16.59

 

 

16.64

 

 

21.26

 

 

33.35

 

 

34.26

 

 

20.38

 

 

Davis Real Estate Fund

20.38

 

 

24.86

 

 

31.37

 

 

25.93

 

 

52.57

 

 

34.91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.10

)

$

–

 

$

–

 

$

–

 

$

–

 

$

(0.10

)

$

44.78

12.06

%

$

71,961

1.88

%7

1.88

%7

1.62

%7

 

(0.53

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(3.95

)

 

40.05

11.91

 

 

87,039

1.89

 

1.88

 

0.69

 

 

(0.53

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.53

)

 

39.36

32.34

 

 

125,550

1.94

 

1.94

 

1.25

 

 

(0.72

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.72

)

 

30.20

36.52

 

 

110,303

1.99

 

1.99

 

2.71

 

 

(0.65

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.65

)

 

22.71

5.13

 

 

91,740

2.00

 

2.00

 

2.45

 

 

(0.56

)

 

–

 

 

(0.23

)

 

–

 

 

–

 

 

(0.79

)

 

22.21

4.70

 

 

87,899

1.99

 

1.99

 

2.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.10

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.10

)

 

45.13

12.10

 

 

102,732

1.86

7

1.86

7

1.64

7

 

(0.54

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(3.96

)

 

40.35

11.93

 

 

95,229

1.88

 

1.87

 

0.70

 

 

(0.54

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.54

)

 

39.63

32.37

 

 

86,835

1.93

 

1.93

 

1.26

 

 

(0.72

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.72

)

 

30.41

36.52

 

 

57,657

1.97

 

1.97

 

2.73

 

 

(0.65

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.65

)

 

22.87

5.11

 

 

38,299

1.97

 

1.97

 

2.48

 

 

(0.56

)

 

–

 

 

(0.24

)

 

–

 

 

–

 

 

(0.80

)

 

22.37

4.75

 

 

39,165

1.97

 

1.96

 

2.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.23

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.23

)

 

45.46

12.72

 

 

90,182

0.76

7

0.76

7

2.74

7

 

(0.99

)

 

(3.42

)

 

–

 

 

–

 

 

–

 

 

(4.41

)

 

40.53

13.20

 

 

79,156

0.77

 

0.77

 

1.80

 

 

(0.92

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.92

)

 

39.78

33.85

 

 

69,241

0.80

 

0.80

 

2.39

 

 

(1.02

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(1.02

)

 

30.51

38.10

 

 

53,740

0.84

 

0.84

 

3.86

 

 

(0.91

)

 

–

 

 

–

 

 

–

 

 

–

 

 

(0.91

)

 

22.93

6.33

 

 

39,456

0.84

 

0.84

 

3.61

 

 

(0.85

)

 

–

 

 

(0.22

)

 

–

 

 

–

 

 

(1.07

)

 

22.42

5.95

 

 

39,203

0.85

 

0.85

 

3.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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. Total returns for periods of less than one full year are not annualized.

 

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.

 

6    Unaudited.

 

7    Annualized.

 

***See Notes to Financial Statements***

 

 

64

 

 

 

**DAVIS SERIES, INC.**

FUND INFORMATION

 

 

**Portfolio Proxy Voting Policies and Procedures**

 

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

 

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

 

**Form N–Q**

 

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

 

 

65

 

 

 

**DAVIS SERIES, INC.**

DIRECTOR APPROVAL OF ADVISORY AGREEMENTS

 

 

**Process of Annual Review**

 

The Board of Directors of the Davis Funds oversees the management of each Davis Fund and, as required by law, determines annually whether to approve the continuance of each Davis Fund's advisory agreement with Davis Selected Advisers, L.P. and sub-advisory agreement with Davis Selected Advisers-NY, Inc. (jointly “Davis Advisors” and “Advisory Agreements”). 

