Fees and Expenses of the Fund
Each Fund must pay operating fees and expenses.
Management Fee
The management fee covers the normal expenses of managing the Funds, including compensation, research costs, corporate overhead expenses and related
expenses. The difference in the fee structure between the Classes is primarily the result of their separate arrangements for shareholder and distribution services and is not the result of any difference in the amounts charged by Davis Advisors for
core investment advisory services. Accordingly, the core investment advisory expenses do not vary by Class. Different fees and expenses will affect performance.
12b-1 Fees
The Davis Funds have Plans of Distribution or 12b-1 Plans
under which the Funds may use their own assets to finance distribution activities. The 12b-1 Plans are used primarily to pay dealers and other institutions for providing services to Davis Funds shareholders. The 12b-1 Plans provide for annual
distribution expenses of up to 0.25% of the average daily net asset value of the Class A shares and up to the lesser of 1.25% of the average daily net asset value of the Class B or C shares or the maximum amount provided by applicable rule or
regulation of the Financial Industry Regulatory Authority (FINRA), which is 1.00% at present.
For Class A, B, or C shares,
up to 0.25% of distribution expenses may be used to pay service fees to qualified dealers providing certain shareholder services. These services may include, but are not limited to, assessing a clients investment needs and recommending
suitable investments on an ongoing basis. In lieu of a front-end sales charge (as assessed upon the sale of Class A shares), up to an additional 1.00% of distribution expenses may be paid for Class B and C shares. Because distribution expenses
are paid out of a funds assets on an ongoing basis, these fees will increase the cost of your investment over time and may cost you more than paying other types of sales charges. Thus, the higher fees for Class B and C shares may cost you more
over time than paying the initial sales charge for Class A shares.
Class B and Class C shares contingent deferred sales charges and
asset-based sales charges have the same purpose as the front-end sales charge on sales of Class A shares, i.e., to compensate dealers and other financial institutions for their services. The fees are paid by the Funds to dealers and financial
institutions for providing services to their clients.
Class Y shares do not have a plan of distribution.
Other Expenses
Other expenses
include miscellaneous fees from affiliated and outside service providers. These fees may include legal, audit, custodial fees, the costs of printing and mailing of reports and statements, automatic reinvestment of distributions and other
conveniences, and payments to third parties that provide recordkeeping services or administrative services for investors in the Funds.
Total Fund Operating Expenses
The total cost of operating a mutual fund is reflected in its expense ratio. A shareholder does not pay operating costs directly; instead, operating costs
are deducted before the Funds NAV is calculated and are expressed as a percentage of the Funds average daily net assets. The effect of these fees is reflected in the performance results for that Class of shares. Investors should examine
total operating expenses closely in the prospectus, especially when comparing one fund with another fund in the same investment category.
Fees Paid to Dealers and Other Financial Intermediaries
Broker-dealers and other financial intermediaries (Qualifying
dealers) may charge Davis Distributors, LLC (the Distributor) or the Adviser substantial fees for selling Davis Funds shares and providing continuing support to shareholders. Qualifying dealers may charge (i) sales
commissions from sales charges paid by purchasing shareholders; (ii) distribution and service fees from the Funds 12b-1 distribution plans; (iii) record-keeping fees from the Funds for providing record-keeping services to investors
who hold Davis Funds shares through dealer-controlled omnibus accounts; and (iv) other fees, described below, paid by Davis Advisors or the Distributor from their own resources.
Qualifying dealers may, as a condition to distributing shares of Davis Funds, request that the Distributor, or the Adviser, pay or reimburse the Qualifying dealer for: (i) marketing support payments
including business planning assistance, educating personnel about Davis Funds, and shareholder financial planning needs, placement on the Qualifying dealers list of offered funds, and access to sales meetings, sales representatives and
management representatives of the Qualifying dealer; and (ii) financial assistance charged to allow the Distributor to participate in and/or present at conferences or seminars, sales or
Page 19
training programs for invited registered representatives and other employees, client and investor events and other dealer-sponsored events. These additional fees are sometimes referred to as
revenue sharing payments. A number of factors are considered in determining fees paid to Qualifying dealers, including the dealers sales and assets, and the quality of the dealers relationship with the Distributor. Fees are
generally based on the value of shares of the Fund held by the Qualifying dealer or financial institution for its customers or based on sales of Fund shares by the dealer or financial institution, or a combination thereof. Davis Advisors may use its
profits from the advisory fee it receives from the Funds to pay some or all of these fees. Some Qualifying dealers may also choose to pay additional compensation to their registered representatives who sell the Funds. Such payments may be associated
with the status of a Fund on a Qualifying dealers preferred list of funds or otherwise associated with the Qualifying dealers marketing and other support activities. The foregoing arrangements may create an incentive for the Qualifying
dealers, brokers, or other financial institutions, as well as their registered representatives, to sell Davis Funds rather than other funds.
In 2013, the Distributor, or the Adviser, was charged additional fees by the Qualifying dealers listed below. The Distributor paid these fees from its
own resources. These Qualifying dealers may provide Davis Funds enhanced sales and marketing support and financial advisers employed by the Qualifying dealers may recommend Davis Funds rather than other funds. Qualifying dealers may be added or
deleted at any time.
ADP Broker Dealer, Inc.; Ameriprise Financial Services, Inc.; Australian Funds Marketing Ltd.; Charles Schwab &
Co., Inc.; Diversified Investment Advisors, Inc.; Genworth Life Insurance Company of New York; Genworth Life and Annuity Insurance Company; Great West Financial Services, Inc.; GWFS Equities, Inc. Hartford Life Insurance Company; Hartford Securities
Distribution Company, Inc.; ING Life Insurance and Annuity Co.; ING Financial Advisers, LLC; John Hancock Life Insurance Company (U.S.A.); John Hancock Life Insurance Company of New York; JP Morgan Retirement Plan Services LLC; LPL Financial
Corporation; Marshall & Ilsley Trust Company; Massachusetts Mutual Life Insurance Co.; Mercer HR Services LLC; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Merrill Lynch Life Insurance Co.; Morgan Stanley Smith Barney LLC; National
Financial Services, LLC; Nationwide Financial Services, Inc.; New York Life Distribution; Raymond James & Associates, Inc.; Standard Insurance Company; T. Rowe Price Retirement Plan Services, Inc.; The Guardian Insurance & Annuity
Company, Inc.; The Vanguard Group, Inc.; Transamerica Advisors Life Insurance Company; Transamerica Advisors Life Insurance Company of New York; UBS Financial Services, Inc.; Wells Fargo Bank N.A.
In addition, the Distributor may, from time to time, pay additional cash compensation or other promotional incentives to authorized dealers or agents who
sell shares of Davis Funds. In some instances, such cash compensation or other incentives may be offered only to certain dealers or agents who employ registered representatives who have sold or may sell significant amounts of shares of Davis Funds
during specified periods of time.
Although Davis Funds may use brokers who sell shares of the Funds to execute portfolio transactions, the
Funds do not consider the sale of Fund shares as a factor when selecting brokers to execute portfolio transactions.
Investors should consult
their financial intermediaries regarding the details of payments they may receive in connection with the sale of Fund shares.
Due
Diligence Meetings.
The Distributor routinely sponsors due diligence meetings for registered representatives during which they receive updates on various Davis Funds and are afforded the opportunity to speak with the Funds Portfolio
Managers. Invitation to these meetings is not conditioned on selling a specific number of shares. Those who have shown an interest in Davis Funds, however, are more likely to be considered. To the extent permitted by their firms policies and
procedures, registered representatives expenses in attending these meetings may be covered by the Distributor.
Seminars and
Educational Meetings.
The Distributor may defray certain expenses of Qualifying dealers incurred in connection with seminars and other educational efforts subject to the Distributors policies and procedures governing payments for such
seminars. The Distributor may share expenses with Qualifying dealers for costs incurred in conducting training and educational meetings about various aspects of the Funds for the employees of Qualifying dealers. In addition, the Distributor may
share expenses with Qualifying dealers for costs incurred in hosting client seminars at which the Fund is discussed.
Recordkeeping
Fees.
Certain Qualifying dealers have chosen to maintain omnibus accounts with Davis Funds. In an omnibus account, the Fund maintains a single account in the name of the Qualifying dealer and the dealer maintains all of its
clients individual shareholder accounts. Likewise, for many retirement plans, a third-party administrator may open an omnibus account with Davis Funds and the administrator will then maintain all of the participant accounts. Davis Advisors, on
behalf of the Funds, enters into agreements whereby the Funds are charged by the Qualifying dealer or administrator for such recordkeeping services.
Recordkeeping services typically include: (i) establishing and maintaining shareholder accounts and records; (ii) recording shareholder account balances and changes thereto; (iii) arranging
for the wiring of funds; (iv) providing statements to shareholders; (v) furnishing proxy materials, periodic Davis Funds reports, prospectuses and other communications to shareholders as required; (vi) transmitting shareholder
transaction information; and (vii) providing information in order to assist Davis Funds in their compliance with state securities laws. Each Davis Fund typically would be paying these shareholder servicing fees directly if a Qualifying dealer
did not hold all customer accounts in a single omnibus account with each Davis Fund.
Page 20
Other Compensation.
The Distributor may, from its own resources and not from the Funds, pay
additional fees to the extent not prohibited by state or federal laws, the Securities and Exchange Commission (SEC), or any self-regulatory agency, such as the Financial Industry Regulatory Authority (FINRA).
Page 21
H
OW
T
O
C
HOOSE
A
S
HARE
C
LASS
Before you buy shares in any Davis Fund, you need to decide which class of
shares best suits your needs. Davis Global Fund and Davis International Fund offer four classes of shares: A, B, C and Y. Each class is subject to different expenses and sales charges. Class Y shares are generally available only to qualified
institutional investors. Class B shares are no longer offered for new purchases.
The difference in the fee structures between the classes is
primarily the result of their separate arrangements for shareholder and distribution services and is not the result of any difference in the amounts charged by Davis Advisors for investment advisory services. Accordingly, the investment advisory
expenses do not vary by class.
You may choose to buy one class of shares rather than another depending on the amount of the purchase and the
expected length of time of investment. Long-term shareholders of Class B or C shares may pay more than the maximum front-end sales charge allowed by FINRA.
Class A Shares
Class A shares may be best for you if you are a long-term
investor who is willing to pay the entire sales charge at the time of purchase. In return, you pay a lower distribution fee than Class B or C shares.
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For any investment below $100,000, you buy Class A shares at their net asset value per share plus a sales charge, which is approximately 4.75% of
the offering price (see chart following). The term offering price includes the front-end sales charge.
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There is no limit to how much you can invest in this share class.
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Davis Funds (other than Davis Government Money Market Fund) pay a distribution fee up to 0.25% of the average daily net assets each year
you hold the shares. This fee is lower than the fee you pay for Class B and C shares. Lower expenses of Class A shares translate into higher annual return on net asset value than Class B or C shares.
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Class A Shares Sales Charges
for all Davis Funds except Davis Government Money Market Fund
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Amount of Purchase
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Sales
Charge
Approximate percentage of
offering price
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Sales
Charge
Approximate percentage of
net amount invested
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Amount of Sales Charge
Retained by Dealer
Percentage of offering price
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Under $100,000
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4.75
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%
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4.99
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%
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4.00
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%
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$100,000-$249,999
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3.50
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%
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3.63
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%
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3.00
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%
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$250,000-$499,999
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2.50
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%
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2.56
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%
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2.00
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%
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$500,000-$749,999
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2.00
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%
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2.04
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%
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1.75
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%
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$750,000-$999,999
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1.00
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%
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1.01
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%
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0.75
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%
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$1 million or more*
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None
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None
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None
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*
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You pay no front-end sales charge on purchases of $1 million or more, but if you sell those shares (in any Davis Fund other than Davis Government Money Market Fund)
within the first year, a deferred sales charge of 0.50% may be deducted from the redemption proceeds.
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The Distributor may
pay the dealer of record commissions (on Davis Funds other than Davis Government Money Market Fund) on purchases at the annual rate described in the table below. Commissions may be paid on either: (i) Class A purchases of $1 million or
more; or (ii) Class A purchases (net of redemptions) in retirement plans which qualify for sales at net asset value. The commission will be paid only on purchases that were not previously subject to a front-end sales charge or dealer
concession.
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Purchase Amount
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Commission
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First $5 million
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0.50
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%
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More than $5 million
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0.25
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%
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The Funds may reimburse the Distributor for these payments through its Plans of Distribution. If distribution fee limits
already have been reached for the year, the Distributor itself will pay the commissions.
Reduction of Class A Shares Initial Sales
Charge
To receive a reduction in your Class A initial sales charge, you must let your financial adviser or Davis Funds know at
the time you purchase shares that you qualify for such a reduction. If you do not let your adviser or Davis Funds know that you are eligible for a reduction, you may not receive a sales charge discount to which you are otherwise entitled.
As the chart above shows, the sales charge gets smaller as your purchase amount increases. There are several ways you may combine
purchases to qualify for a lower sales charge. To qualify for a reduction in Class A shares initial sales charge, you must provide records (generally account statements are sufficient; your broker may require additional documents) of all
Davis Funds shares owned which you wish to count towards the sales charge reduction.
Page 22
You Can Combine Purchases of Class A Shares
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With other immediate family members.
To receive a reduced Class A sales charge, investments made by yourself, your spouse, and
any children under the age of 21, may be aggregated if made for your own account(s) and/or certain other accounts, such as:
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a)
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trust accounts established by the above individuals. However, if the person(s) who established the trust is (are) deceased, then the trust account may only be
aggregated with accounts of the primary beneficiary of the trust;
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b)
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solely controlled business accounts; or
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c)
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single-participant retirement plans.
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Through employee benefit plans.
If you buy shares through trust or fiduciary accounts and Individual Retirement Accounts (IRAs) of a single
employer, the purchases will be treated as a single purchase.
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Under a Statement of Intention.
If you enter a Statement of Intention and agree to buy Class A shares of $100,000 or more over a
thirteen-month period, all of the shares you buy during that period will be counted as a single purchase, with the exception of purchases into Davis Government Money Market Fund. Before entering a Statement of Intention, please read the terms and
conditions in the Statement of Additional Information. Under a Statement of Intention, you agree to permit the Funds service provider, State Street Bank and Trust Company, to hold fund shares in escrow to guarantee payment of any sales charges
that may be due if you ultimately invest less than you agreed to invest over the covered thirteen-month period. Money Market Fund purchases do not count toward a Statement of Intention unless the shares were exchanged from another Davis Fund and the
shares were previously subject to a sales charge.
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Under Rights of Accumulation.
If you notify your dealer or the Distributor, you can include the Class A, B and C shares in Davis Funds you
already own (excluding shares in Davis Government Money Market Fund) when calculating the price for your current purchase. These shares are valued at current offering price to determine whether or not you qualify for a reduction in the sales charge.
Money Market Fund purchases do not count toward Rights of Accumulation unless the shares were exchanged from another Davis Fund and the shares were previously subject to a sales charge.
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Combining Rights of Accumulation (ROA) with Statement of Intention.
A shareholder can use a Statement of Intention and Rights of Accumulation in
conjunction with one another; the Statement of Intention will take precedence over the Rights of Accumulation. Once the Statement of Intention has been satisfied, any new purchases into any of the linked Class A share accounts will receive the
reduced sales charge.
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For more information about how to reduce Class A shares initial sales charge, please visit Davis
Funds website, free of charge at
www.davisfunds.com
(which includes additional information in a clear and prominent format that includes hyperlinks), consult your broker or financial intermediary, or refer to the Funds
Statement of Additional Information which is available through your financial intermediary or from the Funds by calling Investor Services at
1-800-279-0279
.
Class A Shares Front-End Sales Charge Waivers
To receive a waiver of your
Class A initial sales charge, you must let your financial adviser or Davis Funds know at the time you purchase shares that you qualify for such a waiver. If you do not let your adviser or Davis Funds know that you are eligible for a waiver, you
may not receive a sales charge waiver to which you are otherwise entitled.
The Funds do not impose a sales charge on purchases of
Class A shares for:
a)
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Authorized qualified employee benefit plans or savings plans;
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b)
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Rollovers of current investments through authorized qualified employee benefit plans or savings plans, provided the shares are transferred to the same Davis Fund as
either a direct rollover, or subsequent to distribution, the rolled-over proceeds are contributed to a Davis Fund IRA through an account directly with the Fund;
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c)
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Persons investing through an authorized payroll deduction plan;
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d)
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Persons investing through an authorized investment plan for organizations that operate under Section 501(c)(3) of the Internal Revenue Code;
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e)
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Registered investment advisers, trust companies and bank trust departments exercising discretionary investment authority with respect to amounts to be invested in the
Fund;
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f)
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Persons participating in a fee-based program (such as a wrap account) under which they (i) pay advisory fees to a broker-dealer or other financial institution or
(ii) pay fees to a broker-dealer or other financial institution for providing transaction processing and other administrative services, but not investment advisory services;
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Page 23
g)
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Financial intermediaries who have entered into an agreement with the Distributor and have been approved by the Distributor to offer Fund shares to self-directed
investment brokerage accounts that may or may not charge a transaction fee;
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h)
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Certain state sponsored 529 college savings plans;
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i)
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Persons involuntarily liquidated from a Fund, who within 60 days of liquidation buy new shares of another Davis Fund (but only up to the amount that was liquidated);
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j)
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Insurance company separate accounts;
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k)
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Investments in Davis Government Money Market Fund;
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l)
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Shareholders making purchases with dividends or capital gains that are automatically reinvested;
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m)
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Current and former directors, officers, and employees of any Davis Fund or Davis Advisors (or its affiliates), and their extended family. The term extended
family includes immediate family, which is ones spouse and children under 21, and also ones grandchildren, grandparents, parents, parents-in-law, brothers and sisters, sons- and daughters-in-law, a siblings
spouse, a spouses sibling, aunts, uncles, nieces and nephews; relatives by virtue of a remarriage (step-children, step-parents, etc.) are included. Extended family shall include any child regardless of age;
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n)
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Davis Advisors or its affiliates;
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o)
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Registered representatives, principals, and employees (and any extended family member) of securities dealers having a sales agreement with the Distributor;
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p)
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Financial institutions acting as fiduciaries making single purchases of $250,000 or more;
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q)
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State and local governments when purchasing directly from the Fund. Please consult your legal and investment advisers to determine if an investment in the Fund is
permissible and suitable for you;
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r)
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Shareholders making purchases in certain accounts offered by securities firms that have entered into contracts with Davis Funds and which charge fees based on assets in
the account; and
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s)
|
Shareholder accounts established prior to December 2014 as a result of a merger with a Davis Fund.
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Rollovers from Retirement Plans to IRAs
For qualifying rollovers, you must send the Funds service provider, State Street Bank and Trust Company, a written request for the rollover.
Assets from retirement plans may be invested in Class A, B, or C shares through an IRA rollover. Rollovers invested in Class A shares from retirement plans will be subject to applicable sales
charges. Rollovers to Class A shares will be made without a sales charge if they meet the following requirements:
a)
|
the assets being rolled over were invested in Davis Funds at the time of distribution; and
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b)
|
the rolled over assets are contributed to a Davis Funds IRA with State Street Bank and Trust Company as custodian.
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IRA assets that rollover without a sales charge as described above will not be subject to a contingent deferred sales charge.
IRA rollover assets invested in Class A shares that are not attributable to Davis Funds investments, as well as future contributions to the IRA,
will be subject to sales charges and the terms and conditions generally applicable to Class A share investments as described in the prospectus and Statement of Additional Information.
Class B Shares
Class B Shares for Funds offered in this prospectus are no longer
offered for new purchases. New Class B share account applications will be returned and any investments for existing Class B share accounts that are received will be made in Class A shares of Davis Government Money Market Fund. Investors may
continue to exchange Class B Shares of other Davis Funds for Class B Shares of the Funds offered in this prospectus and to exchange Class B Shares of Funds offered in this prospectus for Class B Shares of other Davis Funds.
Class B shares may be best for you if you are willing to pay a higher distribution fee than Class A shares for seven years in order to avoid paying
a front-end sales charge. The Class B contingent deferred sales charge and asset-based sales charge have the same purpose as the front-end sales charge on sales of Class A shares, i.e., to compensate the broker. Class B shares assess a higher
distribution fee to pay fees and expenses charged by dealers and financial institutions for services provided to clients.
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You buy the shares at net asset value (no initial sales charge).
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The purchase maximum per transaction for Class B shares is $50,000.
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Page 24
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If you have significant Davis Funds holdings, you may not be eligible to invest in Class B shares. You may not purchase Class B shares if you are
eligible to purchase Class A shares at the $100,000 or higher sales charge discount rate. See Class A Shares Sales Charges and Reduction of Class A Shares Initial Sales Charge for more information regarding sales
charge discounts.
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If you sell Class B shares in any of the Davis Funds within six years of purchase, you must pay a deferred sales charge. This charge decreases over
time as you own the shares (see chart following).
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After you hold Class B shares for seven years, they are converted automatically into Class A shares without incurring a front-end sales charge. As
this is a dollar for dollar conversion, you may receive fewer Class A shares due to the difference in the price of the two share classes. Investors in Class A shares pay a lower distribution fee.
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Investors in Class B shares (other than Davis Government Money Market Fund) pay a distribution fee of one percent of the average daily net asset value
each year they hold the shares. Higher distribution fees translate into lower annual return on net asset value.
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At redemption, the deferred sales charge for each purchase will be calculated from the date of purchase, excluding any time the shares were held in a
money market fund.
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Note:
Investors who buy Class B shares of Davis Government Money Market Fund will not pay a
deferred sales charge unless the money market fund shares were received in exchange for shares of another Davis Fund (see Exchanging Shares in this prospectus).
Class B Shares Deferred Sales Charges
for all Davis Funds except Davis
Government Money Market Fund
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|
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|
Sales Made After Purchase
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|
Amount of Deferred Sales Charge
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|
Year 1
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4
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%
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Years 2-3
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3
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%
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Years 4-5
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2
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%
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Year 6
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1
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%
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Year 7
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None
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|
Class B shares automatically convert to Class A shares after seven years.
Class C Shares
Class C shares
may be best for you if you are willing to pay a higher distribution fee than Class A shares in order to avoid paying a front-end sales charge. The Class C contingent deferred sales charge and asset-based sales charge have the same purpose as
the front-end sales charge on sales of Class A shares, i.e., to compensate the broker. Class C shares assess a higher distribution fee to pay fees and expenses charged by dealers and financial institutions for services provided to clients.
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You buy the shares at net asset value (no initial sales charge).
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The purchase maximum per transaction for Class C shares is $500,000.
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If you have significant Davis Funds holdings, you may not be eligible to invest in Class C shares. You may not purchase Class C shares if you are
eligible to purchase Class A shares at the $1 million or more sales charge discount rate (i.e., at net asset value). See Class A Shares Sales Charges and Reduction of Class A Shares Initial Sales Charge for more
information regarding sales charge discounts.
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If you sell Class C shares in any of the Davis Funds (other than Davis Government Money Market Fund) within one year of purchase, you must pay a
deferred sales charge of one percent. At redemption, the deferred sales charge for each purchase will be calculated from the date of purchase, excluding any time the shares were held in a money market fund.
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Investors in Class C shares (other than Davis Government Money Market Fund) pay a distribution fee of one percent of the average daily net asset value
each year they hold the shares. Higher distribution fees translate into lower annual return on net asset value.
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Class C shares do not have a conversion provision.
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Deferred Sales Charge
If you purchase shares subject to a contingent deferred sales
charge and redeem any of those shares during the applicable holding period for the class of shares you own, the contingent deferred sales charge will be deducted from the redemption proceeds unless you are eligible for one of the waivers described
below. At redemption, the deferred sales charge will be calculated from the date of each purchase, excluding any time that shares were held in a money market fund. You will pay a deferred sales charge in the following cases:
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|
As a Class A shareholder, only if you buy shares valued at $1 million or more without a sales charge and sell the shares within one year of
purchase.
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Page 25
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As a Class B shareholder, if you sell shares within six years of purchase. The percentage decreases over the six-year period.
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As a Class C shareholder, if you sell shares within one year of purchase.
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To keep deferred sales charges as low as possible, the Funds will first sell shares in your account that are not subject to a deferred sales charge (if any). The Funds do not impose a deferred sales
charge on the amount of your account value represented by an increase in net asset value over the initial purchase price, or on shares acquired through dividend reinvestments or capital gains distributions. If the net asset value has decreased the
sales charge will be based on the current NAV. To determine whether the deferred sales charge applies to a redemption, shares are redeemed in the following order:
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|
Shares in your account represented by an increase in NAV over the initial purchase price (appreciation).
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Shares acquired by reinvestment of dividends and capital gain distributions.
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Shares that are no longer subject to the deferred sales charge.
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Shares held the longest, but which are still subject to the deferred sales charge.
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Note:
Investors who buy Class B or C shares of Davis Government Money Market Fund will not pay a deferred sales charge unless the money market
fund shares were received in exchange for shares of another Davis Fund (see Exchanging Shares in this prospectus).
Deferred Sales Charge Waivers
The Funds will waive the deferred sales charge on sales of Class A, B, and C shares of any Davis Fund if:
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You sell Class A shares that were not subject to a commission at the time of purchase (the amount of purchase totaled $1 million or more) and the
shares were held for more than a year.
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You die and were the sole owner of the account. Otherwise, shares can be redeemed without a contingent deferred sales charge following the death or
disability of the last surviving shareholder, including a trustee of a grantor trust or revocable living trust for which the trustee is also the sole beneficiary. The death or disability must have occurred after the account was established. If you
claim a disability you must provide evidence of a determination of disability by the Social Security Administration.
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You sell shares under a qualified retirement plan or IRA that constitutes a tax-free return of excess contributions to avoid a penalty.
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Your Fund redeems the remaining shares in your account under an Involuntary Redemption.
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You qualify for an exception related to defined contribution plans. These exceptions are described in the Statement of Additional Information.
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You are a director, officer or employee of Davis Advisors or one of its affiliates (or an extended family member of a director, officer or employee).
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You sell Class B or Class C shares under the Systematic Withdrawal Plan if the aggregate value of the redeemed shares does not exceed twelve percent of
the accounts value.*
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If the net asset value of the shares that you sell has increased since you purchased them, any
deferred sales charge will be based on the original cost of the shares.
*
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A Systematic Withdrawal Plan may be established as either a percentage or a fixed-dollar amount. The shares that may be redeemed without a sales charge are
recalculated as a percentage of the current market value of the account as of the date of each withdrawal. If established as a percentage, no sales charge will be incurred regardless of market fluctuations. If established as a fixed-dollar amount, a
sales charge may be incurred if the market value of the account decreases. If you redeem shares in addition to those redeemed pursuant to the Systematic Withdrawal Plan, a deferred sales charge may be imposed on those shares and on any subsequent
redemptions within a twelve-month period, regardless of whether such redemptions are pursuant to a Systematic Withdrawal Plan.
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If you have any additional questions about choosing a share class, please call the Funds toll free at
1-800-279-0279,
Monday through Friday, from 9 a.m. to 6 p.m. Eastern time. If you still
are not sure about which class is best for you, contact your financial adviser.
Class Y Shares
Class Y shares may be best for you if you qualify. Class Y shares are sold at net asset value per share without a sales charge directly to institutional
investors. Investors in Class Y shares do not pay a distribution fee. For details on what types of institutions may purchase shares and what fund minimums apply see How to Open an Account in this prospectus.
Page 26
H
OW
TO
O
PEN
AN
A
CCOUNT
To open an account with Davis Funds you must meet the initial minimum investment for each Fund
you choose to invest in. For each Class A, B, or C share account you must invest at least $1,000. For Class Y shares the minimum investment amount is dependent on how you invest:
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At least $5 million for an institution (trust company, bank trust, endowment, pension plan, foundation) acting on behalf of its own account or one or
more clients.
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At least $5 million for a government entity (a state, county, city, department, authority or similar government agency).
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With an account established under a wrap account or other fee-based program that is sponsored and maintained by a registered broker-dealer
approved by the Distributor.
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At least $500,000 for a 401(k) plan, 457 plan, employer sponsored 403(b) plan, profit sharing and money purchase pension plan, defined benefit plan, or
non-qualified deferred compensation plan where plan level or omnibus accounts are held on the books of the Fund.
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Through a registered investment adviser (RIA) who initially invests for clients an aggregate of at least $100,000 in Davis Funds through a fund
supermarket or other mutual fund trading platform sponsored by a broker-dealer or trust company and which has entered into an agreement with Davis Distributors, LLC.
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At the Distributors discretion, the minimum may be waived for an account established under a wrap account or other fee-based program
that is sponsored and maintained by a registered broker-dealer approved by the Distributor.
Two Ways You Can Open an Account
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By Mail.
Complete and sign the Application Form and mail it to the Funds service provider, State Street Bank and Trust Company. Include a
check made payable to
Davis Funds
. All purchases by check should be in U.S. dollars.
Davis Funds will not accept third-party checks, starter checks, travelers checks or money orders.
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By Dealer.
You may have your dealer order and pay for the shares. In this case, you must pay your dealer directly. Your dealer will then order
the shares from the Distributor. Please note that your dealer may charge a service fee or commission for these transactions.
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Anti-Money Laundering Compliance
Davis Funds and the Distributor are required to comply with various anti-money laundering laws and regulations and have appointed an anti-money laundering compliance officer. Consequently, the Funds or
the Distributor may request additional information from you to verify your identity and the source of your funds. If you do not provide the requested information, Davis Funds may not be able to open your account. If at any time the Funds believe an
investor may be involved in suspicious activity or if certain account information matches information on government lists of suspicious persons, the Fund and the Distributor may choose not to establish a new account or may be required to
freeze a shareholders account. They may also be required to provide a government agency or another financial institution with information about transactions that have occurred in a shareholders account or to transfer monies
received to establish a new account, transfer an existing account or transfer the proceeds of an existing account to a governmental agency. In some circumstances, the law may not permit the Funds or the Distributor to inform the shareholder that it
has taken the actions described above.
Retirement Plan Accounts
You can invest in Davis Funds using any of these types of retirement plan accounts:
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Education Savings Accounts
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Simplified Employee Pension (SEP) IRAs
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State Street
Bank and Trust Company acts as custodian for these retirement plans and charges each participant a $15 custodial fee each year per Social Security Number. This fee will be waived for accounts sharing the same Social Security Number if the accounts
total at least $50,000 at Davis Funds. This custodial fee is automatically deducted from each account unless you elect to pay the fee directly. There is also a $15 fee for closing retirement plan accounts. To open a retirement plan account, you must
fill out a special application form. You can request this form by calling Investor Services or by visiting Davis Funds website (
www.davisfunds.com
). Class Y shares cannot be purchased in an IRA.
Page 27
H
OW
TO
B
UY
, S
ELL
AND
E
XCHANGE
S
HARES
Once you have established an account with Davis Funds,
you can add to or withdraw from your investment. This prospectus describes the types of transactions you can perform as a Davis Funds shareholder including how to initiate these transactions and the charges that you may incur (if any) when buying,
selling or exchanging shares. A transaction will not be executed until all required documents have been received in a form meeting all legal requirements. Legal requirements vary depending upon the type of transaction and the type of account. Call
Investor Services for instructions. These procedures and charges may change over time and the prospectus in effect at the time a transaction is initiated will describe the procedures and charges which will apply to the transaction.
Right to Reject or Restrict any Purchase or Exchange Order
Purchases and exchanges (other than for Davis Government Money Market Fund) should be made for long-term investment purposes only. Davis Funds and the Distributor reserve the right to reject any purchase
or exchange order for any reason prior to the end of the first business day after the date that a purchase or exchange order was processed. Davis Funds or the Distributor may reject a current purchase order or restrict an
investor from placing future purchase orders. Davis Funds and the Distributor will not reject or restrict a redemption order without adequate reason, including but not limited to allowing a purchase check to clear, a court order, etc. Exchanges
involve both a redemption and a purchase; only the purchase side of the exchange may be rejected or restricted. Davis Funds are not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the securities markets.
Accordingly, purchases or exchanges that are part of activity that Davis Funds or the Distributor have determined may involve actual or potential harm to a fund may be rejected.
Four Ways to Buy, Sell and Exchange Shares
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By Telephone
. Call 1-800-279-0279. You can speak directly with an Investor Services Professional, Monday through Friday, from 9 a.m. to 6 p.m.
Eastern time or use the Funds automated telephone system at any time, day or night.
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By Online Account Access.
You may initiate most account transactions through online account access on the Funds website,
www.davisfunds.com
. Please note that certain account types, including all Class Y share accounts, may be restricted from online access.
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By Mail.
Send the request to the Funds service provider, State Street Bank and Trust Company.
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Regular mail:
Davis Funds
c/o State Street Bank and Trust Company
P.O. Box 8406
Boston, MA 02266-8406
Express shipping:
Davis Funds
c/o State Street Bank and Trust Company
30 Dan Road
Canton, MA 02021-2809
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By Dealer.
Contact a dealer who will execute the transaction through the Distributor. Please note that your dealer may charge service fees or
commissions for these transactions.
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The Davis Funds do not issue certificates for any class of shares. Instead, shares
purchased are automatically credited to an account maintained for you on the books of Davis Funds by State Street Bank and Trust Company. Transactions in the account, such as additional investments, will be reflected on regular confirmation
statements from Davis Funds. Dividend and capital gain distributions, purchases through automatic investment plans and certain retirement plans, and automatic exchanges and withdrawals will be confirmed at least quarterly.
When Your Transactions Are Processed
Purchases, sales, and exchanges will be processed at 4 p.m. Eastern time after Davis Funds transfer agent or other qualified financial intermediary receives your request to purchase or sell shares
in good order, including all documents which are required to constitute a legal purchase, sale or exchange of shares.
Buying More Shares
You may buy more shares at any time, by mail, through a dealer or by wire. The minimum purchase amount for all
share classes is $25.
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By Mail.
When you purchase shares by mail:
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Make the check payable to Davis Funds
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Page 28
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If you have the investment slip from your most recent statement, include it with the check. If you do not have an investment slip, include a letter
with your check stating the name of the Fund, the class of shares you wish to buy, and your account number.
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Regular mail:
Davis Funds
c/o State Street Bank and Trust Company
P.O. Box 8406
Boston, MA 02266-8406
Express shipping:
Davis Funds
c/o State Street Bank and Trust Company
30 Dan Road
Canton, MA 02021-2809
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Through a Dealer.
When you buy shares through a dealer, you may be charged service fees or commissions for these transactions.
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By Telephone.
If you have a bank account listed on your account you may purchase shares via ACH (Automated Clearing House) and the funds will be
pulled directly from your bank account to purchase shares. Call 1-800-279-0279 to use the Funds automated phone system 24 hours a day or speak to an Investor Services Professional, Monday through Friday, from 9 a.m. to 6 p.m. Eastern time.
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By Internet.
If you have a bank account listed on your account you may purchase shares via ACH (Automated Clearing House) and the funds will be
pulled directly from your bank account to purchase shares. See Internet Transactions in this prospectus for details on how to access your account through the internet.
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By Wire.
You may wire federal funds directly to the Funds service provider, State Street Bank and Trust Company. To ensure that the
purchase is credited properly, follow these wire instructions:
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State Street Bank and Trust Company
Boston, MA 02210
Attn: Mutual Fund Services
[Name of Davis Fund and Class of shares that you
are buying]
Shareholder Name
Shareholder Account Number
Federal Routing Number 011000028
DDA Number 9904-606-2
Inactive Accounts
If no activity
occurs in your account within the timeframe specified by the law in your state or if account statements mailed to you by the Fund are returned as undeliverable during that timeframe, the ownership of your account may be transferred to your state.
This is called escheatment.
Making Automatic Investments
An easy way to increase your investment in any Davis Fund is to sign up for the Automatic Investment Plan. Under this plan, you arrange for a predetermined amount of money to be withdrawn from your bank
account and invested in Fund shares. The minimum amount you can invest under the plan each month is $25. The account minimum of $1,000 must be met prior to establishing an automatic investment plan.
Purchases can be processed electronically on any day of the month if the institution that services your bank account is a member of the Automated
Clearing House (ACH) system. Each debit should be reflected on your next bank statement.
To sign up for the Automatic Investment Plan,
complete the appropriate section of the Application Form or complete an Account Service Form. You can modify your Automatic Investment Plan at any time by calling Investor Services.
Selling Shares
You may sell back all or part of your shares in
any Davis Fund in which you invest (also known as redeeming your shares) on any day that the Fund is open at net asset value minus any sales charges that may be due. You can sell the shares by telephone, by internet, by mail or through a dealer.
Page 29
You may sell shares in any of the following ways:
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By Mail.
To sell shares by mail, send the request to one of the addresses below. All registered shareholders must sign the request. Redemption
proceeds are usually paid to you by check within seven days after State Street Bank and Trust Company receives your proper redemption request.
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Regular mail:
Davis Funds
c/o State Street Bank and Trust Company
P.O. Box 8406
Boston, MA 02266-8406
Express shipping:
Davis Funds
c/o State Street Bank and Trust Company
30 Dan Road
Canton, MA 02021-2809
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A medallion signature guarantee is required if the redemption request is:
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for a check greater than $100,000;
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made payable to someone other than the registered shareholder(s);
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sent to an address other than to the address of record or to an address of record that has been changed in the last 30 days; or
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to a bank account not on record.
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Through a Dealer.
When you sell shares through a dealer, you may be charged service fees or commissions for these transactions.
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By Telephone.
Call 1-800-279-0279 to use the Funds automated phone system 24 hours a day or speak to an Investor Services Professional,
Monday through Friday, from 9 a.m. to 6 p.m. Eastern time.
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are limited to $100,000;
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must be mailed to the address of record that has been on the account for at least 30 days; and
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must be made payable to the registered shareholder.
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Redemptions via wire or ACH can only be done to a bank currently on the account.
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By Internet.
See Internet Transactions in this prospectus for details on how to access your account through the internet.
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are limited to $100,000;
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must be mailed to the address of record that has been on the account for at least 30 days; and
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must be made payable to the registered shareholder.
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Redemptions via wire or ACH can only be done to a bank currently on the account.
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You may redeem shares on any day that the Fund is open. Redemption proceeds may be withheld until a sufficient period of time has passed for State Street
Bank and Trust Company to be reasonably sure that all checks or drafts (including certified or cashiers checks) for shares purchased have cleared, normally not exceeding fifteen calendar days.
Short-Term Trading Fee
The Funds will deduct a short-term trading fee from the redemption amount if you sell or exchange your shares after holding them for less than 30 days. This short-term trading fee will equal 2% of the
amount redeemed and shares held longest will be treated as being redeemed first and the shares held shortest will be treated as being redeemed last. For shares of the Funds acquired by exchange, the holding period prior to the exchange is not
considered in determining whether to apply the redemption fee. The short-term trading fee is paid to the Funds and is designed to offset the brokerage commissions, market impact, and other costs associated with fluctuations in fund asset levels and
cashflows caused by short-term trading. There are limited exceptions to the short-term trading fee for investors which invest through third-party intermediaries and it is not practical to impose the fee. See the Statement of Additional Information
for a description of these exceptions.
Page 30
What You Need to Know Before You Sell Your Shares
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You will always receive cash for sales that total less than $250,000 or one percent of a funds net asset value during any ninety-day period. Any
sales above the cash limit may be paid in securities. The securities you receive may be liquid or illiquid, you would have to pay brokerage fees if you sold the securities and you would be subject to market and other applicable risks until the
securities were sold. You may be unable to sell illiquid securities.
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In certain circumstances, such as death of a shareholder or acting as power of attorney, additional documentation may be required. Please contact
Investor Services at 1-800-279-0279 to determine if your situation requires such documentation.
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In the past, Davis Funds issued certificates for its shares. If a certificate was issued for the shares you wish to sell, the certificate must be sent
by certified mail to State Street Bank and Trust Company and accompanied by a letter of instruction signed by the owner(s).
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A sale may produce a gain or loss. Gains may be subject to tax.
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The Securities and Exchange Commission may suspend redemption of shares under certain emergency circumstances if the New York Stock Exchange is closed
for reasons other than customary closings and holidays.
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Medallion Signature Guarantee
To protect you and Davis Funds against fraud, certain redemption requests must be made in writing with your signature guaranteed. A medallion signature
guarantee is a written endorsement from an eligible guarantor institution that the signature(s) on the written request is (are) valid. Certain commercial banks, trust companies, savings associations, credit unions and members of a United States
stock exchange participate in the medallion signature guarantee program. No other form of signature verification will be accepted.
Stock Power
This is a letter of
instruction signed by the owner of Fund shares that gives State Street Bank and Trust Company permission to transfer ownership of the shares to another person or group. Any transfer of ownership requires that all shareholders have their signatures
medallion-guaranteed.
If You Decide to Buy Back Shares You Sold
If you sold Davis Funds Class A or Class B shares on which you have paid a sales charge (other Classes of shares are not entitled to this privilege) and decide to repurchase some or all shares
within 60 days of sale, you may notify the Funds in writing of your intent to exercise the
Subsequent Repurchase Privilege
. This privilege can only be exercised once. With this privilege you may purchase Class A shares at current net
asset value without a sales charge. If you redeemed Class B shares and paid a contingent deferred sales charge on redemption, it will not be refunded or returned to your account. You may purchase Class A shares of the same fund/account in an
amount up to, but not exceeding, the dollar amount of Class A or Class B shares which you previously redeemed. To exercise this privilege, you must send a letter to the Funds service provider, State Street Bank and Trust Company, along
with a check for the repurchased shares.
Involuntary Redemption
If your fund/account balance declines to less than the minimum for your share class in any fund as a result of a redemption, exchange or transfer, the Fund will redeem your remaining shares in the Fund at
net asset value. You will be notified before your account is involuntarily redeemed. Telephone redemptions will receive immediate notice that the redemption will result in the entire account being redeemed upon execution of the transaction. All
other redemptions will receive a letter notifying account holders that their accounts will be involuntarily redeemed unless the account balance is increased to the Fund minimum. For Class A, B, and C shares this is typically $1,000. Class Y
share minimums vary. Please see How to Open an Account for details.
Making Systematic Withdrawals
You can sell a predetermined dollar or percentage amount each month or quarter (for retirement accounts or IRAs, withdrawals may be established on
an annual basis). Because withdrawals are sales, they may produce a gain or loss. If you purchase additional fund shares at around the same time that you make a withdrawal, you may have to pay taxes and a sales charge. When you participate in this
plan, known as the
Systematic Withdrawal Plan
, shares are sold so that you will receive payment by one of three methods:
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You may receive a check at the address of record provided that this address has not changed for a period of at least 30 days.
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You may also choose to receive funds by ACH by completing an account service form. If you wish to execute a Systematic Withdrawal Plan by ACH after
your account has been established, please complete an account service form and have your signature medallion guaranteed.
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You may have funds sent by check to a third party at an address other than the address of record. In order to do so, you must complete the appropriate
section of the Application Form. If you wish to designate a third-party payee after your account has been established, you must submit a letter of instruction with a medallion signature guarantee.
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Page 31
You may stop systematic withdrawals at any time without charge or penalty by calling Investor Services.
Wiring Sale Proceeds to Your Bank Account
You may be eligible to have your redemption proceeds electronically transferred to a commercial bank account by federal funds wire. There is a $5 charge by State Street Bank and Trust Company for wire
service and receiving banks may also charge for this service. Proceeds of redemption by federal funds wire are usually credited to your bank account on the next business day after the sale. Alternatively, redemption through ACH will usually arrive
at your bank two banking days after the sale. To have redemption proceeds sent by federal funds wire to your bank, you must first fill out the Banking Instructions section on the account application form and attach a voided check or deposit slip. If
the account has already been established, an Account Service Form must be submitted with a medallion guarantee and a voided check.