 

As a part of this process the Independent Directors, with the assistance of counsel for the Independent Directors, prepares questions, which it submits to Davis Advisors in anticipation of the annual contract review. In a separate meeting held prior to the March 2006 board meeting, the Independent Directors reviewed and evaluated all information, which they deemed reasonably necessary in the circumstances. Upon completion of this review, the Independent Directors found that the terms of the Advisory Agreements are fair and reasonable and that continuation of the Advisory Agreements are in the best interests of the Funds and their shareholders. The Independent Directors recommended that the full Board of Directors approve the continuance of the Advisory Agreements, which occurred at the March 2006 board meeting. 

 

**Reasons the Independent Directors Approved Continuation of the Advisory Agreements**

 

The Independent Directors’ determinations were based upon a comprehensive consideration of all information provided to the Independent Directors and were not the result of any single factor. The following facts and conclusions were important, but not exclusive, in the Independent Directors’ recommendation to renew the Advisory Agreements.

 

While the investment performance of each Fund is certainly relevant to an evaluation of the nature, extent and quality of services provided, the Independent Directors also considered the full range of services, which Davis Advisors provides to the Funds and their shareholders, including: 

 

 

1.

achieving satisfactory investment results over the long-term after all costs;

 

2.

handling shareholder transactions and requests, as efficiently and effectively as possible;

 

3.

providing investor education materials that help to foster healthy investor behavior; and

 

4.

managing third party service providers, accounting, legal and compliance services. 

 

Davis Advisors is reimbursed a portion of its costs in providing some, but not all, of these services.

 

A shareholder’s ultimate return is the product of the fund’s results, as well as the shareholders’ behavior, specifically in selecting when to invest and which fund to invest in. The Independent Directors concluded that, through its actions and communications, Davis Advisors has attempted to have a meaningful positive impact on investor behavior.

 

 

66

 

 

 

**DAVIS SERIES, INC.**

DIRECTOR APPROVAL OF ADVISORY AGREEMENTS - (Continued)

 

 

**Reasons the Independent Directors Approved Continuation of the Advisory Agreements - (Continued)**

 

Davis Advisors and members of the Davis family are some of the largest shareholders in the Davis Funds. The Independent Directors concluded that this investment tends to align Davis Advisors’ and the Davis family’s interests with other shareholders, as they face the same risks, pay the same fees, and are highly motivated to achieve satisfactory long-term returns. In addition, the Independent Directors concluded that significant investments by Davis Advisors and the Davis family have contributed to the economies of scale which have lowered fees and expenses for shareholders over time.

 

The Independent Directors observed that Davis Advisors has consistently demonstrated a shareholder orientation. Davis Advisors and the Davis Funds have continued to receive recognition in the press, and among industry observers and participants, for the quality of its investment process, as well as its shareholder orientation and integrity. Shareholders buying the Davis Funds do so primarily to gain access to Davis Advisors’ investment expertise and shareholder orientation. 

 

For 2005, Davis Advisors was honored as Domestic-Stock Fund Manager of the Year by Morningstar. In the press release, Kunal Kapoor, director of fund analysis for Morningstar, says that Davis Advisors "sets the bar for others in the industry. At a time when other firms don't always do what is best for their shareholders, it’s refreshing to see a firm so committed to the long-term welfare of fundholders." 

 

The Independent Directors noted the importance of reviewing quantitative measures, but also recognized that qualitative factors could be equally, or more important, in assessing whether Davis Fund shareholders have been, or are likely to be, well served by the renewal of the Advisory Agreements. They noted both the value and shortcomings of purely quantitative measures, including the data provided by independent service providers, and concluded that while such measures and data can inform, they should not supersede the judgment of the Independent Directors who take many factors, including those listed below, into consideration in representing the shareholders of Davis Funds. In connection with reviewing comparative performance information, the Independent Directors generally give weight to longer-term measurements.

 

The Independent Directors believe that shareholders of Davis Funds should, and will, expect Davis Advisors to employ a disciplined, company specific, research driven, businesslike, long-term investment philosophy. 

 

The Independent Directors recognized Davis Advisors’ (a) efforts to minimize transaction costs by generally having a long-term time horizon and low portfolio turnover; (b) focus on tax efficiency; (c) record of generally producing satisfactory after tax results over the longer-term; (d) efforts towards fostering healthy investor behavior by, among other things, providing educational material; and (e) efforts to promote shareholder interests by actively speaking out on corporate governance issues. 

 

67

 

 

 

**DAVIS SERIES, INC.**

DIRECTOR APPROVAL OF ADVISORY AGREEMENTS - (Continued)

 

 

**Reasons the Independent Directors Approved Continuation of the Advisory Agreements – (Continued)**

 

The Independent Directors reviewed (a) comparative fee and expense information for competitive funds, as selected and analyzed by a nationally recognized independent service provider; (b) information regarding fees charged by Davis Advisors to other advisory clients, including funds which it sub-advises and private accounts, as well as the differences in the services provided to such other clients; and (c) the fee schedules and, if applicable, breakpoints of the various Davis Funds, including an assessment of competitive fee schedules. 

 

The Independent Directors reviewed the management fee schedule for each Fund, profitability of each Fund to Davis Advisors, the extent to which economies of scale would be realized as the Fund grows, and whether the fee level reflects those economies of scale. The Independent Directors considered various potential benefits that Davis Advisors may receive in connection with the services it provides under the Advisory Agreements with each Davis Fund, including a review of portfolio brokerage practices. The Independent Directors noted that Davis Advisors does not use client commissions to pay for publications that are available to the general public or for third-party research services. 

 

The Independent Directors concluded that Davis Advisors had provided the Funds and their shareholders a reasonable level of both investment and non-investment services. The Independent Directors further concluded that shareholders have received a significant benefit from Davis Advisors’ shareholder oriented approach, as well as the successful execution of its investment discipline.

 

**Davis Opportunity Fund**

 

The Independent Directors noted that Davis Opportunity Fund out-performed its benchmark, the Russell 3000® Index, and exceeded the average performance of its peer group, as determined by an independent service provider, over longer-term investment horizons.

 

The Independent Directors considered the total expense ratio for Davis Opportunity Fund and concluded that it is reasonable and competitive with the range of average expense ratios of its peer group as determined by an independent service provider. 

 

The Independent Directors considered the advisory fee schedule for Davis Opportunity Fund. The Independent Directors concluded that the advisory fee schedule represents an appropriate sharing between Fund shareholders and Davis Advisors of such economies of scale as may exist in the management of the Fund at current asset levels.

 

 

68

 

 

 

**DAVIS SERIES, INC.**

DIRECTOR APPROVAL OF ADVISORY AGREEMENTS - (Continued)

 

 

**Davis Financial Fund**

 

The Independent Directors noted that Davis Financial Fund out-performed its benchmark, the Standard & Poor’s 500® Index, over longer-term investment horizons. Davis Financial Fund exeeded the average performance of its peer group, as determined by an independent service provider, over the 10-year and 3-year investment horizons, while trailing the peer group over the 5-year investment horizon.  

 

The Independent Directors considered the expense ratio for Davis Financial Fund and concluded that it is reasonable and competitive with the range of average expense ratios of its peer group as determined by an independent service provider. 

 

The Independent Directors considered the advisory fee schedule for Davis Financial Fund. The Independent Directors concluded that the advisory fee schedule represents an appropriate sharing between Fund shareholders and Davis Advisors of such economies of scale as may exist in the management of the Fund at current asset levels.

 

**Davis Real Estate Fund**

 

The Independent Directors noted that Davis Real Estate Fund trailed its benchmark, the Dow Jones Wilshire Real Estate Securities Index, over longer-term investment horizons. Davis Real Estate Fund exceeded the average performance of its peer group, as determined by an independent service provider, over the 1-year and 3-year investment horizons and trailed the peer group over the 5-year and 10-year investment horizons.

 

The Independent Directors considered the expense ratio for Davis Real Estate Fund and concluded that it is reasonable and competitive with the range of average expense ratios of its peer group as determined by an independent service provider. 