Exchanging Shares
You can sell shares of any Davis Fund to buy shares in the same class of any other Davis Fund without having to pay
a sales charge. This is known as an exchange. You can only exchange shares from your account within the same class and under the same registration. You can exchange shares by telephone, by internet, by mail or through a dealer. The initial exchange
must be for at least the minimum for your share class. For Class A, B, and C shares, this is typically $1,000. Class Y share minimums vary. Please see How to Open an Account for details. Exchanges are normally performed on the same
day of the request if received in proper form (all necessary documents, signatures, etc.) by 4 p.m. Eastern time.
Shares in different Davis
Funds may be exchanged at relative net asset value. However, if any Davis Fund shares being exchanged are subject to a deferred sales charge, Statement of Intention or other limitation, the limitation will continue to apply to the shares received in
the exchange. When you exchange shares in a Davis Fund for shares in Davis Government Money Market Fund, the holding period for any deferred sales charge does not continue during the time that you own Davis Government Money Market Fund shares. For
example, Class B shares are subject to a declining sales charge for six years. Class C shares are subject to a contingent deferred sales charge for one-year. Any period that you are invested in shares of Davis Government Money Market Fund will be
added to the declining sales charge period.
You may exchange shares in any of the following ways:
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By Mail.
To exchange shares by mail, send the request to one of the addresses below. All registered shareholders must sign the request.
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Regular mail:
Davis Funds
c/o State Street Bank and Trust Company
P.O. Box 8406
Boston, MA 02266-8406
Express shipping:
Davis Funds
c/o State Street Bank and Trust Company
30 Dan Road
Canton, MA 02021-2809
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Through a Dealer.
When you exchange shares through a dealer, you may be charged service fees or commissions for these transactions.
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By Telephone.
Call 1-800-279-0279 to use the Funds automated phone system 24 hours a day or speak to an Investor Services Professional,
Monday through Friday, from 9 a.m. to 6 p.m. Eastern time.
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By Internet.
See Internet Transactions in this prospectus for details on how to access your account through the internet.
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In the past, Davis Funds issued certificates. If you wish to exchange shares for which you hold share certificates, these
certificates must be sent by certified mail to State Street Bank and Trust Company accompanied by a letter of instruction signed by the owner(s). If your shares are being sold for cash, this is known as a redemption. Please see What You Need
to Know Before You Sell Your Shares in this prospectus for restrictions that might apply to this type of transaction.
Before you decide
to make an exchange, you must obtain the current prospectus of the desired Davis Fund. For federal income tax purposes, exchanges between Davis Funds are treated as a sale and a purchase. Therefore, there will usually be a recognizable capital gain
or loss due to an exchange.
Page 32
Making Automatic Exchanges
You can elect to make automatic monthly exchanges if all accounts involved are registered under the same name and have a minimum initial value of at least the minimum for your share class. For
Class A, B, and C shares this is typically $1,000. Class Y share minimums vary. Please see How to Open an Account for details. You must exchange at least $25 to participate in this program, known as the
Automatic Exchange
Program
. To sign up for this program you may contact Investor Services.
S
TATEMENT
OF
A
DDITIONAL
I
NFORMATION
February 28, 2014
D
AVIS
G
LOBAL
F
UND
D
AVIS
I
NTERNATIONAL
F
UND
Each an Authorized Series of
Davis New York Venture Fund, Inc.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85756
1-800-279-0279
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Funds prospectus dated February 28, 2014. This Statement of Additional Information incorporates the prospectus by reference. A copy of the Funds prospectus may be obtained, without charge, by calling
Investor Services at 1-800-279-0279 or by visiting our website at http://www.davisfunds.com/prospectus.html.
The Funds most
recent Annual Report and Semi-Annual Report to Shareholders are separate documents that are available on request and without charge by calling Investor Services. The Annual Report dated October 31, 2013, accompanying notes and report of
independent registered public accounting firm appearing in the Annual Report are incorporated, by reference, in this Statement of Additional Information. The Semi-Annual Report (unaudited) and the accompanying notes are incorporated, by reference,
into this Statement of Additional Information.
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Class A
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Class B
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Class C
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Class Y
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Davis Global Fund
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DGFAX
|
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DGFBX
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DGFCX
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DGFYX
|
Davis International Fund
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DILAX
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DILBX
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DILCX
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DILYX
|
T
ABLE
O
F
C
ONTENTS
S
ECTION
I: Investment Objectives, Strategies, Risks and
Restrictions
This Statement of Additional Information supplements and should be read in conjunction with, the prospectus for Davis
Global Fund and Davis International Fund.
The Adviser and Sub-Adviser.
The Funds are managed by Davis Selected Advisers, L.P. (the
Adviser) and Davis Selected Advisers NY, Inc. (the Sub-Adviser).
Davis Global Fund First Available to the
Public December 29, 2006.
During the period from December 22, 2004, (inception) through December 29, 2006, only the directors, officers and employees of the Fund or its investment adviser and sub-adviser (and the investment
adviser itself and affiliated companies) were eligible to purchase Fund shares. During this time period the Funds investment strategies and operations were substantially the same as they are expected to be in the immediate future.
Davis International Fund First Available to the Public December 30, 2009.
During the period from December 29, 2006, (inception) through
December 30, 2009, only the directors, officers and employees of the Fund or its investment adviser and sub-adviser (and the investment adviser itself and affiliated companies) were eligible to purchase Fund shares. During this time period the
Funds investment strategies and operations were substantially the same as they are expected to be in the immediate future.
I
NVESTMENT
O
BJECTIVE
The investment objective, principal investment strategies and the main risks of investing in each Fund are described in the Funds prospectus. There
is no assurance that a Fund will achieve its investment objective. An investment in a Fund may not be appropriate for all investors and short-term investing is discouraged. The Funds investment objectives are not fundamental policies and may
be changed by the Board of Directors without a vote of shareholders. The Funds prospectus would be amended prior to any change in investment objective and shareholders would be provided at least 30 days notice before the change in
investment objective was implemented.
In the discussions that follow, Fund applies equally to Davis Global Fund and Davis
International Fund, unless the context indicates otherwise.
N
ON
-P
RINCIPAL
I
NVESTMENT
S
TRATEGIES
AND
R
ISKS
Davis Funds may implement investment strategies which are not principal investment strategies if,
in the Advisers professional judgment, the strategies are appropriate. A strategy includes any policy, practice, or technique used by the Funds to achieve their investment objectives. Whether a particular strategy, including a strategy to
invest in a particular type of security, is a principal investment strategy depends on the strategys anticipated importance in achieving the Funds investment objectives, and how the strategy affects the Funds potential risks and
returns. In determining what a principal investment strategy is, the Adviser considers, among other things, the amount of the Funds assets expected to be committed to the strategy, the amount of the Funds assets expected to be placed at
risk by the strategy, and the likelihood of the Funds losing some or all of those assets from implementing the strategy. Non-principal investment strategies are generally those investments which constitute less than 5% to 10% of a Funds assets
depending upon their potential impact upon the investment performance of the Fund. There are exceptions to the 5% to 10% of assets test, including, but not limited to, the percentage of a Funds assets invested in a single industry or in a
single country.
While the Adviser expects to pursue the Funds investment objectives by implementing the principal investment strategies
described in the Funds prospectus, a Fund may employ non-principal investment strategies or securities if, in Davis Advisors professional judgment, the securities, trading, or investment strategies are appropriate. Factors that Davis
Advisors considers in pursuing these other strategies include whether the strategy: (i) is likely to be consistent with shareholders reasonable expectations; (ii) is likely to assist the Adviser in pursuing the Funds investment
objective; (iii) is consistent with the Funds investment objective; (iv) will not cause the Fund to violate any of its fundamental or non-fundamental investment restrictions, and (v) will not materially change the Funds
risk profile from the risk profile that results from following the principal investment strategies as described in the Funds prospectus and further explained in this Statement of Additional Information, as amended from time to time.
Davis
Global Fund and Davis International Fund Statement of Additional Information 3
The composition of the Funds portfolio and the strategies that the Adviser may use to try to achieve
the Funds investment objectives may vary depending on market conditions and available investment opportunities. The Fund is not required to use any of the investment strategies described below in pursuing its investment objective. The Fund may
use some of the investment strategies rarely or not at all. Whether the Fund uses a given investment strategy at a given time depends on the professional judgment of the Adviser.
The principal investment strategies and risks for each Fund are described in the Funds prospectus. An investment strategy which is a principal investment strategy for one Fund may be a non-principal
investment strategy for one of the other Funds which therefore may only invest a limited portion of its assets in the non-principal investment strategy, as described above. A number of investment strategies and risks, which are not principal
investment strategies or principal risks for any of the Funds (and therefore are not included in the Funds prospectus), are described below.
Equity Strategies and Risks
Emphasizing Investments in Selected Market
Sectors.
A Fund may invest up to 25% of its net assets in the securities of issuers conducting their principal business activities in the same industry. Significant investments in selected market sectors render a portfolio particularly
vulnerable to the risks of its target sectors. Prior to investing 20% or more in a selected market sector the Funds prospectus would be amended to clarify that this has become a principal investment strategy.
Passive Foreign Investment Companies.
Some securities of companies domiciled outside the U.S. in which the Fund may invest may be considered
passive foreign investment companies (PFICs) under U.S. tax laws. PFICs are foreign corporations which generate primarily passive income. For federal tax purposes, a corporation is deemed a PFIC if 75% or more of the foreign
corporations gross income for its tax year is passive income or, in general, if 50% or more of its assets are assets that produce or are held to produce passive income. Passive income is further defined as any income to be considered foreign
personal holding company income within the subpart F provisions defined by Section 954 of the Internal Revenue Code.
Investing in PFICs
involves the risks associated with investing in foreign securities, as described above. There is also the risk that the Fund may not realize that a foreign corporation it invests in is a PFIC for federal tax purposes. Federal tax laws impose severe
tax penalties for failure to properly report investment income from PFICs. The Fund makes efforts to ensure compliance with federal tax reporting of these investments, however, there can be no guarantee that the Funds efforts will always be
successful.
Unsponsored Depositary Receipts.
A Fund may invest in both sponsored and unsponsored arrangements. In a sponsored
arrangement, the foreign issuer assumes the obligation to pay some or all of the depositarys transaction fees, whereas in an unsponsored arrangement the foreign issuer assumes no obligations and the depositarys transaction fees are paid
by the holders. Foreign issuers in respect of whose securities unsponsored depositary receipts have been issued are not necessarily obligated to disclose material information in the markets in which the unsponsored depositary receipts are traded
and, therefore, such information may not be reflected in the prices of such securities in those markets. Shareholder benefits, voting rights and other attached rights may not be extended to the holders of unsponsored depositary receipts.
Investments in Other Investment Companies.
The Funds can invest in the securities issued by other investment companies, which can include open-end
funds, closed-end funds, or exchange-traded funds (ETFs, which are typically open-ended funds or unit investment trusts listed on a stock exchange). The Funds may do so as a way of gaining exposure to securities represented by the
investment companys portfolio at times when the Funds may not be able to buy those securities directly. As shareholders of an investment company, the Funds would be subject to their ratable share of that investment companys expenses,
including its advisory and administration expenses. At the same time, the Funds would bear their own management fees and expenses. The Funds do not intend to invest in other investment companies unless the portfolio manager believes that the
potential benefits of the investment justify the expenses. The Funds investments in the securities of other investment companies are subject to the limits that apply to those kinds of investments under the Investment Company Act of 1940, as
revised (1940 Act).
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Global Fund and Davis International Fund Statement of Additional Information 4
Initial Public Offerings (IPOs).
An IPO is the initial public offering of securities of a
particular company. IPOs in which the Fund invests can have a dramatic impact on Fund performance and assumptions about future performance based on that impact may not be warranted. Investing in IPOs involves risks. Many, but not all, of the
companies issuing IPOs are small, unseasoned companies. Many are companies that have only been in operation for short periods of time. Small company securities, including IPOs, are subject to greater volatility in their prices than are securities
issued by more established companies. If the Fund does not intend to make a long-term investment in an IPO (it is sometimes possible to immediately sell an IPO at a profit) the Adviser may not perform the same detailed research on the company that
it does for core holdings.
Rights and Warrants.
Rights and warrants are forms of equity securities. Warrants, basically, are options
to purchase equity securities at specific prices valid for a specific period of time. Their prices do not necessarily move parallel to the prices of the underlying securities. Rights are similar to warrants, but normally have shorter maturities and
are distributed directly by issuers to their shareholders. Rights and warrants have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.
Other Forms of Equity Securities.
In addition to common stock the Fund may invest in other forms of equity securities, including preferred stocks and securities with equity conversion or purchase
rights. The prices of equity securities fluctuate based on changes in the financial condition of their issuers and on market and economic conditions. Events that have a negative impact on a business probably will be reflected in a decline in the
price of its equity securities. Furthermore, when the total value of the stock market declines, most equity securities, even those issued by strong companies, likely will decline in value.
Financial Services.
A company is principally engaged in financial services if it owns financial services related assets constituting at least 50% of the total value of its assets, or if
at least 50% of its revenues are derived from its provision of financial services. The financial services sector consists of several different industries that behave differently in different economic and market environments, including for example,
banking, insurance, and securities brokerage houses. Companies in the financial services sector include: commercial banks, industrial banks, savings institutions, finance companies, diversified financial services companies, investment banking firms,
securities brokerage houses, investment advisory companies, leasing companies, insurance companies and companies providing similar services. Due to the wide variety of companies in the financial services sector, they may react in different ways to
changes in economic and market conditions.
Risks of investing in the financial services sector include: (i) Systemic risk: Factors
outside the control of a particular financial institution like the failure of another, significant financial institution or material disruptions to the credit markets may adversely affect the ability of the financial institution to
operate normally or may impair its financial condition; (ii) Regulatory actions: financial services companies may suffer setbacks if regulators change the rules under which they operate; (iii) Changes in interest rates: unstable and/or
rising interest rates may have a disproportionate effect on companies in the financial services sector; (iv) Non-diversified loan portfolios: financial services companies whose securities the Fund purchases may themselves have concentrated
portfolios, such as a high level of loans to real estate developers, which makes them vulnerable to economic conditions that affect that industry; (v) Credit: financial services companies may have exposure to investments or agreements which
under certain circumstances may lead to losses, for example sub-prime loans; and (vi) Competition: the financial services sector has become increasingly competitive.
Banking.
Commercial banks (including money center regional and community banks), savings and loan associations and holding companies of the foregoing are especially subject to adverse
effects of volatile interest rates, concentrations of loans in particular industries or classifications (such as real estate, energy, or sub-prime mortgages), and significant competition. The profitability of these businesses is to a significant
degree dependent on the availability and cost of capital funds. Economic conditions in the real estate market may have a particularly strong effect on certain banks and savings associations. Commercial banks and savings associations are subject to
extensive federal and, in many instances, state regulation. Neither such extensive regulation nor the federal insurance of deposits ensures the solvency or profitability of companies in this industry, and there is no assurance against losses in
securities issued by such companies.
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Global Fund and Davis International Fund Statement of Additional Information 5
Insurance.
Insurance companies are particularly subject to government regulation and rate setting,
potential anti-trust and tax law changes, and industry-wide pricing and competition cycles. Property and casualty insurance companies also may be affected by weather, terrorism, long-term climate changes, and other catastrophes. Life and health
insurance companies may be affected by mortality and morbidity rates, including the effects of epidemics. Individual insurance companies may be exposed to reserve inadequacies, problems in investment portfolios (for example, real estate or
junk bond holdings) and failures of reinsurance carriers.
Other Financial Services Companies.
Many of the investment
considerations discussed in connection with banks and insurance companies also apply to other financial services companies. These companies are subject to extensive regulation, rapid business changes, and volatile performance dependent on the
availability and cost of capital and prevailing interest rates and significant competition. General economic conditions significantly affect these companies. Credit and other losses resulting from the financial difficulty of borrowers or other third
parties have a potentially adverse effect on companies in this industry. Investment banking, securities brokerage and investment advisory companies are particularly subject to government regulation and the risks inherent in securities trading and
underwriting activities.
Other Regulatory Limitations.
Regulations of the Securities and Exchange Commission (SEC) impose
limits on: (1) investments in the securities of companies that derive more than 15% of their gross revenues from the securities or investment management business (although there are exceptions, the Fund is prohibited from investing more than 5%
of its total assets in a single company that derives more than 15% of its gross revenues from the securities or investment management business); and (2) investments in insurance companies. The Fund generally is prohibited from owning more than
10% of the outstanding voting securities of an insurance company.
Inflation risk.
Also called purchasing power risk, is the chance
that the cash flows from an investment wont be worth as much in the future because of changes in purchasing power due to inflation.
Real Estate Companies, Including REITs.
Real estate companies are companies that have at least 50% of the value of their assets, gross income or
net profits attributable to ownership, financing, construction, management or sale of real estate, or to products or services that are related to real estate or the real estate industry. The Fund does not invest directly in real estate. Real estate
companies include real estate investment trusts (REITs) or other securitized real estate investments, brokers, developers, lenders and companies with substantial real estate holdings such as paper, lumber, hotel and entertainment
companies. REITs pool investors funds for investment primarily in income-producing real estate or real estate-related loans or interests. A REIT is not taxed on income distributed to shareholders if it complies with various requirements
relating to its organization, ownership, assets and income, and with the requirement that it distribute to its shareholders at least 90% of its taxable income (other than net capital gains) each taxable year. REITs generally can be classified as
equity REITs, mortgage REITs and hybrid REITs. Equity REITs invest the majority of their assets directly in real property and derive their income primarily from rents. Equity REITs also can realize capital gains by selling property that has
appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both equity REITs and mortgage REITs. To the
extent that the management fees paid to a REIT are for the same or similar services as the management fees paid by the Fund, there will be a layering of fees, which would increase expenses and decrease returns. Securities issued by REITs may trade
less frequently and be less liquid than common stock issued by other companies.
Real estate securities, including REITs, are subject to risks
associated with the direct ownership of real estate including: (i) declines in property values, because of changes in the economy or the surrounding area or because a particular region has become less appealing to tenants; (ii) increases
in property taxes, operating expenses, interest rates or competition; (iii) overbuilding; (iv) changes in zoning laws; (v) losses from casualty or condemnation;. (vi) declines in the value of real estate, risks related to general
and local economic conditions; (vii) uninsured casualties or condemnation losses; (viii) fluctuations in rental income; (ix) changes in neighborhood values; (x) the appeal of properties to tenants; (xi) increases in interest
rates, and (xii) access to the credit markets. The Fund also could be subject to such risks by reason of direct ownership as a result of a default on a debt security it may own.
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Global Fund and Davis International Fund Statement of Additional Information 6
Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of credit extended. Equity and mortgage REITs are dependent on management skill, may not be diversified and are subject to project financing risks. REITs also are subject to: heavy cash flow dependency,
defaults by borrowers, self-liquidation and the possibility of failing to qualify for the favorable federal income tax treatment generally available to REITs under the Internal Revenue Code, and failing to maintain exemption from registration under
the 1940 Act. Changes in interest rates also may affect the value of the debt securities in the Funds portfolio. By investing in REITs indirectly through the Fund, a shareholder will bear not only his or her proportionate share of the expense
of the Fund but also, indirectly, similar expenses of the REITs, including compensation of management. Some real estate securities may be rated less than investment grade by rating services. Such securities may be subject to the risks of high-yield,
high-risk securities discussed below.
Preferred Stock risk.
Preferred stock is a form of equity security and is generally ranked
behind an issuers debt securities in claims for dividends and assets of an issuer in a liquidation or bankruptcy. An adverse event may have a negative impact on a company and could result in a decline in the price of its preferred stock.
Convertible Securities.
Convertible securities are a form of equity security. Generally, convertible securities are: bonds,
debentures, notes, preferred stocks, warrants or other securities that convert or are exchangeable into shares of the underlying common stock at a stated exchange ratio. Usually, the conversion or exchange is solely at the option of the holder.
However, some convertible securities may be convertible or exchangeable at the option of the issuer or are automatically converted or exchanged at a certain time, or on the occurrence of certain events, or have a combination of these
characteristics. Usually a convertible security provides a long-term call on the issuers common stock and therefore tends to appreciate in value as the underlying common stock appreciates in value. A convertible security also may be subject to
redemption by the issuer after a certain date and under certain circumstances (including a specified price) established on issue. If a convertible security held by the Fund is called for redemption, the Fund could be required to tender it for
redemption, convert it into the underlying common stock or sell it.
Convertible bonds, debentures and notes are varieties of debt securities,
and as such are subject to many of the same risks, including interest rate sensitivity, changes in debt rating and credit risk. In addition, convertible securities are often viewed by the issuer as future common stock subordinated to other debt and
carry a lower rating than the issuers non-convertible debt obligations. Thus, convertible securities are subject to many of the same risks as high-yield, high-risk securities. A more complete discussion of these risks is provided below in the
sections titled Bonds and Other Debt Securities and High-Yield, High-Risk Debt Securities.
Due to its conversion
feature, the price of a convertible security normally will vary in some proportion to changes in the price of the underlying common stock. A convertible security will also normally provide a higher yield than the underlying common stock (but
generally lower than comparable non-convertible securities). Due to their higher yield, convertible securities generally sell above their conversion value, which is the current market value of the stock to be received on conversion. The
difference between this conversion value and the price of convertible securities will vary over time depending on the value of the underlying common stocks and interest rates. When the underlying common stocks decline in value, convertible
securities will tend not to decline to the same extent because the yield acts as a price support. When the underlying common stocks rise in value, the value of convertible securities also may be expected to increase, but generally will not increase
to the same extent as the underlying common stocks.
Fixed income securities generally are considered to be interest rate sensitive. The
market value of convertible securities will change in response to changes in interest rates. During periods of falling interest rates, the value of convertible bonds generally rises. Conversely, during periods of rising interest rates, the value of
such securities generally declines. Changes by recognized rating services in their ratings of debt securities and changes in the ability of an issuer to make payments of interest and principal also will affect the value of these investments.
Fixed Income Strategies and Risks
Bonds and Other Debt Securities.
Bonds and other debt securities may be purchased by the Fund if the Adviser believes that such investments are consistent with the Funds investment
strategies, may contribute to the achievement of the Funds investment objective and will not violate any of the Funds investment
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Global Fund and Davis International Fund Statement of Additional Information 7
restrictions. The U.S. Government, corporations and other issuers sell bonds and other debt securities to borrow money. Issuers pay investors interest and generally must repay the amount borrowed
at maturity. Some debt securities, such as zero-coupon bonds, do not pay current interest, but are purchased at discounts from their face values. The prices of debt securities fluctuate, depending on such factors as interest rates, credit quality
and maturity.
Bonds and other debt securities, generally, are subject to credit risk and interest rate risk. While debt securities issued by
the U.S. Treasury generally are considered free of credit risk, debt issued by agencies and corporations all entail some level of credit risk. Investment grade debt securities have less credit risk than do high-yield, high-risk debt securities.
Credit risk is described more fully in the section titled High-Yield, High-Risk Debt Securities.
Bonds and other debt securities,
generally, are interest rate sensitive. During periods of falling interest rates, the values of debt securities held by the Fund generally rise. Conversely, during periods of rising interest rates, the values of such securities generally decline.
Changes by recognized rating services in their ratings of debt securities and changes in the ability of an issuer to make payments of interest and principal also will affect the value of these investments.
U.S. Government Securities.
U.S. Government securities represent loans by investors to the U.S. Treasury Department or a wide variety of
government agencies and instrumentalities. Securities issued by most U.S. government entities are neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government. These entities include, among others, the
Federal Home Loan Banks (FHLBs), the Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC). Securities issued by the U.S. Treasury and a small number of U.S. government agencies, such as the Government
National Mortgage Association (GNMA), are backed by the full faith and credit of the U.S. government. The market values of U.S. government and agency securities and U.S. Treasury securities are subject to fluctuation.
U.S. Government securities include mortgage-related securities issued by an agency or instrumentality of the U.S. Government. GNMA certificates are
mortgage-backed securities representing part ownership of a pool of mortgage loans. These loans issued by lenders such as mortgage bankers, commercial banks and savings and loan associations are either insured by the Federal Housing Administration
or guaranteed by the Veterans Administration. A pool or group of such mortgages is assembled and, after being approved by GNMA, is offered to investors through securities dealers. Once approved by GNMA, the timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full faith and credit of the U.S. Government. GNMA certificates differ from bonds in that principal is paid back monthly by the borrower over the term of the loan rather than
returned in a lump sum at maturity. GNMA certificates are characterized as pass-through securities because both interest and principal payments (including prepayments) are passed through to the holder of such certificates.
As of September 7, 2008, the Federal Housing Finance Agency (FHFA) was appointed as the conservator of FHLMC and FNMA for an indefinite
period. In accordance with the Federal Housing Finance Regulatory Reform Act of 2008 and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as conservator, the FHFA will control and oversee these entities until the FHFA
deems them financially sound and solvent. During the conservatorship, each entitys obligations are expected to be paid in the normal course of business. Although no express guarantee exists for the debt or mortgage-backed securities issued by
these entities, the U.S. Department of the Treasury, through a securities lending credit facility and a senior preferred stock purchase agreement, has attempted to enhance the ability of the entities to meet their obligations.
Pools of mortgages also are issued or guaranteed by other agencies of the U.S. Government. The average life of pass-through pools varies with the
maturities of the underlying mortgage instruments. In addition, a pools term may be shortened or lengthened by unscheduled or early payment, or by slower than expected prepayment of principal and interest on the underlying mortgages. The
occurrence of mortgage prepayments is affected by the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. As prepayment rates of individual pools vary widely, it is
not possible to accurately predict the average life of a particular pool.
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Global Fund and Davis International Fund Statement of Additional Information 8
A collateralized mortgage obligation (CMO) is a debt security issued by a corporation, trust,
custodian, or by a U.S. Government agency or instrumentality that is collateralized by a portfolio or pool of mortgages, mortgage-backed securities, U.S. Government securities or corporate debt obligations. The issuers obligation to make
interest and principal payments is secured by the underlying pool or portfolio of securities. CMOs are most often issued in two or more classes (each of which is a separate security) with varying maturities and stated rates of interest. Interest and
principal payments from the underlying collateral (generally a pool of mortgages) are not necessarily passed directly through to the holders of the CMOs; these payments typically are used to pay interest on all CMO classes and to retire successive
class maturities in a sequence. Thus, the issuance of CMO classes with varying maturities and interest rates may result in greater predictability of maturity with one class and less predictability of maturity with another class than a direct
investment in a mortgage-backed pass-through security (such as a GNMA certificate). Classes with shorter maturities, typically, have lower volatility and yield while those with longer maturities, typically, have higher volatility and yield. Thus,
investments in CMOs provide greater or lesser control over the investment characteristics than mortgage pass-through securities and offer more defensive or aggressive investment alternatives.
Investments in mortgage-related U.S. Government securities, such as GNMA certificates and CMOs, also involve other risks. The yield on a pass-through security typically is quoted based on the maturity of
the underlying instruments and the associated average life assumption. Actual prepayment experience may cause the yield to differ from the assumed average life yield. Accelerated prepayments adversely impact yields for pass-through securities
purchased at a premium; the opposite is true for pass-through securities purchased at a discount. During periods of declining interest rates, prepayment of mortgages underlying pass-through certificates can be expected to accelerate. When the
mortgage obligations are prepaid, the Fund reinvests the prepaid amounts in securities, the yields of which reflect interest rates prevailing at that time. Therefore, the Funds ability to maintain a portfolio of high-yielding, mortgage-backed
securities will be adversely affected to the extent that prepayments of mortgages must be reinvested in securities that have lower yields than the prepaid mortgages. Moreover, prepayments of mortgages that underlie securities purchased at a premium
could result in capital losses. Investment in such securities also could subject the Fund to maturity extension risk, which is the possibility that rising interest rates may cause prepayments to occur at a slower than expected rate. This
particular risk may effectively change a security that was considered a short- or intermediate-term security at the time of purchase into a long-term security. Long-term securities generally fluctuate more widely in response to changes in interest
rates than short or intermediate-term securities.
If the Fund purchases mortgage-backed securities that are subordinated to other
interests in the same mortgage pool, the Fund, as a holder of those securities, may only receive payments after the pools obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a
mortgage pool may limit substantially the pools ability to make payments of principal or interest to the Fund as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless; the
risk of such defaults is generally higher in the case of mortgage pools that include so-called subprime mortgages. An unexpectedly high or low rate of prepayment on a pools underlying mortgages may have similar effects on
subordinated securities. A mortgage pool may issue securities subject to various levels of subordination; the risk of non-payment affects securities at each level, although the risk is greatest in the case of more highly subordinate securities.
The guarantees of the U.S. Government, its agencies and instrumentalities are guarantees of the timely payment of principal and interest on
the obligations purchased. The value of the shares issued by the Fund is not guaranteed and will fluctuate with the value of the Funds portfolio. Generally, when the level of interest rates rise, the value of the Funds investment in U.S.
Government securities is likely to decline and, when the level of interest rates decline, the value of the Funds investment in U.S. Government securities is likely to rise.
The Fund may engage in portfolio trading primarily to take advantage of yield disparities. Such trading strategies may result in minor temporary increases or decreases in the Funds current income
and in its holding of debt securities that sell at substantial premiums or discounts from face value. If expectations of changes in interest rates or the price of the securities prove to be incorrect, the Funds potential income and capital
gain will be reduced or its potential loss will be increased.
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Global Fund and Davis International Fund Statement of Additional Information 9
Interest Rate Sensitivity risk.
If a security pays a fixed interest rate, and market rates increase,
the value of the fixed-rate security should decline. Interest rates may also have a powerful influence on the earnings of financial institutions.
Credit risk.
Like any borrower, the issuer of a fixed income security may be unable to make timely payments of interest and principal. If the issuer is unable to make payments in a timely fashion
the value of the security will decline and may become worthless. Financial institutions are often highly leveraged and may not be able to make timely payments of interest and principal. Even U.S. Government Securities are subject to credit risk.
High-Yield, High-Risk Debt Securities.
The real estate securities, convertible securities, bonds and other debt securities in which
the Fund may invest may include high-yield, high-risk debt securities rated BB or lower by Standard & Poors Corporation (S&P) or Ba or lower by Moodys Investors Service (Moodys) or unrated
securities. Securities rated BB or lower by S&P and Ba or lower by Moodys are referred to in the financial community as junk bonds and may include D-rated securities of issuers in default. See Appendix A for a more detailed
description of the rating system. Ratings assigned by credit agencies do not evaluate market risks. The Adviser considers the ratings assigned by S&P or Moodys as one of several factors in its independent credit analysis of issuers. A
description of each bond quality category is set forth in Appendix A titled Quality Ratings of Debt Securities. The ratings of Moodys and S&P represent their opinions as to the quality of the securities that they undertake to
rate. It should be emphasized, however, that ratings are relative and subjective and are not absolute standards of quality. There is no assurance that any rating will not change. The Fund may retain a security whose rating has changed or has become
unrated.
While likely to have some quality and protective characteristics, high-yield, high-risk debt securities, whether or not convertible
into common stock, usually involve increased risk as to payment of principal and interest. Issuers of such securities may be highly leveraged and may not have available to them traditional methods of financing. Therefore, the risks associated with
acquiring the securities of such issuers generally are greater than is the case with higher-rated securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers of high-yield securities may be more
likely to experience financial stress, especially if such issuers are highly leveraged. During such periods, such issuers may not have sufficient revenues to meet their principal and interest payment obligations. The issuers ability to service
its debt obligations also may be adversely affected by specific issuer developments, or the issuers inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of high-yield securities because such securities may be unsecured and may be subordinated to other creditors of the issuer.
High-yield, high-risk debt securities are subject to greater price volatility than higher-rated securities, tend to decline in price more steeply than higher-rated securities in periods of economic
difficulty or accelerating interest rates, and are subject to greater risk of non-payment in adverse economic times. There may be a thin trading market for such securities, which may have an adverse impact on market price and the ability of the Fund
to dispose of particular issues and may cause the Fund to incur special securities registration responsibilities, liabilities and costs, and liquidity and valuation difficulties. Unexpected net redemptions may force the Fund to sell
high-yield, high-risk debt securities without regard to investment merit, thereby possibly reducing return rates. Such securities may be subject to redemptions or call provisions, which, if exercised when investment rates are declining, could result
in the replacement of such securities with lower-yielding securities, resulting in a decreased return. To the extent that the Fund invests in bonds that are original issue discount, zero-coupon, pay-in-kind or deferred interest bonds, the Fund may
have taxable interest income greater than the cash actually received on these issues. In order to avoid taxation at the Fund level, the Fund may have to sell portfolio securities to meet distribution requirements.
The market values of high-yield, high-risk debt securities tend to reflect individual corporate developments to a greater extent than higher-rated
securities, which react primarily to fluctuations in the general level of interest rates. Lower-rated securities also tend to be more sensitive to economic and industry conditions than higher-rated securities. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis regarding individual lower-rated bonds, may result in reduced prices for such securities. If the negative factors such as these adversely impact the market value of high-yield, high-risk
securities and the Fund holds such securities, the Funds net asset value will be adversely affected.
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Global Fund and Davis International Fund Statement of Additional Information 10
The Fund may have difficulty disposing of certain high-yield, high-risk bonds because there may be a thin
trading market for such bonds. Because not all dealers maintain markets in all high-yield, high-risk bonds, the Fund anticipates that such bonds could be sold only to a limited number of dealers or institutional investors. The lack of a liquid
secondary market may have an adverse impact on market price and the ability to dispose of particular issues and also may make it more difficult to obtain accurate market quotations or valuations for purposes of valuing the Funds assets. Market
quotations generally are available on many high-yield issues only from a limited number of dealers and may not necessarily represent firm bid prices of such dealers or prices for actual sales. In addition, adverse publicity and investor perceptions
may decrease the values and liquidity of high-yield, high-risk bonds regardless of a fundamental analysis of the investment merits of such bonds. To the extent that the Fund purchases illiquid or restricted bonds, it may incur special
securities registration responsibilities, liabilities and costs, and liquidity and valuation difficulties relating to such bonds.
Bonds
may be subject to redemption or call provisions. If an issuer exercises these provisions when investment rates are declining, the Fund will be likely to replace such bonds with lower-yielding bonds, resulting in decreased returns. Zero-coupon,
pay-in-kind and deferred interest bonds involve additional special considerations. Zero-coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or a specified cash payment date when the
securities begin paying current interest (the cash payment date) and therefore are issued and traded at discounts from their face amounts or par value. The market prices of zero-coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than securities paying interest currently with similar maturities and credit quality. Pay-in-kind bonds pay
interest in the form of other securities rather than cash. Deferred interest bonds defer the payment of interest to a later date. Zero-coupon, pay-in-kind or deferred interest bonds carry additional risk in that, unlike bonds that pay interest in
cash throughout the period to maturity, the Fund will realize no cash until the cash payment date unless a portion of such securities are sold. There is no assurance of the value or the liquidity of securities received from pay-in-kind bonds. If the
issuer defaults, the Fund may obtain no return at all on its investment. To the extent that the Fund invests in bonds that are original issue discount, zero-coupon, pay-in-kind or deferred interest bonds, the Fund may have taxable interest income
greater than the cash actually received on these issues. In order to distribute such income to avoid taxation, the Fund may have to sell portfolio securities to meet its distribution requirements under circumstances that could be adverse.
Federal tax legislation limits the tax advantages of issuing certain high-yield, high-risk bonds. This could have a materially adverse effect
on the market for high-yield, high-risk bonds.
Cash Management.
For defensive purposes or to accommodate inflows of cash awaiting more
permanent investment, the Fund may temporarily and without limitation hold high-grade, short-term money market instruments, cash and cash equivalents, including repurchase agreements. The Fund also may invest in registered investment companies which
are regulated as money market funds or companies exempted from registration under Sections 3(c)(1) or 3(c)(7) of the 1940 Act that themselves primarily invest in temporary defensive investments, including U.S. Government securities and commercial
paper. To the extent that the management fees paid to other investment companies are for the same or similar services as the management fees paid by the Fund, there will be a layering of fees that would increase expenses and decrease returns.
Investments in other investment companies are limited by the 1940 Act and the rules there under.
Derivatives.
The Funds can invest in
a variety of derivative investments to pursue their investment objectives using both speculative and/or hedging strategies. Historically the Funds have not invested in derivative investments. Some derivative investments the Funds can use are the
instruments described below.
Hedging
. A Fund can use hedging to attempt to protect against declines in the market value of the
Funds portfolio, to permit the Fund to retain unrealized gains in the value of portfolio securities that have appreciated or to facilitate selling securities for investment reasons. To do so, the Fund could:
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sell futures contracts;
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buy puts on such futures or on securities; or
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write covered calls on securities or futures.
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Global Fund and Davis International Fund Statement of Additional Information 11
The Fund can use hedging to establish a position in the securities market as a temporary substitute for
purchasing particular securities. In that case, the Fund would normally seek to purchase the securities and then terminate that hedging position. The Fund might also use this type of hedge to attempt to protect against the possibility that its
portfolio securities would not be fully included in a rise in the value of the market. To do so the Fund could:
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buy calls on such futures or on securities; or
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sell puts on such futures or on securities.
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The Fund is not obligated to use hedging instruments, even though it is permitted to use them in the Advisers discretion, as described below. The Funds strategy of hedging with futures and
options on futures will be incidental to the Funds activities in the underlying cash market. The particular hedging instruments the Fund can use are described below. The Fund can employ new hedging instruments and strategies when they are
developed, if those investment methods are consistent with the Funds investment objective and are permissible under applicable regulations governing the Fund.
Futures
. The Fund can buy and sell futures contracts that relate to: (1) broad-based stock indices (stock index futures); (2) debt securities (these are referred to as
interest rate futures); (3) other broad-based securities indices (these are referred to as financial futures); (4) foreign currencies (these are referred to as forward contracts); or (5) commodities
(these are referred to as commodity futures).
A broad-based stock index is used as the basis for trading stock index futures.
They may in some cases be based on stocks of issuers in a particular industry or group of industries. A stock index assigns relative values to the common stocks included in the index and its value fluctuates in response to the changes in value of
the underlying stocks. A stock index cannot be purchased or sold directly. Financial futures are similar contracts based on the future value of the basket of securities that comprise the index. These contracts obligate the seller to deliver, and the
purchaser to take, cash to settle the futures transaction. There is no delivery made of the underlying securities to settle the futures obligation. Either party also may settle the transaction by entering into an off-setting contract.
An interest rate future obligates the seller to deliver (and the purchaser to take) cash or a specified type of debt security to settle the futures
transaction. Either party also could enter into an off-setting contract to close out the position.
On entering into a futures transaction,
the Fund will be required to deposit an initial margin payment with the futures commission merchant (the futures broker). Initial margin payments will be deposited with the Funds custodian bank in an account registered in the
futures brokers name. However, the futures broker can gain access to that account only under specified conditions. As the future is marked to market (that is, its value on the Funds books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or by the futures broker daily.
At any time before expiration of
the future, the Fund can elect to close out its position by taking an opposite position, at which time a final determination of variation margin is made and any additional cash must be paid by or released to the Fund. Any loss or gain on the future
is then realized by the Fund for tax purposes. All futures transactions, except forward contracts, are effected through a clearinghouse associated with the exchange on which the contracts are traded.
Put and Call Options
. The Fund can buy and sell (and sell short) certain kinds of put options (puts) and call options
(calls). The Fund can buy and sell exchange-traded and over-the-counter put and call options, including index options, securities options, currency options, commodities options and options on the other types of futures described above.
Writing Covered Call Options
. The Fund can write (that is, sell) covered calls. If the Fund sells a call option, it must be covered.
That means the Fund must own the security subject to the call while the call is outstanding or, for certain types of calls, the call can be covered by identifying liquid assets on the Funds books to enable the Fund to satisfy its obligations
if the call is exercised.
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Global Fund and Davis International Fund Statement of Additional Information 12
When the Fund writes a call on a security, it receives cash (a premium). The Fund agrees to sell the
underlying security to a purchaser of a corresponding call on the same security during the call period at a fixed exercise price regardless of market price changes during the call period. The call period is usually not more than nine months. The
exercise price may differ from the market price of the underlying security. If the Fund owns the underlying security, the Fund continues to bear the risk of loss that the price of the underlying security may decline during the call period. That risk
may be offset to some extent by the premium the Fund receives. If the value of the investment does not rise above the call price, it is likely that the call will lapse without being exercised. In that case, the Fund would keep the cash premium and
the investment. If the underlying security should rise in value above the call price, the Fund may either have to deliver the underlying security to the owner of the call without profiting from the rise in value, or pay the owner of the call the
difference between the call price and the current value of the underlying security.
When the Fund writes a call on an index, it receives cash
(a premium). If the buyer of the call exercises it, the Fund will pay an amount of cash equal to the difference between the closing price of the call and the exercise price, multiplied by a specified multiple that determines the total value of the
call for each point of difference. If the value of the underlying investment does not rise above the call price, it is likely that the call will lapse without being exercised. In that case, the Fund would keep the cash premium.
The Funds custodian bank or a securities depositary acting for the custodian bank, will act as the Funds escrow agent, through the facilities
of the Options Clearing Corporation (OCC), as to the investments on which the Fund has written calls traded on exchanges or as to other acceptable escrow securities. In that way, no margin will be required for such transactions. OCC will
release the securities on the expiration of the option or when the Fund enters into a closing transaction.
When the Fund writes an
over-the-counter (OTC) option, it will treat as illiquid (for purposes of its restriction on holding illiquid securities) the marked-to-market value of any OTC option it holds, unless the option is subject to a buy-back agreement by the
executing broker. To terminate its obligation on a call it has written, the Fund can purchase a corresponding call in a closing purchase transaction. The Fund will then realize a profit or loss, depending on whether the net of the amount
of the option transaction costs and the premium received on the call the Fund wrote is more or less than the price of the call the Fund purchases to close out the transaction. The Fund may realize a profit if the call expires unexercised, because
the Fund will retain the underlying security and the premium it received when it wrote the call. Any such profits are considered short-term capital gains for federal income tax purposes, as are the premiums on lapsed calls. When distributed by the
Fund, they are taxable as ordinary income. If the Fund cannot effect a closing purchase transaction due to the lack of a market, it will have to hold the callable securities until the call expires or is exercised.
The Fund also can write calls on a futures contract without owning the futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by identifying an equivalent dollar amount of liquid assets on the Funds books. The Fund will identify additional liquid assets on its books if the value of the segregated assets drops
below 100% of the current value of the future. Because of this segregation requirement, in no circumstances would the Funds receipt of an exercise notice as to that future require the Fund to deliver a futures contract. It would simply put the
Fund in a short futures position, which is permitted by the Funds hedging policies.
Writing Put Options
. The Fund can write/sell
put options. A put option on securities gives the purchaser the right to sell, and the writer the obligation to buy, the underlying investment at the exercise price during the option period.
If the Fund writes a put, the put must be covered by liquid assets identified on the Funds books. The premium the Fund receives from writing a put represents a profit, as long as the price of the
underlying investment remains equal to or above the exercise price of the put. However, the 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. If a put the Fund has written expires unexercised, the Fund realizes a gain in the amount of the premium less the transaction costs incurred. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price. The price usually will exceed the market value of the investment at that time. In that case, the Fund may incur a loss if it sells the underlying investment. That loss will be
equal to the sum of the sale price of the underlying investment and the premium received minus the sum of the exercise price and any transaction costs the Fund incurred.