 

The Independent Directors considered the advisory fee schedule for Davis Real Estate Fund. The Independent Directors concluded that the advisory fee schedule represents an appropriate sharing between Fund shareholders and Davis Advisors of such economies of scale as may exist in the management of the Fund at current asset levels.

 

**Davis Appreciation & Income Fund**

 

The Independent Directors noted that Davis Appreciation & Income Fund out-performed its benchmark, the Standard & Poor’s 500® Index and exceeded the average performance of its peer group, as determined by an independent service provider, over all investment horizons reviewed. 

 

The Independent Directors considered the expense ratio for Davis Appreciation & Income Fund and concluded that it is reasonable and competitive with the range of average expense ratios of its peer group as determined by an independent service provider. 

 

The Independent Directors considered the advisory fee schedule for Davis Appreciation & Income Fund. The Independent Directors concluded that the advisory fee schedule represents an appropriate sharing between Fund shareholders and Davis Advisors of such economies of scale as may exist in the management of the Fund at current asset levels.

 

 

69

 

 

 

**DAVIS SERIES, INC.**

DIRECTOR APPROVAL OF ADVISORY AGREEMENTS - (Continued)

 

 

**Davis Government Bond Fund**

 

The Independent Directors noted that Davis Government Bond Fund trailed its benchmark, the Citigroup U.S. Treasury/Agency 1-3 Year Index and trailed the average performance of its peer group, as determined by an independent service provider, over longer-term investment horizons. The Independent Directors continue to monitor the performance of the Fund.

 

The Independent Directors considered the total expense ratio for Davis Government Bond Fund and noted that it is higher thanthe range of average expense ratios of its peer group as determined by an independent service provider. The Independent Directors continue to monitor the expenses of the Fund.

 

The Independent Directors considered the fixed advisory fee schedule for Davis Government Bond Fund, observed that fixed fee schedules are common with competitive government bond funds, the Fund’s management fee is lower than its peer group, and concluded that at current assets, the fee schedule was appropriate.

 

**Davis Government Money Market Fund**

 

The Independent Directors noted that Davis Government Money Market Fund exceeded the average performance of its peer group, as determined by an independent service provider, over all reviewed investment horizons. 

 

The Independent Directors considered the total expense ratio for Davis Government Money Market Fund and concluded that it is reasonable and competitive with the range of average expense ratios of its peer group as determined by an independent service provider. 

 

The Independent Directors considered the advisory fee schedule for Davis Government Money Market Fund and concluded that it represents an appropriate sharing between Fund shareholders and Davis Advisors of such economies of scale as may exist in the management of the Fund at current asset levels.

 

**Approval of Advisory Arrangements**

 

The Independent Directors determined that the advisory fees for Davis Opportunity Fund, Davis Financial Fund, Davis Real Estate Fund, Davis Appreciation & Income Fund, Davis Government Bond Fund, and Davis Government Money Market Fund were reasonable in light of the nature, quality and extent of the services being provided to the Funds, the costs incurred by Davis Advisors in providing such service, and in comparison to the range of the average advisory fees of their peer groups as determined by an independent service provider. The Independent Directors found that the terms of the Advisory Agreements are fair and reasonable and that continuation of the Advisory Agreements is in the best interests of the Funds and their shareholders. The Independent Directors therefore recommended continuation of the Advisory Agreements.

 

 

70

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**DIRECTORS**

 

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

 

 

 

 

 

**Number of**

 

 

 

**Term of**

 

**Portfolios in**

 

 

 

**Office and**

 

**Fund**

 

 

**Position(s)**

**Length of**

 

**Complex**

 

**Name**

**Held With**

**Time**

**Principal Occupation(s)**

**Overseen by**

**Other Directorships**

(birthdate)

**Fund**

**Served**

**During Past Five Years**

**Director**

**Held by Director**

 

***Independent Directors***

 

 

 

 

 

 

**Marc P. Blum**

(9/9/42)

Director

Director since 1986

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

12

Director, Legg Mason Trust (asset management company) and Rodney Trust Company (Delaware).

 

 

 

 

 

 

**Thomas S. Gayner**

(12/16/61)

Director

Director since 2004

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

12

Director, First Market Bank.