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Global Fund and Davis International Fund Statement of Additional Information 13
When writing a put option on a security, to secure its obligation to pay for the underlying security the
Fund will deposit in escrow or otherwise segregate liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Fund therefore foregoes the opportunity of investing the segregated assets or writing calls
against those assets.
As long as the Funds obligation as the put writer continues, it may be assigned an exercise notice by the
broker-dealer through which the put was sold. That notice will require the Fund to take delivery of the underlying security and pay the exercise price. The Fund has no control over when it may be required to purchase the underlying security, since
it may be assigned an exercise notice at any time prior to the termination of its obligation as the writer of the put. That obligation terminates on expiration of the put. It also may terminate if, before it receives an exercise notice, the Fund
effects a closing purchase transaction by purchasing a put of the same series as it sold. Once the Fund has been assigned an exercise notice, it cannot effect a closing purchase transaction.
The Fund can decide to effect a closing purchase transaction to realize a profit on an outstanding put option it has written or to prevent the underlying security from being exercised. Effecting a closing
purchase transaction also will permit the Fund to write another put option on the security or to sell the security and use the proceeds from the sale for other investments. The Fund will realize a profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or more than the premium received from writing the put option. Any profits from writing puts are considered short-term capital gains for federal tax purposes and, when distributed by the Fund,
are taxable as ordinary income.
Purchasing Calls and Puts
. The Fund can purchase calls to protect against the possibility that the
Funds portfolio will not participate in an anticipated rise in the securities market. When the Fund buys a call (other than in a closing purchase transaction), it pays a premium. The Fund then has the right to buy the underlying investment
from a seller of a corresponding call on the same investment during the call period at a fixed exercise price. The Fund benefits only if it sells the call at a profit or if, during the call period, the market price of the underlying investment is
above the sum of the call price plus the transaction costs and the premium paid for the call and the Fund exercises the call. If the Fund does not exercise the call or sell it (whether or not at a profit), the call will become worthless at its
expiration date. In that case, the Fund will have paid the premium but lost the right to purchase the underlying investment.
The Fund can buy
puts regardless of whether it holds the underlying investment in its portfolio. When the Fund purchases a put, it pays a premium and, except as to puts on indices, has the right to sell the underlying investment to a seller of a put on a
corresponding investment during the put period at a fixed exercise price. Buying a put on securities or futures the Fund owns enables the Fund to attempt to protect itself during the put period against a decline in the value of the underlying
investment below the exercise price by selling the underlying investment at the exercise price to a seller of a corresponding put. If the market price of the underlying investment is equal to or above the exercise price and, as a result, the put is
not exercised or resold, the put will become worthless at its expiration date. In that case, the Fund will have paid the premium but lost the right to sell the underlying investment. However, the Fund can sell the put prior to its expiration. That
sale may or may not be at a profit.
When the Fund purchases a call or put on an index or future, it pays a premium, but settlement is in cash
rather than by delivery of the underlying investment to the Fund. Gain or loss depends on changes in the index in question (and thus on price movements in the securities market generally) rather than on price movements in individual securities or
futures contracts.
Forward Contracts
. Forward contracts are foreign currency exchange contracts. They are used to buy or sell foreign
currency for future delivery at a fixed price. The Fund uses them to lock in the U.S. dollar price of a security denominated in a foreign currency that the Fund has bought or sold, or to protect against possible losses from changes in
the relative values of the U.S. dollar and a foreign currency. The Fund limits its exposure in foreign currency exchange contracts in a particular foreign currency to the amount of its assets denominated in that currency or a closely correlated
currency. The Fund also can use cross-hedging where the Fund hedges against changes in currencies other than the currency in which a security it holds is denominated.
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Global Fund and Davis International Fund Statement of Additional Information 14
Under a forward contract, one party agrees to purchase, and another party agrees to sell, a specific
currency at a future date. That date may be any fixed number of days from the date of the contract agreed on by the parties. The transaction price is set at the time the contract is entered into. These contracts are traded in the inter-bank market
conducted directly among currency traders (usually large commercial banks) and their customers.
The Fund can use forward contracts to protect
against uncertainty in the level of future exchange rates. The use of forward contracts does not eliminate the risk of fluctuations in the prices of the underlying securities the Fund owns or intends to acquire, but it does fix a rate of exchange in
advance. Although forward contracts may reduce the risk of loss from a decline in the value of the hedged currency, at the same time they limit any potential gain if the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when it anticipates receiving dividend
payments in a foreign currency, the Fund might desire to lock in the U.S. dollar price of the security or the U.S. dollar equivalent of the dividend payments. To do so, the Fund might enter into a forward contract for the purchase or
sale of the amount of foreign currency involved in the underlying transaction, in a fixed amount of U.S. dollars per unit of the foreign currency. This is called a transaction hedge. The transaction hedge will protect the Fund against a
loss from an adverse change in the currency exchange rates during the period between the date on which the security is purchased or sold or on which the payment is declared and the date on which the payments are made or received.
The Fund also could use forward contracts to lock in the U.S. dollar value of portfolio positions. This is called a position hedge. When the
Fund believes that foreign currency might suffer a substantial decline against the U.S. dollar, it could enter into a forward contract to sell an amount of that foreign currency approximating the value of some or all of the Funds portfolio
securities denominated in that foreign currency. When the Fund believes that the U.S. dollar may suffer a substantial decline against a foreign currency, it could enter into a forward contract to buy that foreign currency for a fixed dollar amount.
Alternatively, the Fund could enter into a forward contract to sell a different foreign currency for a fixed U.S. dollar amount if the Fund believes that the U.S. dollar value of the foreign currency to be sold pursuant to its forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in which portfolio securities of the Fund are denominated. That is referred to as a cross hedge.
The Fund will cover its short positions in these cases by identifying to its custodian bank assets having a value equal to the aggregate amount of the Funds commitment under forward contracts. The
Fund will not enter into forward contracts or maintain a net exposure to such contracts if the consummation of the contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Funds portfolio
securities or other assets denominated in that currency or another currency that is the subject of the hedge. However, to avoid excess transactions and transaction costs, the Fund can maintain a net exposure to forward contracts in excess of the
value of the Funds portfolio securities or other assets denominated in foreign currencies if the excess amount is covered by liquid securities denominated in any currency. The cover must be at least equal at all times to the amount
of that excess. As one alternative, the Fund can purchase a call option permitting the Fund to purchase the amount of foreign currency being hedged by a forward sale contract at a price no higher than the forward contract price. As another
alternative, the Fund can purchase a put option permitting the Fund to sell the amount of foreign currency subject to a forward purchase contract at a price as high as or higher than the forward contract price.
The precise matching of the amounts under forward contracts and the value of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a consequence of market movements between the date the forward contract is entered into and the date it is sold. In some cases, the Adviser might decide to sell the security and
deliver foreign currency to settle the original purchase obligation. If the market value of the security is less than the amount of foreign currency that the Fund is obligated to deliver, the Fund might have to purchase additional foreign currency
on the spot (that is, cash) market to settle the security trade. If the market value of the security instead exceeds the amount of foreign currency the Fund is obligated to deliver to settle the trade, the Fund might have to sell on the
spot market some of the foreign currency received on the sale of the security. There will be additional transaction costs on the spot market in those cases.
The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements would not be accurately predicted, causing the Fund to sustain losses on
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Global Fund and Davis International Fund Statement of Additional Information 15
these contracts and to pay additional transactions costs. The use of forward contracts in this manner might reduce the Funds performance if there are unanticipated changes in currency
prices to a greater degree than if the Fund had not entered into such contracts.
At or before the maturity of a forward contract requiring
the Fund to sell a currency, the Fund might sell a portfolio security and use the sale proceeds to make delivery of the currency. In the alternative, the Fund might retain the security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Fund will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. Similarly, the Fund might close out a forward contract requiring it to purchase a
specified currency by entering into a second contract entitling it to sell the same amount of the same currency on the maturity date of the first contract. The Fund would realize a gain or loss as a result of entering into such an off-setting
forward contract under either circumstance. The gain or loss will depend on the extent to which the exchange rate or rates between the currencies involved moved between the execution dates of the first and off-setting contracts.
The cost to the Fund of engaging in forward contracts varies with factors such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts usually are entered into on a principal basis, no brokerage fees or commissions are involved. Because these contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of the counterparty under each forward contract.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. The Fund can convert foreign currency from time to time and will incur costs in doing so. Foreign exchange dealers do not charge a fee for conversion, but
they do seek to realize a profit based on the difference between the prices at which they buy and sell various currencies. Thus, a dealer might offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange if the
Fund desires to resell that currency to the dealer.
Index-Linked Notes
. Principal and/or interest payments on these notes depend on
the performance of an underlying index. Currency-indexed securities are another derivative the Fund can use. Typically these are short-term or intermediate-term debt securities. Their value at maturity or the rates at which they pay income are
determined by the change in value of the U.S. dollar against one or more foreign currencies or an index. In some cases, these securities may pay an amount at maturity based on a multiple of the amount of the relative currency movements. This type of
index security offers the potential for increased income or principal payments but at a greater risk of loss than a typical debt security of the same maturity and credit quality.
Debt Exchangeable for Common Stock of an Issuer or Equity-Linked Debt Securities of an Issuer
. At maturity, the debt security is exchanged for common stock of the issuer or it is
payable in an amount based on the price of the issuers common stock at the time of maturity. Both alternatives present a risk that the amount payable at maturity will be less than the principal amount of the debt because the price of the
issuers common stock might not be as high as the Adviser expected.
Interest Rate Swap Transactions
. The Fund can enter into
interest rate swap agreements. In an interest rate swap, the Fund and another party exchange their right to receive or their obligation to pay interest on a security. For example, they might swap the right to receive floating rate payments for fixed
rate payments. The Fund can enter into swaps only on securities that it owns. Also, the Fund will identify liquid assets on its books (typically U.S. Treasury notes, certificates of deposit, other high-grade, short-term obligations or
interest-bearing cash equivalents.) to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive, and it will adjust that amount daily as needed.
Swap agreements entail both interest rate risk and credit risk. There is a risk that based on movements of interest rates in the future the payments made by the Fund under a swap agreement will be greater
than the payments it received. Credit risk arises from the possibility that the counterparty will default. If the counterparty defaults, the Funds loss will consist of the net amount of contractual interest payments that the Fund has not yet
received. The Adviser will monitor the creditworthiness of counterparties to the Funds interest rate swap transactions on an ongoing basis.
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Global Fund and Davis International Fund Statement of Additional Information 16
The Fund can enter into swap transactions with certain counterparties pursuant to master netting agreements.
A master netting agreement provides that all swaps done between the Fund and that counterparty shall be regarded as parts of an integral agreement. If amounts are payable on a particular date in the same currency in respect of one or more swap
transactions, the amount payable on that date in that currency shall be the net amount. In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the counterparty can terminate all of the swaps with
that party. Under these agreements, if a default results in a loss to one party, the measure of that partys damages is calculated by reference to the average cost of a replacement swap for each swap. It is measured by the mark-to-market value
at the time of the termination of each swap. The gains and losses on all swaps are then netted, and the result is the counterpartys gain or loss on termination. The termination of all swaps and the netting of gains and losses on termination
generally is referred to as aggregation.
Hedging Foreign Currency
. To attempt to reduce exposure to currency fluctuations,
the Fund may trade in forward foreign currency exchange contracts (forward contracts), currency futures contracts and options thereon and securities indexed to foreign securities. These techniques are not always effective and their use may expose
the Fund to other risks, such as liquidity and counterparty risk. The Adviser exercises its professional judgment as to whether the reduction in currency risk justifies the expense and exposure to liquidity and counterparty risk. These techniques
may be used to lock in an exchange rate in connection with transactions in securities denominated or traded in foreign currencies, to hedge the currency risk in foreign securities held by the Fund and to hedge a currency risk involved in an
anticipated purchase of foreign securities. Cross-hedging also may be utilized that is, entering into a hedge transaction with respect to a foreign currency different from the one in which a trade is to be made or in which a portfolio security is
principally traded. There is no limitation on the amount of assets that may be committed to currency hedging. However, the currency hedging transactions may be utilized as a tool to reduce currency fluctuation risks due to a current or anticipated
position in foreign securities. The successful use of currency hedging transactions usually depends on the Advisers ability to forecast interest rate and currency exchange rate movements. Should interest or exchange rates move in an unexpected
manner, the anticipated benefits of futures contracts, options or forward contracts may not be achieved or losses may be realized and thus the Fund could be in a worse position than if such strategies had not been used. Unlike many exchange-traded
futures contracts, there are no daily price fluctuation limits with respect to options on currencies and forward contracts, and adverse market movements therefore could continue to an unlimited extent over a period of time. In addition, the
correlation between movements in the prices of such instruments and movements in the prices of the securities and currencies hedged or used for cover will not be perfect and could produce unanticipated losses. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. When taking a position in an anticipatory hedge (when the Fund purchases a futures contract or other similar instrument to gain market
exposure in anticipation of purchasing the underlying securities at a later date), the Fund is required to set aside cash or high-grade liquid securities to fully secure the obligation.
A forward contract is an obligation to purchase or sell a specific currency for an agreed price at a future date that is individually negotiated and privately traded by currency traders and their
customers. Such a contract gives the Fund a position in a negotiated, currently non-regulated market. The Fund may enter into a forward contract for example, when it enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to lock in the U.S. dollar price of the security (transaction hedge). Additionally, when the Adviser believes that a foreign currency may suffer a substantial decline against the U.S. dollar, the
Fund may enter into a forward sale contract to sell an amount of that foreign currency approximating the value of some or all of the Funds portfolio securities denominated in such foreign currency. When the Adviser believes that the U.S.
dollar may suffer a substantial decline against a foreign currency, the Fund may enter into a forward purchase contract to buy that foreign currency for a fixed dollar amount in anticipation of purchasing foreign traded securities (position
hedge). In this situation the Fund may, in the alternative, enter into a forward contract with respect to a different foreign currency for a fixed U.S. dollar amount (cross hedge). This may be done, for example, where the Adviser
believes that the U.S. dollar value of the currency to be sold pursuant to the forward contract will fall whenever there is a decline in the U.S. dollar value of the currency in which portfolio securities of the Fund are denominated.
The Fund may purchase and write put and call options on foreign currencies for the purpose of protecting against declines in the U.S. dollar value of
foreign currency-denominated portfolio securities and against increases in the U.S. dollar cost of such securities to be acquired. As in the case of other kinds of options,
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Global Fund and Davis International Fund Statement of Additional Information 17
however, the writing of an option on a foreign currency constitutes only a partial hedge, up to the amount of the premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on a foreign currency may constitute an effective hedge against fluctuations in exchange rates although, in the event of rate movements adverse to the
Funds position, it may forfeit the entire amount of the premium plus related transaction costs. Options on foreign currencies to be written or purchased by the Fund are traded on U.S. and foreign exchanges or over-the-counter. Currently, a
significant portion or all of the value of an over-the-counter option may be treated as an illiquid investment and subject to the restriction on such investments as long as the SEC requires that over-the-counter options be treated as illiquid.
Generally, the Fund would utilize options traded on exchanges where the options are standardized.
The Fund may enter into contracts for the
purchase or sale for future delivery of foreign currencies (currency futures contracts) and may purchase and write put and call options to buy or sell currency futures contracts. A sale of a currency futures contract means
the acquisition of a contractual obligation to deliver the foreign currencies called for by the contract at a specified price on a specified date. A purchase of a currency futures contract means the incurring of a contractual obligation
to acquire the foreign currencies called for by the contract at a specified price on a specified date. Options on currency futures contracts to be purchased by the Fund will be traded on U.S. or foreign exchanges or over-the-counter.
The Fund also may purchase securities (debt securities or deposits) that have their coupon rate or value at maturity determined by reference to the value
of one or more foreign currencies. These strategies will be used for hedging purposes only. The Fund will hold securities or other options or futures positions whose values are expected to offset its obligations under the hedge strategies. The Fund
will not enter into a currency hedging position that exposes the Fund to an obligation to another party unless it follows its segregated account procedures.
The Funds ability to dispose of its positions in futures contracts, options and forward contracts will depend on the availability of liquid markets in such instruments. Markets in options and
futures with respect to currencies are still developing. It is impossible to predict the amount of trading interest that may exist in various types of futures contracts, options and forward contracts. If a secondary market does not exist with
respect to an option purchased or written by the Fund over-the-counter, it might not be possible to effect a closing transaction in the option (i.e., dispose of the option) with the result that: (i) an option purchased by the Fund would have to
be exercised in order for the Fund to realize any profit; and (ii) the Fund may not be able to sell currencies covering an option written by the Fund until the option expires or it delivers the underlying futures currency on exercise.
Therefore, no assurance can be given that the Fund will be able to utilize these instruments effectively for the purposes set forth above. The Funds ability to engage in currency hedging transactions may be limited by tax considerations.
Risks of Hedging With Options and Futures
. The use of hedging instruments requires special skills and knowledge of investment
techniques that are different than what is required for normal portfolio management. If the Adviser uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce the Funds return or may
compound its losses. The Fund also could experience losses if the prices of its futures and options positions were not correlated with its other investments.
The Funds option activities could affect its portfolio turnover rate and brokerage commissions. The exercise of calls written by the Fund might cause the Fund to sell related portfolio securities,
thus increasing its turnover rate. The exercise by the Fund of puts on securities will cause the sale of underlying investments, increasing portfolio turnover. Although the decision whether to exercise a put it holds is within the Funds
control, holding a put might cause the Fund to sell the related investments for reasons that would not exist in the absence of the put.
The
Fund could pay a brokerage commission each time it buys a call or put, sells a call or put, or buys or sells an underlying investment in connection with the exercise of a call or put. Those commissions could be higher on a relative basis than the
commissions for direct purchases or sales of the underlying investments. Premiums paid for options are small in relation to the market value of the underlying investments. Consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could result in the Funds net asset value being more sensitive to changes in the value of the underlying investment.
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Global Fund and Davis International Fund Statement of Additional Information 18
If a covered call written by the Fund is exercised on an investment that has increased in value, the Fund
will be required to sell the investment at the call price. It will not be able to realize any profit if the investment has increased in value above the call price.
An option position may be closed out only on a market that provides secondary trading for options of the same series, and there is no assurance that a liquid secondary market will exist for any particular
option. The Fund might experience a loss if it could not close out a position because of an illiquid market for the future or option.
There
is a risk in using short hedging by selling futures or purchasing puts on broad-based indices or futures to attempt to protect against declines in the value of the Funds portfolio securities. The risk is that the prices of the futures or the
applicable index will correlate imperfectly with the behavior of the cash prices of the Funds securities. For example, it is possible that while the Fund has used hedging instruments in a short hedge, the market might advance and the value of
the securities held in the Funds portfolio might decline. If that occurred, the Fund would lose money on the hedging instruments and also experience a decline in the value of its portfolio securities. However, while this could occur for a very
brief period or to a very small degree, over time the value of a diversified portfolio of securities will tend to move in the same direction as the indices on which the hedging instruments are based. The risk of imperfect correlation increases as
the composition of the Funds portfolio diverges from the securities included in the applicable index. To compensate for the imperfect correlation of movements in the price of the portfolio securities being hedged and movements in the price of
the hedging instruments, the Fund might use hedging instruments in a greater dollar amount than the dollar amount of portfolio securities being hedged. It might do so if the historical volatility of the prices of the portfolio securities being
hedged is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets
are subject to distortions, due to differences in the nature of those markets. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through off-setting transactions that could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into off-setting
transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in the securities markets. Therefore, increased participation by speculators in the futures market may cause temporary price distortions.
The Fund can use hedging instruments to establish a position in the securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures, broad-based indices or on securities. It is possible that when the Fund does so, the market might decline. If the Fund then concludes not to invest in securities because of
concerns that the market might decline further or for other reasons, the Fund will realize a loss on the hedging instruments that is not offset by a reduction in the price of the securities purchased.
Regulatory Aspects of Hedging Instruments
. If and when the Fund begins using futures and options on futures, the Fund will be required to operate
within certain guidelines and restrictions with respect to the use of futures as established by the Commodities Futures Trading Commission (the CFTC). In particular, prior to trading in derivatives, the Fund intends to comply with Rule
4.5 and make the necessary filings with the CFTC to be exempted from registration with the CFTC as a commodity pool operator. To comply with Rule 4.5 the Fund would be required to limit its transactions in commodities to below one of two thresholds.
One of the thresholds requires that the Funds aggregate initial margin and premiums posted for its non-bona fide hedging trading in these instruments must not exceed five percent of the liquidating value of its portfolio. As an alternative the
Fund may limit the aggregate net notional value of its derivatives transactions not used solely for bona fide hedging purposes to no more than 100 percent of the liquidation value of its portfolio determined at the time the most recent position was
established.
Davis
Global Fund and Davis International Fund Statement of Additional Information 19
Transactions in options by the Fund are subject to limitations established by the option exchanges. The
exchanges limit the maximum number of options that may be written or held by a single investor or group of investors acting in concert. Those limits apply regardless of whether the options were written or purchased on the same or different exchanges
or are held in one or more accounts or through one or more different exchanges or through one or more brokers. Thus, the number of options that the Fund can write or hold may be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser that is an affiliate of the Funds adviser). The exchanges also impose position limits on futures transactions. An exchange may order the liquidation of positions found to
be in violation of those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases a future,
it must maintain cash or readily marketable short-term debt instruments in an amount equal to the market value of the securities underlying the future, less the margin deposit applicable to it.