 

 

 

 

 

 

 

 

 

**Jerry D. Geist**

(5/23/34)

Director

Director since 1986

Chairman, Santa Fe Center Enterprises (energy project development); retired Chairman and President, Public Service Company of New Mexico.

12

 

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

 

 

 

 

 

 

 

 

71

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**DIRECTORS – (Continued)**

 

 

 

 

 

**Number of**

 

 

 

**Term of**

 

**Portfolios in**

 

 

 

**Office and**

 

**Fund**

 

 

**Position(s)**

**Length of**

 

**Complex**

 

**Name**

**Held With**

**Time**

**Principal Occupation(s)**

**Overseen by**

**Other Directorships**

(birthdate)

**Fund**

**Served**

**During Past Five Years**

**Director**

**Held by Director**

 

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

 

 

 

 

 

 

**D. James Guzy**

(3/7/36)

Director

Director since 1982

Chairman, PLX Technology, Inc. (semi-conductor manufacturer).

12

Director, Intel Corp. (semi-conductor manufacturer), Cirrus Logic Corp. (semi-conductor manufacturer), Alliance Technology Fund (a mutual fund), Micro Component Technology, Inc. (micro-circuit handling and testing equipment manufacturer), LogicVision, Inc. (semi-conductor software company), and Tessera Technologies, Inc. (semi-conductor packaging company).

 

 

 

 

 

 

**G. Bernard Hamilton**

(3/18/37)

Director

Director since 1978

Retired, Managing General Partner, Avanti Partners, L.P. from 1990-2005 (investment partnership).

12

none 

 

 

 

 

 

 

**Samuel H. Iapalucci**

(7/19/52)

Director

Director since 2006

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

12

none 

 

 

 

 

 

 

**Robert P. Morgenthau**

(3/22/57)

Director

Director since 2002

Chairman, NorthRoad Capital Management, LLC (an investment management firm) since June 2002; President of Private Advisory Services of Bank of America (an investment management firm) from 2001 until 2002; prior to that a managing director and global head of marketing and distribution for Lazard Asset Management (an investment management firm) for ten years.

12

none 

 

 

72

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**DIRECTORS – (Continued)**

 

 

 

 

 

**Number of**

 

 

 

**Term of**

 

**Portfolios in**

 

 

 

**Office and**

 

**Fund**

 

 

**Position(s)**

**Length of**

 

**Complex**

 

**Name**

**Held With**

**Time**

**Principal Occupation(s)**

**Overseen by**

**Other Directorships**

(birthdate)

**Fund**

**Served**

**During Past Five Years**

**Director**

**Held by Director**

 

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

 

 

 

 

 

 

**Theodore B. Smith, Jr.**

(12/23/32)

Director

Director since 1994

Chairman of John Hassall, Inc. (fastener manufacturing); Chairman, Cantrock Realty; Mayor, Incorporated Village of Mill Neck, NY.

12

none

 

 

 

 

 

 

**Christian R. Sonne**

(5/6/36)

Director

Director since 1990

General Partner of Tuxedo Park Associates (land holding and development firm); President and Chief Executive Officer of Mulford Securities Corporation (private investment fund) until 1990; formerly Vice President of Goldman Sachs & Co. (investment banking); Chairman, Board of Trustees, American Scandinavian Foundation.

12

none

 

 

 

 

 

 

**Marsha Williams**

(3/28/51)

Director

Director since 1999

Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a real estate investment trust); Former Chief Administrative Officer, Crate & Barrel (home furnishings retailer); former Vice President and Treasurer, Amoco Corporation (oil & gas company).

15

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

 

***Inside Directors****

 

 

 

 

 

 

**Jeremy H. Biggs**

(8/16/35)

Director/

Chairman

Director since 1994

Vice Chairman, Member of the Investment Policy Committee and Member of the International Investment Committee, all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P. 