Tax Aspects of Certain Hedging Instruments
. Certain foreign currency exchange contracts in which the Fund can invest are treated as Section
1256 contracts under the Internal Revenue Code. In general, gains or losses relating to Section 1256 contracts are characterized as 60% long-term and 40% short-term capital gains or losses under the Code. However, foreign currency gains
or losses arising from Section 1256 contracts that are forward contracts generally are treated as ordinary income or loss. In addition, Section 1256 contracts held by the Fund at the end of each taxable year are
marked-to-market, and unrealized gains or losses are treated as though they were realized. These contracts also may be marked-to-market for purposes of determining the excise tax applicable to investment company distributions and for
other purposes under rules prescribed pursuant to the Internal Revenue Code. An election can be made by the Fund to exempt those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into may result in straddles for federal income tax purposes. The straddle rules may affect the character and timing of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on the disposition of a position making up a straddle is allowed only to the extent that the loss exceeds any unrecognized gain in the off-setting positions making up the straddle. A
previously disallowed loss generally is allowed at the point when there is no unrecognized gain in the off-setting positions making up the straddle or the off-setting position is disposed of.
Under the Internal Revenue Code, the following gains or losses are treated as ordinary income or loss: (1) gains or losses attributable to fluctuations in exchange rates that occur between the time
the Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities, and (2) gains or losses attributable to
fluctuations in the value of a foreign currency between the date of acquisition of a debt security denominated in a foreign currency or foreign currency forward contracts and the date of disposition.
Currency gains and losses are offset against market gains and losses on each trade before determining a net Section 988 gain or loss under
the Internal Revenue Code for that trade, which may increase or decrease the amount of the Funds investment income available for distribution to its shareholders.
Additional Non-Principal Investment Strategies and Risks
Restricted and
Illiquid Securities.
The Fund may invest in restricted securities that are subject to contractual restrictions on resale. The Funds policy is to not purchase or hold illiquid securities (which may include restricted securities) if more
than 15% of the Funds net assets would then be illiquid. If illiquid securities were to exceed 15% of the value of the Funds net assets, the Adviser would attempt to reduce the Funds investment in illiquid securities in an orderly
fashion.
The restricted securities that the Fund may purchase include securities that have not been registered under the Securities Act of
1933, as amended (the 1933 Act) but are eligible for purchase and sale pursuant to Rule 144A (Rule 144A Securities). This Rule permits certain qualified institutional buyers, such as the Fund, to trade in privately placed
securities even though such securities are not registered under the 1933 Act. The Adviser, under criteria established by the Funds Board of Directors, will consider whether Rule 144A Securities being purchased or held by the Fund are illiquid
and thus subject to the Funds policy
Davis
Global Fund and Davis International Fund Statement of Additional Information 20
limiting investments in illiquid securities. In making this determination, the Adviser will consider the frequency of trades and quotes, the number of dealers and potential purchasers, dealer
undertakings to make a market and the nature of the security and the marketplace trades (for example, the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A Securities
also will be monitored by the Adviser and if, as a result of changed conditions, it is determined that a Rule 144A Security is no longer liquid, the Funds holding of illiquid securities will be reviewed to determine what, if any, action is
required in light of the policy limiting investments in such securities. Investing in Rule 144A Securities could have the effect of increasing the amount of investments in illiquid securities if qualified institutional buyers are unwilling to
purchase such securities.
Distressed Companies.
The Fund may invest in, or continue to hold, debt or securities issued by distressed
companies which are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy. A bankruptcy, merger or other restructuring, or a tender or exchange offer, proposed or pending at the time the Fund invests in the debt
or securities may not be completed on the terms or within the time frame contemplated, which may result in losses to the Fund. Debt obligations of distressed companies typically are unrated, lower-rated, in default or close to default and are
generally more likely to become worthless than the securities of more financially stable companies.
Borrowing.
The Fund may purchase
additional securities so long as borrowings do not exceed 5% of its total assets. The Fund may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities. The Fund may borrow from banks
provided that, immediately after any such borrowing there is an asset coverage of at least 300% for all borrowings. In the event that such asset coverage at any time falls below 300% the Fund shall, within three days thereafter (not including
Sundays and holidays) reduce the amount of its borrowings to an extent that the asset coverage of such borrowings shall be at least 300%. The Fund is not required to dispose of portfolio holdings immediately if the Fund would suffer losses as a
result. Borrowing money to meet redemptions or other purposes would have the effect of temporarily leveraging the Funds assets and potentially exposing the Fund to leveraged losses.
Lending Portfolio Securities.
The Fund may lend its portfolio securities to certain types of eligible borrowers approved by the Board of Directors. The Fund may engage in securities lending to earn
additional income or to raise cash for liquidity purposes. The Fund must receive collateral for a loan. Under current applicable regulatory requirements (which are subject to change), on each business day the loan collateral must be at least equal
to the value of the loaned securities. The collateral must consist of cash, bank letters of credit, securities of the U.S. Government or its agencies or instrumentalities, or other cash equivalents in which the Fund is permitted to invest.
Lending activities are strictly limited as described in the section titled Investment Restrictions. Lending money or securities
involves the risk that the Fund may suffer a loss if a borrower does not repay a loan when due. To manage this risk the Fund deals only with counterparties it believes to be creditworthy and requires that the counterparty deposit collateral with the
Fund.
When it loans securities, the Fund still owns the securities, receives amounts equal to the dividends or interest on loaned securities
and is subject to gains or losses on those securities. The Fund also receives one or more of: (a) negotiated loan fees, (b) interest on securities used as collateral, and/or (c) interest on any short-term debt instruments purchased
with such loan collateral. Either type of interest may be shared with the borrower. The Fund also may pay reasonable finders, custodian and administrative fees in connection with these loans. The terms of the Funds loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to reacquire loaned securities on five days notice or in time to vote on any important matter.
Short Sales.
When the Fund believes that a security is overvalued, it may sell the security short and borrow the same security from a broker or other institution to complete the sale. If the price
of the security decreases in value, the Fund may make a profit and, conversely, if the security increases in value, the Fund will incur a loss because it will have to replace the borrowed security by purchasing it at a higher price. There can be no
assurance that the Fund will be able to close out the short position at any particular time or at an acceptable price. Although the Funds gain is limited to the amount at which it sold a security short, its potential loss is not limited. A
lender may request that the borrowed securities be returned on short notice; if that occurs at a time when other short sellers of the subject security are receiving similar requests, a short squeeze can occur. This means that the Fund
might be compelled, at the most disadvantageous
Davis
Global Fund and Davis International Fund Statement of Additional Information 21
time, to replace borrowed securities previously sold short with purchases on the open market at prices significantly greater than those at which the securities were sold short. Short selling also
may produce higher than normal portfolio turnover and result in increased transaction costs to the Fund. If the Fund sells a security short it will either own an off-setting long position (an economically equivalent security which is
owned) or establish a Segregated Account as described in this Statement of Additional Information.
The Fund also may make short
sales against-the-box, in which it sells short securities it owns. The Fund will incur transaction costs, including interest expenses, in connection with opening, maintaining and closing short sales against-the-box, which results in a
constructive sale, requiring the Fund to recognize any taxable gain from the transaction.
The Fund has adopted a non-fundamental
investment limitation that prevents it from selling any security short if it would cause more than 5% of its total assets, taken at market value, to be sold short. This limitation does not apply to selling short against the box.
When-Issued and Delayed-Delivery Transactions.
The Fund can invest in securities on a when-issued basis and can purchase or sell
securities on a delayed-delivery basis. When-issued and delayed-delivery are terms that refer to securities whose terms and indenture are available and for which a market exists but that are not available for immediate delivery.
When such transactions are negotiated, the price (which generally is expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date (generally within 45 days of the date the offer is accepted). The securities are subject to change in value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest rates before settlement will affect the value of such securities and may cause a loss to the Fund. During the period between purchase and settlement, no payment is made
by the Fund to the issuer and no interest accrues to the Fund from the investment.
The Fund may engage in when-issued transactions to secure
what the Adviser considers to be an advantageous price and yield at the time of entering into the obligation. When the Fund enters into a when-issued or delayed-delivery transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the security at a price and yield the Adviser considers to be advantageous. When the Fund engages in when-issued and delayed-delivery transactions, it does so for the purpose of
acquiring or selling securities consistent with its investment objective and strategies, and not for the purpose of investment leverage. Although the Fund will enter into delayed-delivery or when-issued purchase transactions to acquire securities,
it can dispose of a commitment before settlement. If the Fund chooses to dispose of the right to acquire a when-issued security before its acquisition or to dispose of its right to delivery or receive against a forward commitment, it may incur a
gain or loss.
At the time the Fund makes the commitment to purchase or sell a security on a when-issued or delayed-delivery basis, it records
the transaction on its books and reflects the value of the security purchased in determining the Funds net asset value. In a sale transaction, it records the proceeds to be received. The Fund will identify on its books liquid securities of any
type at least equal in value to the value of the Funds purchase commitments until the Fund pays for the investment.
When issued and
delayed-delivery transactions can be used by the Fund as defensive techniques to hedge against anticipated changes in interest rates and prices. For instance, in periods of rising interest rates and falling prices, the Fund might sell securities in
its portfolio on a forward commitment basis to attempt to limit its exposure to anticipated falling prices. In periods of falling interest rates and rising prices, the Fund might sell portfolio securities and purchase the same or similar securities
on a when-issued or delayed-delivery basis to obtain the benefit of currently higher cash yields.
Segregated Accounts.
A number of the
Funds potential non-principal investment strategies may require it to establish segregated accounts. When the Fund enters into an investment strategy that would result in a senior security as that term is defined in the 1940 Act,
the Fund will either: (i) own an off-setting position in securities; or (ii) set aside liquid securities in a segregated account with its custodian bank (or designated in the Funds books and records) in the amount prescribed. The
Fund will maintain the value of such segregated account equal to the prescribed amount by adding or removing additional liquid securities to account for fluctuations in the value of securities held in such account. Securities held in a segregated
account cannot be sold while the senior security is outstanding, unless they are replaced with qualifying securities and the value of the account is maintained.
Davis
Global Fund and Davis International Fund Statement of Additional Information 22
A segregated account is not required when the Fund holds securities, options, or futures positions whose
value is expected to offset its obligations that would otherwise require a segregated account. The Fund may also use other SEC approved methods to reduce or eliminate the leveraged aspects of senior securities.
P
ORTFOLIO
T
RANSACTIONS
The Adviser is responsible for the placement of portfolio transactions, subject to the supervision of the Funds Board of Directors. Following is a
summary of the Advisers trading policies which are described in Part II of its Form ADV. The Adviser is primarily a discretionary investment adviser. Accordingly, the Adviser generally determines the securities and quantities to be bought and
sold for each clients account.
Best Execution.
The Adviser follows procedures intended to provide reasonable assurance of best
execution. However, there can be no assurance that best execution will in fact be achieved in any given transaction. The Adviser seeks to place portfolio transactions with brokers or dealers who will execute transactions as efficiently as possible
and at the most favorable net price. In placing executions and paying brokerage commissions or dealer markups, the Adviser considers, among other factors, price, commission, timing, aggregated trades, capable floor brokers or traders, competent
block trading coverage, ability to position, capital strength and stability, reliable and accurate communication and settlement processing, use of automation, knowledge of other buyers or sellers, arbitrage skills, administrative ability,
underwriting and provision of information on the particular security or market in which the transaction is to occur, research, the range and quality of the services made available to clients, and the payment of bona fide client expenses. To the
extent that clients direct brokerage, the Adviser cannot be responsible for achieving best execution. The Adviser may place orders for portfolio transactions with broker-dealers who have sold shares of funds which the Adviser serves as adviser or
sub-adviser. However, when the Adviser places orders for portfolio transactions, it does not give any consideration to whether a broker-dealer has sold shares of the funds which the Adviser serves as adviser or sub-adviser. The applicability of
specific criteria will vary depending on the nature of the transaction, the market in which it is executed and the extent to which it is possible to select from among multiple broker-dealers.
Cross Trades.
When the Adviser deems it to be advantageous, the Fund may purchase or sell securities directly from or to another client account which is managed by the Adviser. This may happen due
to a variety of circumstances, including situations when the Fund must purchase securities due to holding excess cash and, at the same time, a different client of the Adviser must sell securities in order to increase its cash position. Cross trades
are only executed when deemed beneficial to the Fund and the other client, and the Adviser has adopted written procedures to ensure fairness to both parties.
Investment Allocations.
The Adviser considers many factors when allocating securities among its clients, including the Fund, including but not limited to the clients investment style,
applicable restrictions, availability of securities, available cash, anticipated liquidity, and existing holdings. The Adviser employs several portfolio managers, each of whom performs independent research and develops different levels of conviction
concerning potential investments. Clients managed by the portfolio manager performing the research may receive priority allocations of limited investment opportunities that are in short supply, including Initial Public Offerings (IPOs).
Clients are not assured of participating equally or at all in particular investment allocations. The nature of a clients investment
style may exclude it from participating in many investment opportunities, even if the client is not strictly precluded from participation based on written investment restrictions. For example: (i) large-cap value clients are unlikely to
participate in initial public offerings of small-capitalization companies; (ii) the Adviser may allocate short-term trading opportunities to clients pursuing active trading strategies rather than clients pursuing long-term buy-and-hold
strategies; (iii) minimum block sizes may be optimal for liquidity which may limit the participation of smaller accounts; (iv) it is sometimes impractical for some custodians to deal with securities which are difficult to settle; and
(v) private accounts and managed money/wrap accounts generally do not participate in direct purchases of foreign securities, but may participate in depositary receipts consisting of American Depositary Receipts ADRs, European
Depositary Receipts EDRs, and Global Depositary Receipts GDRs.
Davis
Global Fund and Davis International Fund Statement of Additional Information 23
The Adviser attempts to allocate limited investment opportunities, including IPOs, among clients in a manner
that is fair and equitable when viewed over a considerable period of time and involving many allocations. When the Adviser is limited in the amount of a particular security it can purchase, due to a limited supply, limited liquidity, or other
reason, the Adviser may allocate the limited investment opportunity to a subset of eligible clients. The Adviser would then allocate the next limited investment opportunity to a different subset of eligible clients, rotating among subsets as limited
investment opportunities are identified.
The Adviser serves as investment adviser for a number of clients and may deal with conflicts of
interest when allocating investment opportunities among its various clients. For example: (i) the Adviser receives different advisory fees from different clients; (ii) the performance records of some clients are more public than the
performance records of other clients; and (iii) the Adviser and its affiliates, owners, officers and employees have invested substantial amounts of their own capital in some client accounts (notably the Davis Funds, Selected Funds, and Clipper
Fund), but do not invest their own capital in every clients account. The majority of the Advisers clients pursue specific investment strategies, many of which are similar. The Adviser expects that, over long periods of time, most clients
pursuing similar investment strategies should experience similar, but not identical, investment performance. Many factors affect investment performance, including but not limited to: (i) the timing of cash deposits and withdrawals to and from
an account; (ii) the fact that the Adviser may not purchase or sell a given security on behalf of all clients pursuing similar strategies; (iii) price and timing differences when buying or selling securities; and (iv) the
clients own different investment restrictions. The Advisers trading policies are designed to minimize possible conflicts of interest in trading for its clients.
Limitations on Aggregate Investments in a Single Company.
The Advisers policy is not to invest for the purpose of exercising control or management of other companies. In extraordinary
circumstances the Adviser may seek to influence management. In such an event appropriate government and regulatory filings would be made.
Federal and state laws, as well as company documents (sometimes referred to as poison pills) may limit the percentage of a companys
outstanding shares which may be purchased or owned by the Advisers clients. This is especially true in heavily regulated industries such as insurance, banking, and real estate investment trusts. Unless it can obtain an exception, the Adviser
will not make additional purchases of these companies for its clients if, as a result of such purchase, shares in excess of the applicable investment limitation (for example, 9.9% of outstanding voting shares) would be held by its clients in the
aggregate.
Order Priority.
The Advisers trading desk prioritizes incoming orders of similar purchases and sales of securities
between institutional and managed money/wrap account orders. The Advisers trading desk typically executes orders for institutional clients, including investment companies, institutional private accounts, sub-advised accounts and others.
Managed money/wrap account program sponsors typically execute orders for managed money/wrap accounts.
The Advisers trading desk
attempts to coordinate the timing of orders with a trade rotation to prevent the Adviser from bidding against itself on orders. Generally, a block trade representing a portion of the total trade is placed first for institutional and
private accounts. Once this trade is completed, the Adviser places orders for wrap accounts, one sponsor at a time. Sponsors of certain model portfolios will execute trades for their clients. These model portfolio Sponsors are included as a part of
the wrap account trade rotation. If the Adviser has not received a response from a model portfolio Sponsor within a reasonable period of time the Adviser will resume through the trade rotation. If this occurs it is possible that the model portfolio
Sponsor and the Adviser will be executing similar trades for discretionary clients. The trading concludes with another block transaction for institutional and private accounts. The trading desk follows procedures intended to provide reasonable
assurance that no clients are disadvantaged by this trade rotation; and the compliance department monitors execution quality. However, there can be no assurance that best execution will in fact be achieved in any given transaction.
Pattern Accounts
. The Adviser serves as investment adviser for a number of clients which are patterned after model portfolios or designated mutual
funds managed by the Adviser. For example, a client pursuing the Advisers large cap value strategy may be patterned after Davis New York Venture Fund. A client patterned after Davis New York Venture Fund will usually have all of its trading
(other than trading reflecting cash flows due to client deposits or withdrawals) aggregated with that of Davis New York
Davis
Global Fund and Davis International Fund Statement of Additional Information 24
Venture Fund. In unusual circumstances, the Adviser may not purchase or sell a given security on behalf of all clients (even clients managed in a similar style), and it may not execute a purchase
of securities or a sale of securities for all participating clients at the same time.
Orders for accounts which are not patterned after model
portfolios or designated mutual funds are generally executed in the order received by the trading desk, with the following exceptions: (i) the execution of orders for clients that have directed that particular brokers be used may be delayed
until the orders which do not direct a particular broker have been filled; (ii) the execution of orders may be delayed when the client (or responsible portfolio manager) requests such delay due to market conditions in the security to be
purchased or sold; and (iii) the execution of orders which are to be bunched or aggregated.
Aggregated Trades.
Generally, the
Advisers equity portfolio managers communicate investment decisions to a centralized equity trading desk, while fixed income portfolio managers normally place their transactions themselves. The Adviser frequently follows the practice of
aggregating orders of various institutional clients for execution, if the Adviser believes that this will result in the best net price and most favorable execution. In some instances, aggregating trades could adversely affect a given client.
However, the Adviser believes that aggregating trades generally benefits clients because larger orders tend to have lower execution costs, and the Advisers clients do not compete with one another trading in the market. Directed brokerage
trades in a particular security are typically executed separately from, and possibly after, the Advisers other client trades.
In
general, all of the Advisers clients (excluding clients who are directing brokerage and managed account/wrap programs) seeking to purchase or sell a given security at approximately the same time will be aggregated into a single order or series
of orders. When an aggregated order is filled, all participating clients receive the price at which the order was executed. If, at a later time, the participating clients wish to purchase or sell additional shares of the same security, or if
additional clients seek to purchase or sell the same security, then the Adviser will issue a new order and the clients participating in the new order will receive the price at which the new order was executed.
In the event that an aggregated order is not entirely filled, the Adviser will allocate the purchases or sales among participating clients in the manner
it considers to be most equitable and consistent with its fiduciary obligations to all such clients. Generally, partially-filled orders are allocated pro rata based on the initial order submitted by each participating client.
In accordance with the various managed account/wrap programs in which the Adviser participates, the Adviser typically directs all trading to the
applicable program sponsor unless, in the Advisers reasonable discretion, doing so would adversely affect the client. Clients typically pay no commissions on trades executed through program sponsors. In the event that an order to the sponsor
of a managed account/wrap program is not entirely filled, the Adviser will allocate the purchases or sales among the clients of that sponsor in the manner it considers to be most equitable and consistent with its fiduciary obligations to all such
clients. Generally, partially-filled orders are allocated among the particular sponsors participating clients on a random basis that is anticipated to be equitable over time.
Trading Error Correction.
In the course of managing client accounts, it is possible that trading errors will occur from time to time. The Adviser has adopted Trading Error Correction
Policies & Procedures which, when the Adviser is at fault, seek to place a clients account in the same position it would have been had there been no error. The Adviser retains flexibility in attempting to place a clients account
in the same position it would have been had there been no error. The Adviser attempts to treat all material errors uniformly, regardless of whether they would result in a profit or loss to the client. For example, the Adviser may purchase securities
from a client account at cost if they were acquired due to a trading error. If more than one trading error, or a series of trading errors, is discovered in a client account, then gains and losses on the erroneous trades may be netted.
Research Paid For With Commissions (Soft Dollars).
The Adviser does not use client commissions, soft dollars, to pay for:
(i) computer hardware or software, or other electronic communications facilities; (ii) publications, both paper based or electronic, that are available to the general public; and (iii) third-party research services. If the Adviser
determines to purchase such services, it pays for them using its own resources.
Davis
Global Fund and Davis International Fund Statement of Additional Information 25
The Advisers portfolio managers may take into account the research resources, as well as the execution
capacity, of a brokerage firm in selecting brokers. Thus, transactions may be directed to a brokerage firm which provides: (i) important information concerning a company; (ii) introductions to key company officers; (iii) industry and
company conferences; and (iv) other value added research services. The Adviser may have an incentive to select or recommend a broker-dealer based on its interest in receiving the research or services, rather than on its clients interest
in receiving most favorable execution. If the Adviser were to direct brokerage to a firm providing these value added services the Adviser may receive a benefit as it may not have to pay for the services it has received.
The Adviser follows the concepts of Section 28(e) of the Securities Exchange Act of 1934. Subject to the criteria of Section 28(e), the Adviser
may pay a broker a brokerage commission in excess of that which another broker might have charged for effecting the same transactions, in recognition of the value of the brokerage and research services provided by or through the broker. The
Adviser Head Trader exercises his professional judgment to determine which brokerage firm is best suited to execute any given portfolio transaction. This includes transactions executed through brokerage firms which provide the services listed
above. The Adviser does not attempt to allocate soft dollar benefits to client accounts proportionately to the commissions which the accounts pay to brokerage firms which provide research services. The Adviser believes it is important to its
investment decision-making to have access to independent research.
Exceptions.