12

none

 

 

 

 

 

 

 

 

73

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Suite 101

Tucson, Arizona 85706

 

**DIRECTORS – (Continued)**

 

 

 

 

 

**Number of**

 

 

 

**Term of**

 

**Portfolios in**

 

 

 

**Office and**

 

**Fund**

 

 

**Position(s)**

**Length of**

 

**Complex**

 

**Name**

**Held With**

**Time**

**Principal Occupation(s)**

**Overseen by**

**Other Directorships**

(birthdate)

**Fund**

**Served**

**During Past Five Years**

**Director**

**Held by Director**

 

***Inside Directors* - (Continued)***

 

 

 

 

 

 

**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.

15

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

 

 

 

 

 

 

**Christopher C. Davis**

(7/13/65)

Director

Director since 1997

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

15

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

****

*

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

 

 

74

 

 

 

**DAVIS SERIES, INC.**

2949 East Elvira Road, Tucson, Arizona 85706

 

 

**Directors**

**Officers**

 

Jeremy H. Biggs

Jeremy H. Biggs

 

Marc P. Blum

*Chairman*

 

Andrew A. Davis

Andrew A. Davis

 

Christopher C. Davis

*President – Davis Appreciation & Income*

 

Thomas S. Gayner

*Fund, Davis Real Estate Fund &*

 

Jerry D. Geist

*Vice President – Davis Opportunity Fund, Davis*

 

D. James Guzy

*Government Bond Fund, Davis Government*

 

G. Bernard Hamilton

*Money Market Fund, & Davis Financial Fund*

 

Samuel H. Iapalucci

Christopher C. Davis

 

Robert P. Morgenthau

*President – Davis Opportunity Fund,*

 

Theodore B. Smith, Jr.

*Davis Financial Fund & Vice President - Davis*

 

Christian R. Sonne

*Government Bond Fund, Davis Government*

 

Marsha Williams

*Money Market Fund, Davis Appreciation &*

 

 

*Income Fund, & Davis Real Estate Fund*

 

 

Creston A. King

 

 

*President – Davis Government Money Market*

**Investment Adviser**

*Fund & Davis Government Bond Fund*

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

Kenneth C. Eich

2949 East Elvira Road, Suite 101

*Executive Vice President & Principal*

Tucson, Arizona 85706

*Executive Officer*

(800) 279-0279

Sharra L. Reed

 

*Vice President & Chief Compliance Officer*

**Distributor**

Douglas A. Haines

Davis Distributors, LLC

*Vice President & Principal Accounting Officer*

2949 East Elvira Road, Suite 101

Thomas D. Tays

Tucson, Arizona 85706

*Vice President & Secretary*

 

 

**Transfer Agent**

 

Boston Financial Data Services, Inc

 

c/o The Davis Funds

 

P.O. Box 8406

 

Boston, Massachusetts 02266-8406

 

 

 

**Custodian**

 

State Street Bank and Trust Co.

 

One Lincoln Street

 

Boston, Massachusetts 02111

 

 

 

**Counsel**

 

Seyfarth Shaw LLP

 

131 South Dearborn Street, Suite 2400

 

Chicago, Illinois 60603-5577

 

 

 

**Independent Registered Public Accounting Firm**

 

KPMG LLP

 

707 Seventeenth Street, Suite 2700

 

Denver, Colorado 80202

 

 

 

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

 

 

 

 

75

 

 

 

**ITEM 2.  CODE OF ETHICS**

 

Not Applicable

 

**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**

 

Not Applicable

 

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

 

Not Applicable

 

**ITEM 6.  SCHEDULE OF INVESTMENTS**

 

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

 

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

 

Not Applicable****

 

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

 

Not Applicable

 

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

 

Not Applicable

 

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

 

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

 

**ITEM 11.  CONTROLS AND PROCUDURES**

 

 

(a)

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

 

 

(b)

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

 

 

 

 

**ITEM 12.  EXHIBITS**

 

(a)(1)  Not Applicable

 

(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:  August 31, 2006

 

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:  August 31, 2006

 

By

/s/ Douglas A. Haines

 
 

Douglas A. Haines

 
 

Principal Financial Officer

 

Date:  August 31, 2006