There are occasions when the Adviser varies the trading
procedures and considerations described above. The Adviser exercises its best judgment in determining whether clients should execute portfolio transactions simultaneously with prior to, or subsequent to the model portfolio or designated mutual fund
that they are patterned after. The factors that the Adviser considers in exercising its judgment include, but are not limited to, the need for confidentiality of the purchase or sale, market liquidity of the securities in issue, the particular
events or circumstances that prompt the purchase or sale of the securities, and operational efficiencies. Even when transactions are executed on the same day, clients may not receive the same price as the model portfolios or designated mutual funds
they are patterned after. If the transactions are not aggregated, such prices may be better or worse.
Portfolio Turnover.
Because the
Funds portfolios are managed using the Davis Investment Discipline, portfolio turnover is expected to be low. The Funds anticipate that during normal market conditions, their annual portfolio turnover rate will be less than 100%. However,
depending upon market conditions, portfolio turnover rate will vary. At times, it could be high, which could require the payment of larger amounts in brokerage commissions and possibly more taxable distributions.
When the Adviser deems it to be appropriate, a Fund may engage in active and frequent trading to achieve its investment objective. Active trading may
include participation in IPOs. Active trading may result in the realization and distribution to shareholders of larger amounts of capital gains compared with a fund with less active trading strategies, which could increase shareholder tax liability.
Active trading may also generate larger amounts of short-term capital gains, which are generally taxable as ordinary income when distributed to taxable shareholders. Frequent trading also increases transaction costs which could detract from a
Funds performance.
Portfolio Commissions
The Funds paid the following brokerage commissions:
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|
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|
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|
|
|
|
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Fiscal year ended October 31,
|
|
|
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2013
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|
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2012
|
|
|
2011
|
|
Davis Global Fund
|
|
|
|
|
|
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Brokerage commissions paid:
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$
|
78,011
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|
|
$
|
91,222
|
|
|
$
|
81,143
|
|
Amount paid to brokers providing research:
|
|
|
none
|
|
|
|
none
|
|
|
|
none
|
|
Amount paid to broker providing services to funds:
|
|
|
none
|
|
|
|
none
|
|
|
|
none
|
|
Davis International Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage commissions paid:
|
|
$
|
12,732
|
|
|
$
|
7,630
|
|
|
$
|
21,199
|
|
Amount paid to brokers providing research:
|
|
|
none
|
|
|
|
none
|
|
|
|
none
|
|
Amount paid to broker providing services to funds:
|
|
|
none
|
|
|
|
none
|
|
|
|
none
|
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 26
Investments in Certain Broker-Dealers.
As of October 31, 2013, the Funds owned the following
securities (excluding repurchase agreements) issued by any of its regular brokers and dealers. The Funds regular brokers and dealers are the ten brokers or dealers receiving the greatest amount of commissions from the Funds portfolio
transactions during the most recent fiscal year, the ten brokers or dealers engaging in the largest amount of principal transactions during the most recent fiscal year, and the ten brokers or dealers that sold the largest amount of Fund shares
during the most recent fiscal year. As of the most recent fiscal year ended October 31, 2013, the Fund owned securities (excluding repurchase agreements) issued by one broker dealer:
|
|
|
|
|
|
|
Fund
|
|
Broker-Dealer
|
|
Value
|
|
Davis Global Fund
|
|
Wells Fargo & Co.
|
|
$
|
2,541,295
|
|
Davis International Fund
|
|
none
|
|
|
|
|
I
NVESTMENT
R
ESTRICTIONS
The Funds follow investment strategies developed in accordance with their investment objectives, policies and restrictions described in their prospectus
and this Statement of Additional Information.
The Funds have adopted the fundamental investment policies set forth below, which may not be
changed without shareholder approval. Where necessary, an explanation following a fundamental policy describes the Funds practices with respect to that policy, as permitted by governing rules, regulations, and interpretations. If the governing
rules, regulations, and/or interpretations change, the Funds investment practices may change without a shareholder vote.
The
fundamental investment restrictions set forth below may not be changed without the approval of the lesser of: (A) 67% or more of the voting securities present at such meeting if the holders of more than 50% of the outstanding voting securities
of such company are present or represented by proxy; or (B) more than 50% of the outstanding voting securities of such company.
Except
for the fundamental investment policies regarding illiquid securities and borrowing, all percentage restrictions apply as of the time of an investment without regard to any later fluctuations in the value of portfolio securities or other assets. All
references to the assets of a Fund are in terms of current market value.
(1)
|
Diversification
.
The Fund may not make any investment that is inconsistent with its classification as a diversified investment company under the
1940 Act.
|
Further Explanation of Diversification Policy
. To remain classified as a diversified investment company under
the 1940 Act, the Fund must conform with the following: With respect to 75% of its total assets, a diversified investment company may not invest more than 5% of its total assets, determined at market or other fair value at the time of purchase, in
the securities of any one issuer, or invest in more than 10% of the outstanding voting securities of any one issuer, determined at the time of purchase. These limitations do not apply to investments in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
(2)
|
Concentration.
The Fund may not concentrate its investments in the securities of issuers primarily engaged in any particular industry.
|
Further Explanation of Concentration Policy
. The Fund may not invest 25% or more of its total assets, taken at market value, in the securities of
issuers primarily engaged in any particular industry (other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities). The Fund generally uses Global Industry Classification Standard (GICS) as
developed by Morgan Stanley Capital International and Standard & Poors Corporation to determine industry classification. GICS presents industry classification as a series of levels (i.e. sector, industry group, industry, and
sub-industry). For purposes of measuring concentration, the Fund generally classifies companies at the industry group or industry level. However, further analysis may lead the Adviser to classify companies at the sub-industry
level. The Adviser will only measure concentration at the sub-industry level when it believes that the various sub-industries in question can reasonably be expected to be impacted differently to a material extent by future economic events. For
example, in the Insurance industry, the Adviser believes that the sub-industries (insurance brokers, life & health insurance, multi-line insurance, property & casualty
Davis
Global Fund and Davis International Fund Statement of Additional Information 27
insurance, and reinsurance) can reasonably be expected to be impacted differently to a material extent by future economic events such as natural disasters, global politics, inflation,
unemployment, technology, etc. In addition, the Adviser may reclassify a company into an entirely different sector if it believes that the GICS classification on a specific company does not accurately describe the company.
(3)
|
Issuing Senior Securities.
The Fund may not issue senior securities, except as permitted under applicable law, including the 1940 Act and published SEC staff
positions.
|
Further Explanation of Issuing Senior Securities.
The Fund may not issue senior securities, except as
provided by the 1940 Act and any rules, regulations, orders or letters issued there under. This limitation does not apply to selling short against the box. See the non-fundamental restriction further limiting short selling below. The 1940 Act
defines a Senior Security as any bond, debenture, note or similar obligation constituting a security and evidencing indebtedness.
(4)
|
Borrowing.
The Fund may not borrow money, except to the extent permitted by applicable law including the 1940 Act and published SEC staff positions.
|
Further Explanation of Borrowing Policy
. The Fund may borrow from banks provided that, immediately thereafter the Fund
has 300% asset coverage for all borrowings. The Fund may purchase additional securities so long as borrowings do not exceed 5% of its total assets. The Fund may obtain such short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities. In the event that market fluctuations cause borrowing to exceed the limits stated above, the Adviser would act to remedy the situation as promptly as possible, normally within three business days, although it is not
required to dispose of portfolio holdings immediately if the Fund would suffer losses as a result.
(
5)
|
Underwriting.
The Fund may not underwrite securities of other issuers except to the extent permitted by applicable law, including the 1940 Act and published SEC
staff positions.
|
Further Explanation of Underwriting Policy
. The Fund may not underwrite securities of other issuers,
except insofar as the Fund may be deemed to be an underwriter in connection with the disposition of its portfolio securities.
(6)
|
Investments in Commodities and Real Estate.
The Fund may not purchase or sell commodities or real estate, except to the extent permitted by applicable law,
including the 1940 Act and published SEC staff positions.
|
Further Explanation of Policy Restricting Investments in
Commodities and Real Estate
. The Fund may purchase or sell financial futures contracts, options on financial futures contracts, currency contracts and options on currency contracts as described in its prospectus and Statement of Additional
Information. The Fund may not purchase or sell real estate, except that the Fund may invest in securities that are directly or indirectly secured by real estate or issued by issuers that invest in real estate.
(7)
|
Making Loans.
The Fund may not make loans to other persons, except as allowed by applicable law including the 1940 Act and published SEC staff positions.
|
Further Explanation of Lending Policy
. The acquisition of investment securities or other investment instruments,
entering into repurchase agreements, leaving cash on deposit with the Funds custodian, and similar actions are not deemed to be the making of a loan.
To generate income and offset expenses, the Fund may lend portfolio securities to broker-dealers and other financial institutions that the Adviser believes to be creditworthy in an amount up to 33 1/3% of
its total assets, taken at market value. While securities are on loan, the borrower will pay the Fund any income accruing on the security. The Fund may invest any collateral it receives in additional portfolio securities, typically U.S. Treasury
notes, certificates of deposit, other high-grade, short-term obligations or interest-bearing cash equivalents. The Fund is still subject to gains or losses due to changes in the market value of securities that it has lent.
When the Fund lends its securities, it will require the borrower to give the Fund collateral in cash or U.S. Government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of the securities lent, including accrued interest. The Fund has the right to call a loan and obtain the securities lent any time on notice of not more than five business
days. The Fund may pay reasonable fees in connection with such loans.
Davis
Global Fund and Davis International Fund Statement of Additional Information 28
Non-Fundamental Investment Policies
The Funds have adopted and will follow the non-fundamental investment policies set forth below, which may be changed by the Funds Board of Directors without the approval of the Funds
shareholders.
1.
|
Illiquid Securities
.
The Fund will not purchase or hold illiquid securities if more than 15% of the value of the Funds net assets would be invested
in such securities. If illiquid securities exceeded 15% of the value of the Funds net assets, the Adviser would attempt to reduce the Funds investment in illiquid securities in an orderly fashion.
|
2.
|
High-Yield, High-Risk Securities
. The Fund will not purchase debt securities rated BB or Ba or lower (sometimes referred to as Junk Bonds) if the
securities are in default at the time of purchase or if such purchase would then cause more than 20% of the Funds net assets to be invested in such lower-rated securities.
|
3.
|
Options
. The Fund will not purchase an option if the purchase would cause the total premiums (at market) of all options then owned to exceed 5% of the
Funds total assets. The Fund will not sell covered calls if the transaction would cause the total premiums (at market) of all covered calls then written to exceed 25% of the Funds total assets. For additional information concerning
option strategies and their risks, see the section entitled Derivatives.
|
4.
|
Futures Contracts
. The Fund will not engage in a futures transaction if the transaction would cause the nominal value of futures contracts then purchased or sold
to exceed 25% of the Funds total assets. For additional information concerning futures contracts and their risks, see the section entitled Derivatives.
|
5.
|
Short Selling
. The Fund will not sell any security short if it would cause more than 5% of its total assets, taken at market value, to be sold short. This
limitation does not apply to selling short against the box.
|
6.
|
Investing For Control
. The Fund does not invest for the purpose of exercising control or management of other companies.
|
7.
|
Mortgage, Pledge, Lend, or Hypothecate Assets
. The Fund will not mortgage, pledge, or hypothecate more than 33 1/3% of its total assets, taken at market value in
securities lending or other activities.
|
S
ECTION
II: The Fund and Key Persons
This Statement of Additional Information should be read in conjunction with the prospectus. This Statement of Additional Information
supplements the information available in the prospectus.
O
RGANIZATION
O
F
T
HE
F
UNDS
Davis New York Venture Fund, Inc.
Davis New York Venture Fund, Inc., is
an open-end, management investment company incorporated in Maryland in 1968 and registered under the 1940 Act. Davis New York Venture Fund, Inc., is a series investment company that may issue multiple series, each of which would represent an
interest in its separate portfolio. Davis New York Venture Fund, Inc., currently offers four series: Davis New York Venture Fund, Davis Global Fund, and Davis International Fund which are classified under the 1940 Act as diversified companies, and
Davis Research Fund which is classified under the 1940 Act as non-diversified company. Currently, only the directors, officers and employees of the Davis Funds or their investment adviser and sub-adviser (and affiliated companies) are eligible to
purchase shares of Davis Research Fund. Davis New York Venture Fund, Davis Global Fund, and Davis International Fund are available for public investment and their shares are offered through separate prospectuses and a Statement of Additional
Information that may be obtained by calling Davis Funds Investor Services at 1-800-279-0279. The Board of Directors may increase the number of Davis Funds in the future and may, at any time, discontinue offering shares of any fund to the public.
Fund Shares.
The Funds may issue shares in different classes. Davis Global Funds and Davis International Funds shares
currently are divided into four classes of shares: A, B, C and Y. The Board of Directors may offer additional series or classes in the future and may at any time discontinue the offering of any series or class of shares. Each share, when issued and
paid for in accordance with the terms of the offering, is fully paid and non-assessable. Shares have no preemptive or subscription rights. Each of the Funds shares represent an interest in the assets of the Fund issuing the share and have
identical voting, dividend, liquidation and other rights and the same terms and conditions as any other shares except that: (i)
Davis
Global Fund and Davis International Fund Statement of Additional Information 29
each dollar of net asset value per share is entitled to one vote; (ii) the expenses related to a particular class, such as those related to the distribution of each class and the transfer
agency expenses of each class are borne solely by each such class; (iii) each class of shares votes separately with respect to provisions of the Rule 12b-1 Distribution Plan that pertain to a particular class; and (iv) other matters for
which separate class voting is appropriate under applicable law. Each fractional share has the same rights, in proportion, as a full share. Due to the differing expenses of the classes, dividends are likely to be lower for Class B and C shares than
for Class A shares and are likely to be higher for Class Y shares than for any other class of shares.
For some issues, such as the
election of directors, all of Davis New York Venture Fund, Inc.s authorized series vote together. For other issues, such as approval of the advisory agreement, each authorized series votes separately. Shares do not have cumulative voting
rights; therefore, the holders of more than 50% of the voting power can elect all of the directors. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the shareholders of the outstanding voting securities of an investment company will not be deemed to have been effectively acted on unless approved by the holders of a majority of the outstanding shares of each series affected by such
matter. Rule 18f-2 further provides that a series shall be deemed to be affected by a matter unless it is clear that the interests of each series in the matter are identical or that the matter does not affect any interest of such series. Rule 18f-2
exempts the selection of independent accountants and the election of Board members from the separate voting requirements of the Rule.
In
accordance with Maryland law and Davis New York Venture Fund, Inc.s bylaws, the Funds do not hold regular annual shareholder meetings. Shareholder meetings are held when they are required under the 1940 Act or when otherwise called for special
purposes. Special shareholder meetings may be called on the written request of shareholders of at least 25% of the voting power that could be cast at the meeting. The Funds will provide assistance in calling and holding such special meetings to the
extent required by Maryland statutes or SEC rules and regulations then in effect.
D
IRECTORS
A
ND
O
FFICERS
Each of the Independent Directors and officers holds identical offices with each of the Davis Funds (three registrants, a total of 13 separate series):
Davis New York Venture Fund, Inc., Davis Series, Inc., and Davis Variable Account Fund, Inc. The three registrants have the same directors. As indicated below, certain directors and officers also may hold similar positions with Selected American
Shares, Inc., Selected International Fund, Inc., and Selected Capital Preservation Trust (collectively the Selected Funds), and Clipper Fund, Inc., mutual funds that are managed by the Adviser.
The Funds Board of Directors supervises the business and management of the Funds. The Board establishes the Funds policies and meets
regularly to review the activities of the officers, who are responsible for day-to-day operations of the Fund, the Adviser, and certain other service providers. The Board approves all significant agreements between the Funds and those companies that
furnish services to the Funds. Directors are elected and serve until their successors are elected and qualified. Information about the Directors, including their business addresses, dates of birth, principal occupations during the past five years,
and other current Directorships of publicly traded companies or funds, are set forth in the table below.
The Board has appointed an
Independent Director as Chair. The Chairman presides at meetings of the Directors and may call meetings of the Board and any Board committee whenever he deems it necessary. The Chair may act as a liaison with the Funds management, officers,
attorneys, and other Directors generally between meetings. The Chair may perform such other functions as may be requested by the Board from time to time. The Board has designated a number of standing committees as further described below, each of
which has a Chair. The Board also may designate working groups or ad hoc committees as it deems appropriate.
The Board believes that this
leadership structure is appropriate because it allows the Board to exercise informed and independent judgment over matters under its purview, and it allocates areas of responsibility among committees or working groups of Directors and the full Board
in a manner that enhances effective oversight. The Board also believes that having a majority of Independent Directors is appropriate and in the best interest of the Funds shareholders. Nevertheless, the Board also believes that having
interested
Davis
Global Fund and Davis International Fund Statement of Additional Information 30
persons serve on the Board brings corporate and financial viewpoints that are, in the Boards view, crucial elements in its decision-making process. The leadership structure of the Board may
be changed at any time and in the discretion of the Board, including in response to changes in circumstances or the characteristics of the Funds.
D
IRECTORS
For the purposes of their service as
directors to the Davis Funds, the business address for each of the Directors is: 2949 E Elvira Road, Suite 101, Tucson, AZ 85756. Subject to exceptions and exemptions which may be granted by the Independent Directors, Directors must retire at the
close of business on the last day of the calendar year in which the Director attains age seventy-four (74).
|
|
|
|
|
|
|
|
|
Name
(birth date)
|
|
Position(s)
held with
Funds
|
|
Term of
office and
length of
time served
|
|
Principal occupation(s)
during past five years
|
|
No.
of
portfolios in
Fund
complex
overseen by
director
|
I
NDEPENDENT
D
IRECTORS
:
|
|
|
|
|
|
Marc Blum
(09/09/42)
|
|
Director
|
|
Since 1986
|
|
Chief Executive Officer, World Total Return Fund, LLLP; of Counsel to Gordon Feinblatt LLC (law firm).
|
|
13
|
Other directorships for public companies currently serving:
Director, Rodney Trust Company (trust and asset management company).
|
|
|
|
|
|
John Gates, Jr.
(08/02/53)
|
|
Director
|
|
Since 2007
|
|
Chairman and Chief Executive Officer of PortaeCo LLC, a private investment company (from 2006 to present).
|
|
13
|
Other directorships for public companies currently serving:
Director, DCT Industrial Trust (a REIT); Chairman, Regional Transportation Authority of
Chicago (public transportation system).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Gayner
(12/16/61)
|
|
Director/
Chairman
|
|
Since 2004
|
|
President and Chief Investment Officer, Markel Corporation (a diversified financial holding company).
|
|
13
|
Other directorships for public companies currently serving:
Director, Graham Holdings Company (formerly known as Washington Post Co., a publishing
company); Director, Colfax Corporation (engineering and manufacturer of pumps and fluid handling equipment).
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 31
|
|
|
|
|
|
|
|
|
Name
(birth date)
|
|
Position(s)
held with
Funds
|
|
Term of
office and
length of
time served
|
|
Principal occupation(s)
during past five years
|
|
No.
of
portfolios in
Fund
complex
overseen by
director
|
Samuel Iapalucci
(07/19/52)
|
|
Director
|
|
Since 2006
|
|
Executive Vice President and Chief Financial Officer, CH2M- HILL Companies Ltd. (engineering) until 2008.
|
|
13
|
Other directorships for public companies currently serving:
Director, exp Global Inc. (formerly known as Trow Global Holdings Inc., an engineering
firm).
|
|
|
|
|
|
Robert Morgenthau
(03/22/57)
|
|
Director
|
|
Since 2002
|
|
Principal, Spears Abacus Advisors,
LLC (an investment management firm) since August 2011;
Chairman, NorthRoad
Capital Management, LLC
(an investment
management firm) from June 2002 to August 2011.
|
|
13
|
Other directorships for public companies currently serving:
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marsha Williams
(03/28/51)
|
|
Director
|
|
Since 1999
|
|
Retired; Former Senior Vice President and Chief Financial Officer of Orbitz Worldwide, Inc. (travel service provider) from 2007 to 2010.
|
|
13
|
Other directorships for public companies currently serving:
Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge
& Iron Company, N.V. (industrial construction and engineering); Director, Fifth Third Bancorp (diversified financial services).
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 32
|
|
|
|
|
|
|
|
|
Name
(birth date)
|
|
Position(s)
held with
Funds
|
|
Term of
office and
length of
time served
|
|
Principal occupation(s)
during past five years
|
|
No.
of
portfolios in
Fund
complex
overseen by
director
|
I
NTERESTED
D
IRECTORS
*:
|
|
|
|
|
|
Andrew Davis
(06/25/63)
|
|
Director
|
|
Director
since 1997;
Davis Funds
officer 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 of certain companies affiliated
with the Adviser.
|
|
15
|
Other directorships for public companies currently serving:
Director of the Selected Funds (consisting of 2 portfolios) since 1998.
|
|
|
|
|
|
Christopher Davis
(07/13/65)
|
|
Director
|
|
Davis Funds
director
since 1997;
Davis Funds
officer since
1997
|
|
President or Vice President of each Davis Fund, Selected Fund, and Clipper Fund; Chairman of Davis Selected Advisers, L.P., and also serves as an executive officer of certain
companies affiliated with the Adviser, including sole member of the Advisers general partner, Davis Investments, LLC; Employee of Shelby Cullom Davis & Co. (registered broker/dealer).
|
|
15
|
Other directorships for public companies currently serving:
Director of the Selected Funds (consisting of 2 portfolios) since 1998. Director, Graham
Holdings Company (a publishing company).
|
*
|
Andrew Davis and Christopher 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 Davis and Christopher Davis are brothers.
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 33
I
NDEPENDENT
D
IRECTORS
C
OMPENSATION
During the fiscal year ended October 31, 2013, the compensation paid to the Directors who are not
considered to be interested persons of the Funds is listed in the table below. The Directors receive no pecuniary retirement benefits accrued as Fund expenses. Interested Directors are not compensated by the Funds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Davis
International
Fund
|
|
|
Davis
Global
Fund
|
|
|
Aggregate
Fund
Compensation
1
|
|
|
Total
Complex
Compensation
2
|
|
Marc Blum
|
|
$
|
207
|
|
|
$
|
504
|
|
|
$
|
75,800
|
|
|
$
|
125,000
|
|
John Gates Jr.
|
|
$
|
207
|
|
|
$
|
504
|
|
|
$
|
75,800
|
|
|
$
|
125,000
|
|
Thomas Gayner
|
|
$
|
207
|
|
|
$
|
504
|
|
|
$
|
75,800
|
|
|
$
|
125,000
|
|
Samuel Iapalucci
|
|
$
|
207
|
|
|
$
|
504
|
|
|
$
|
75,800
|
|
|
$
|
125,000
|
|
Robert Morganthau
|
|
$
|
207
|
|
|
$
|
504
|
|
|
$
|
75,800
|
|
|
$
|
125,000
|
|
Marsha Williams
|
|
$
|
213
|
|
|
$
|
519
|
|
|
$
|
78,000
|
|
|
$
|
128,600
|
|
Directors Emeritus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christian Sonne
3
|
|
$
|
24
|
|
|
$
|
61
|
|
|
$
|
9,550
|
|
|
$
|
15,625
|
|
G. Bernard Hamilton
3
|
|
$
|
79
|
|
|
$
|
191
|
|
|
$
|
28,350
|
|
|
$
|
46,875
|
|
1.
|
Aggregate Fund Compensation is the aggregate compensation paid for service as a director by all series of Davis New York Venture Fund,
Inc., Davis New York Venture Fund, Davis Research Fund, Davis Global Fund and Davis International Fund.
|
2.
|
Total complex compensation is the aggregate compensation paid for service as a director by all mutual funds with the same investment
adviser. There are six registered investment companies in the complex.
|
3.
|
Mr. Hamilton retired in December 2011 and served as Director Emeritus until December 2013. Mr. Sonne retired in December 2010 and served as
Director Emeritus until December 2012.
|
O
FFICERS
All Davis Funds officers (including some Interested Directors) hold positions as executive officers with the Adviser and its affiliates, including Davis
Selected Advisers, L.P. (Adviser), Davis Selected Advisers NY, Inc. (sub-adviser), Davis Distributors, LLC (the principal underwriter), Davis Investments, LLC (the sole general partner of the Adviser), and other affiliated companies. The
Davis Funds do not pay salaries to any of their officers. Each of the Davis Funds officers serves for one year and until his or her successor is elected and qualified.
Christopher Davis (born 07/13/65, Davis Funds officer since 1997).
See description in the section on Interested Directors.
Andrew Davis (born 06/25/63, Davis Funds officer since 1997
). See description in the section on Interested Directors.
Kenneth Eich (born 08/14/53, Davis Funds officer since 1997).
Executive Vice President and Principal Executive Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds
(consisting of two portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Chief Operating Officer, Davis Selected Advisers, L.P.; and also serves as an executive officer of certain companies affiliated with the Adviser.
Douglas Haines (born 03/04/71, Davis Funds officer since 2004).
Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer,
and Principal Accounting Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of two portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Director of Fund Accounting, Davis
Selected Advisers, L.P.
Davis
Global Fund and Davis International Fund Statement of Additional Information 34
Sharra Haynes (born 09/25/66, Davis Funds officer since 1997).
Vice President and Chief Compliance
Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of two portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Chief Compliance Officer, Davis Selected Advisers, L.P.; and
also serves as an executive officer of certain companies affiliated with the Adviser.
Ryan Charles (born 07/25/78, Davis Funds
officer since 2014).
Vice President and Secretary of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of two portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President, Chief Legal Officer
and Secretary, Davis Selected Advisers, L.P.; and also serves as an executive officer of certain companies affiliated with the Adviser.
Arthur Don (born 09/24/53, Davis Funds officer since 1991).
Assistant Secretary (for clerical purposes only) of each of the Davis Funds and
Selected Funds; Shareholder, Greenberg Traurig, LLP (a law firm); counsel to the Independent Directors and the Davis Funds.
S
TANDING
C
OMMITTEES
O
F
T
HE
B
OARD
O
F
D
IRECTORS
Although the Board has general criteria that guide its choice of candidates to serve on the
Board, there are no specific required qualifications for Board membership, including with respect to the diversity of candidates for Board membership. Candidates for Board membership nominated by shareholders are not treated differently than
candidates nominated from other sources. The Board believes that the different perspectives, viewpoints, professional experience, education, and individual qualities of each Director represent a diversity of experiences and a variety of
complementary skills. Each Director has experience as a Director of the Davis Funds. It is the Directors belief that this allows the Board, as a whole, to oversee the business of the Funds in a manner consistent with the best interests of the
Funds shareholders. When considering potential nominees to fill vacancies on the Board, and as part of its annual self-evaluation, the Board reviews the mix of skills and other relevant experiences of the Directors; qualified candidates will
be men or women of proven character and talent who have achieved notable success in their professional careers. The specific talents which the Nominating Committee of the Board seeks in a candidate depends to a great extent upon the Board of
Directors needs at the time a vacancy occurs.
The table above provides professional experience of each Director on an individual basis.
This disclosure includes the length of time serving the Funds, other directorships held, and their principal occupation during the past five years. Each of the Directors has served on the board of directors for at least five years, during which time
they have become familiar with the Funds regulatory and investment matters and have contributed to the Directors deliberations. In light of the Funds business and structure, the Board believes the experience of each Director is
beneficial for overseeing the business of the Funds. Moreover, the Board believes that the different experiences and backgrounds of the Directors are complementary and enhance the Boards ability to oversee the Funds affairs.
Audit Committee.
The Davis Funds have an Audit Committee, which is comprised entirely of Independent Directors (Marsha Williams, Chair; Samuel
Iapalucci; and Robert Morgenthau). The Audit Committee has a charter. The Audit Committee reviews financial statements and other audit-related matters for the Davis Funds. The Audit Committee also holds discussions with management and with the
Independent Accountants concerning the scope of the audit and the auditors independence. The Audit Committee meets as often as deemed appropriate by the Audit Committee. The Audit Committee met four times during the year ended December 2013.
The Board of Directors has determined that Marsha Williams is the Davis Funds independent audit committee financial expert pursuant to
Section 407 of the Sarbanes-Oxley Act and as defined by Item 3 of Form N-CSR of the Investment Company Act of 1940. In their deliberations, the Board of Directors considered Ms. Williams: (i) professional experience;
(ii) independence as defined in Item 3 of Form N-CSR; and (iii) integrity and absence of disciplinary history.
Nominating
Committee.
The Davis Funds have a Nominating Committee, which is comprised entirely of Independent Directors (Thomas Gayner, Chair; and Marc Blum), which meets as often as deemed appropriate by the Nominating Committee. The Funds do not elect
Directors annually. Each Director serves
Davis
Global Fund and Davis International Fund Statement of Additional Information 35
until retirement, resignation, death or removal. Subject to exceptions and exemptions which may be granted by the Independent Directors, Directors must retire at the close of business on the last
day of the calendar year in which the Director attains age seventy-four (74). After formal retirement, Directors may serve an additional two years in emeritus status, attend board functions and receive up to one-half the current compensation of
Directors. The Nominating Committee met one time during the year ended December 2013. The Nominating Committee reviews and nominates persons to serve as members of the Board of Directors, and reviews and makes recommendations concerning the
compensation of the Independent Directors. The chairperson of the Nominating Committee also currently serves as the Chairman of the Board and: (a) presides over board meetings; (b) presides over executive sessions of the Independent
Directors of the Funds, in addition to presiding over meetings of the committee; (c) participates with the officers and counsel in the preparation of agendas and materials for Board meetings; (d) facilitates communication between the
Independent Directors and management, and among the Independent Directors; and (e) has such other responsibilities as the Board or Independent Directors shall determine. The Nominating Committee has a charter. When the Board of Directors is
seeking a candidate to become a director, it considers qualified candidates received from a variety of sources, including having authority to retain third parties that may receive compensation related to identifying and evaluating candidates.
Shareholders may propose nominees by writing to the Nominating Committee, in care of the Secretary of the Davis Funds, at 2949 East Elvira, Suite 101, Tucson, Arizona 85756.
Brokerage Committee.
The Davis Funds have a Brokerage Committee, which is comprised entirely of Independent Directors (John Gates, Chair and Thomas Gayner;), which meets as often as deemed
appropriate by the Brokerage Committee. The Brokerage Committee met once during the year ended December 2013. The Brokerage Committee reviews and makes recommendations concerning Davis Funds portfolio brokerage and trading practices.
Pricing Committee.
The Davis Funds have a Pricing Committee (Marc Blum, Chair, Independent Director; Kenneth Eich, an officer of the Fund; and
Douglas Haines, an officer of the Fund) that meets as often as deemed appropriate by the Pricing Committee. The Pricing Committee met more than 20 times during the year ended December 2013. The Pricing Committee reviews and makes recommendations
concerning pricing of the Funds portfolio securities.
R
ISK
O
VERSIGHT
As registered investment companies, Davis Funds are subject to a variety of risks, including investment risk,
valuation risk, reputational risk, risk of operational failure or lack of business continuity, and legal, compliance and regulatory risk. Risk management seeks to identify and address risks, i.e., events or circumstances that could have material
adverse effects on the business, operations, shareholder services, investment performance or reputation of the Fund.
Day-to-day management of
Davis Funds, including risk management, is the responsibility of the Funds contractual service providers, including the Funds investment adviser, principal underwriter/distributor and transfer agent. Each of these entities is responsible
for specific portions of the Funds operations, including the processes and associated risks relating to the Funds investments, integrity of cash movements, financial reporting, operations and compliance. The Board oversees the service
providers discharge of their responsibilities, including the processes they use to manage relevant risks. As part of its overall activities, the Board reviews the management of the Funds risk management structure by various departments
of the Adviser, including: Portfolio Management, Fund Operations, Legal and Internal Audit, as well as by Davis Funds Chief Compliance Officer (CCO). The responsibility to manage the Funds risk management structure on a
day-to-day basis is within the Advisers overall investment management responsibilities. The Adviser has its own, independent interest in risk management.
The Board discharges risk oversight as part of its overall activities, with the assistance of its Audit Committee and CCO. In addressing issues regarding the Funds risk management between meetings,
appropriate representatives of the Adviser communicate with the Chair of the Board or the Funds CCO, who is accountable and reports directly to the Board. Various personnel, including the Funds CCO, the Advisers management, and
other service providers (such as the Funds independent accountants) make periodic reports to the Board or to the Audit Committee with respect to various aspects of risk management.
Davis
Global Fund and Davis International Fund Statement of Additional Information 36
The Board recognizes that not all risks that may affect the Funds can be identified, that it may not be
practical or cost-effective to eliminate or mitigate certain risks, that it may be necessary to bear certain risks (such as investment-related risks) to achieve the Funds investment objectives, and that the processes, procedures and controls
employed to address certain risks may be limited in their effectiveness. Moreover, reports received by the Directors as to risk management matters are typically summaries of the relevant information. As a result of the foregoing and other factors,
the Boards risk management oversight is subject to substantial limitations.
The Audit Committee assists the Board in reviewing with the
independent auditors, at various times throughout the year, matters relating to the annual audits and financial accounting and reporting matters. The Pricing Committee reviews and makes recommendations concerning pricing of the Funds portfolio
securities.
The Funds CCO assists the Board in overseeing the significant investment policies of the relevant Funds. The CCO monitors
these policies. The Board receives and considers the CCOs annual written report, which, among other things, summarizes material compliance issues that arose during the previous year and any remedial action taken to address these issues, as
well as any material changes to the compliance programs. The Board also receives and considers reports from the Funds CCO throughout the year. As part of its oversight responsibilities, the Board has approved various compliance policies and
procedures. Each Committee presents reports to the Board which may prompt further discussion of issues concerning the oversight of the Funds risk management. The Board also may discuss particular risks that are not addressed in the Committee
process.
D
IRECTORS
F
UND
H
OLDINGS
As of December 31, 2013, the Directors had invested the following amounts in all Funds managed by the Adviser. Investments are
listed in the following ranges: none, $1-10,000, $10,001-50,000, $50,001-100,000 and over $100,000:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Davis Global Fund
|
|
|
Davis International
Fund
|
|
|
Total Invested In
All Funds
(2)
|
|
I
NDEPENDENT
D
IRECTORS
:
|
|
Marc Blum
|
|
|
over $100,000
|
|
|
|
$10,001-50,000
|
|
|
over $
|
100,000
|
|
John Gates, Jr.
|
|
|
none
|
|
|
|
none
|
|
|
over $
|
100,000
|
|
Thomas Gayner
|
|
|
$50,001-100,000
|
|
|
|
$10,001-50,000
|
|
|
over $
|
100,000
|
|
Samuel Iapalucci
|
|
|
none
|
|
|
|
none
|
|
|
over $
|
100,000
|
|
Robert Morgenthau
|
|
|
over $100,000
|
|
|
|
none
|
|
|
over $
|
100,000
|
|
Marsha Williams
|
|
|
over $100,000
|
|
|
|
$50,001-100,000
|
|
|
over $
|
100,000
|
|
I
NTERESTED
D
IRECTORS
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew Davis
|
|
|
none
|
|
|
|
none
|
|
|
over $
|
100,000
|
|
Christopher Davis
|
|
|
over $100,000
|
|
|
|
over $100,000
|
|
|
over $
|
100,000
|
|
(1)
|
Andrew Davis and Christopher Davis are employed by and own shares in the Adviser and are considered to be interested persons of the Funds
as defined in the Investment Company Act of 1940.
|
(2)
|
Total Invested in All Funds is the aggregate dollar range of investments in all Funds overseen by the individual director and managed by Davis Selected
Advisers, L.P. This includes the Davis Funds for all directors, also the Selected Funds for Andrew Davis and Christopher Davis.
|
I
NDEPENDENT
D
IRECTORS
A
FFILIATIONS
A
ND
T
RANSACTIONS
None of the Independent Directors (or their immediate family members) owns any securities issued by the Davis Funds investment adviser,
sub-adviser, principal underwriter or any company (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with the above listed companies (hereafter referred to as the Adviser and
its affiliates). Andrew Davis and Christopher Davis own partnership units (directly, indirectly, or both) in the Adviser and are considered to be Interested Directors.
Davis
Global Fund and Davis International Fund Statement of Additional Information 37
None of the Independent Directors (or their immediate family members) have had any direct or indirect
interest, the value of which exceeds $120,000, during the last two calendar years in the Adviser or in the Adviser and its affiliates.
None
of the Independent Directors (or their immediate family members) have had any material interest in any transaction, or series of transactions, during the last two years, in which the amount involved exceeds $120,000 and to which any of the following
persons was a party: any Davis Fund, an officer of the Davis Funds, or any fund managed by the Adviser or in the Adviser and its affiliates.
None of the Independent Directors (or their immediate family members) have had any direct or indirect relationships during the last two years, in which
the amount involved exceeds $120,000 and to which any of the following persons was a party: any Davis Fund, an officer of the Davis Funds, or any fund managed by the Adviser or in the Adviser and its affiliates.
None of the officers of the Adviser and its affiliates have served during the last two years on the board of directors of a company where any Director of
the Fund (or any of the Directors immediate family members) served as an officer.
C
ERTAIN
S
HAREHOLDERS
O
F
T
HE
F
UNDS
As of January 30, 2014, officers and directors as a group owned the following percentages of
each class of shares issued by the Funds
(1)
:
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|
|
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|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class Y
|
|
Davis Global Fund
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Davis International Fund
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This percentage does not include investments controlled indirectly, including holdings by Davis Selected Advisers, L.P.
|
*
|
Indicates that officers and directors as a group owned less than 1% of the outstanding shares of the indicated class of shares.
|
The following table sets forth as of January 30, 2014, the name and holdings of each person known by Davis New York Venture Fund, Inc., to be a
record owner of more than 5% of the outstanding shares of any class of any of the Funds. Other than as indicated below, the Funds are not aware of any shareholder who beneficially owns more than 25% of the Funds total outstanding shares.
Shareholders owning a significant percentage of the Funds shares do not affect the voting rights of other shareholders.
|
|
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|
|
|
|
C
LASS
O
F
S
HARES
|
|
N
AME
AND
A
DDRESS
OF
S
HAREHOLDER
(
S
) O
WNING
M
ORE
THAN
5%
OF
E
ITHER
F
UND
|
|
P
ERCENT
OF
C
LASS
O
UTSTANDING
|
|
Class A Shares
|
|
Davis Global Fund
UBS WM USA
Jersey City, NJ
|
|
|
8.76
|
%
|
|
|
|
|
|
First Clearing LLC
Saint
Louis, MO
|
|
|
7.86
|
%
|
|
|
|
|
|
Dengel & Co.
Fiduciary
Trust Co. Intl.
New York, NY
|
|
|
6.84
|
%
|
|
|
|
|
|
Christopher Davis TOD
New
York, NY
|
|
|
6.63
|
%
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 38
|
|
|
|
|
|
|
C
LASS
O
F
S
HARES
|
|
N
AME
AND
A
DDRESS
OF
S
HAREHOLDER
(
S
) O
WNING
M
ORE
THAN
5%
OF
E
ITHER
F
UND
|
|
P
ERCENT
OF
C
LASS
O
UTSTANDING
|
|
Class A Shares
|
|
Davis International Fund
Christopher Davis TOD
New York, NY
|
|
|
23.77
|
%
|
|
|
|
|
|
Charles Schwab & Co. Inc.
San Francisco, CA
|
|
|
15.88
|
%
|
|
|
|
|
|
First Clearing LLC
Saint
Louis, MO
|
|
|
12.45
|
%
|
|
|
|
|
|
UBS WM USA
Jersey City,
NJ
|
|
|
10.17
|
%
|
|
|
|
|
|
LPL Financial
San Diego,
CA
|
|
|
5.15
|
%
|
|
|
|
Class B Shares
|
|
Davis Global Fund
First Clearing LLC
Saint Louis,
MO
|
|
|
20.66
|
%
|
|
|
|
|
|
Pershing LLC
Jersey City,
NJ
|
|
|
7.45
|
%
|
|
|
|
|
|
Merrill Lynch Pierce Fenner & Smith
Jacksonville, FL
|
|
|
6.92
|
%
|
|
|
|
|
|
Edward Jones & Co.
Maryland Heights, MO
|
|
|
5.14
|
%
|
|
|
|
Class B Shares
|
|
Davis International Fund
Merrill Lynch Pierce Fenner & Smith
Jacksonville, FL
|
|
|
54.94
|
%
|
|
|
|
|
|
Pershing LLC
Jersey City,
NJ
|
|
|
13.81
|
%
|
|
|
|
|
|
First Clearing LLC
Saint
Louis, MO
|
|
|
9.41
|
%
|
|
|
|
|
|
State Street Bank & Trust Co.
Cust. for C. Beat
Guthrie, OK
|
|
|
7.03
|
%
|
|
|
|
Class C Shares
|
|
Davis Global Fund
Merrill Lynch Pierce Fenner & Smith
Jacksonville, FL
|
|
|
21.66
|
%
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 39
|
|
|
|
|
|
|
C
LASS
O
F
S
HARES
|
|
N
AME
AND
A
DDRESS
OF
S
HAREHOLDER
(
S
) O
WNING
M
ORE
THAN
5%
OF
E
ITHER
F
UND
|
|
P
ERCENT
OF
C
LASS
O
UTSTANDING
|
|
|
|
First Clearing LLC
Saint
Louis, MO
|
|
|
19.19
|
%
|
|
|
|
|
|
Morgan Stanley & Co.
Jersey City, NJ
|
|
|
11.13
|
%
|
|
|
|
|
|
Raymond James
St.
Petersburg, FL
|
|
|
6.55
|
%
|
|
|
|
|
|
Pershing LLC
Jersey City,
NJ
|
|
|
6.13
|
%
|
|
|
|
|
|
UBS WM USA
Jersey City,
NJ
|
|
|
5.99
|
%
|
|
|
|
Class C Shares
|
|
Davis International Fund
Merrill Lynch Pierce Fenner & Smith
Jacksonville, FL
|
|
|
30.69
|
%
|
|
|
|
|
|
Raymond James
St.
Petersburg, FL
|
|
|
16.80
|
%
|
|
|
|
|
|
Pershing LLC
Jersey City,
NJ
|
|
|
12.40
|
%
|
|
|
|
|
|
State Street Bank & Trust Co.
Custodial Account
St. Louis Park, MN
|
|
|
7.50
|
%
|
|
|
|
|
|
State Street Bank & Trust Co.
Custodial Account
Auburn, MA
|
|
|
5.61
|
%
|
|
|
|
|
|
First Clearing LLC
Saint
Louis, MO
|
|
|
5.48
|
%
|
|
|
|
Class Y Shares
|
|
Davis Global Fund
State Street Bank & Trust Co.
FBO KBR
Employee Benefit Master Trust
Houston, TX
|
|
|
39.00
|
%
|
|
|
|
|
|
Central Georgia Health Systems Inc.
Macon, GA
|
|
|
31.04
|
%
|
|
|
|
|
|
Davis Selected Advisers, L.P.
Tucson, AZ
|
|
|
22.84
|
%
|
|
|
|
Class Y Shares
|
|
Davis International Fund
Davis Selected Advisers, L.P.
Tucson, AZ
|
|
|
97.34
|
%
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 40
I
NVESTMENT
A
DVISORY
S
ERVICES
Davis Selected Advisers, L.P. and Davis Selected Advisers-NY, Inc.
Davis Selected Advisers, L.P. (the
Adviser), whose principal office is at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85756, serves as investment adviser for Davis New York Venture Fund, Inc., Davis Series, Inc., Davis Variable Account Fund, Inc. (collectively the
Davis Funds), Selected American Shares, Inc., Selected International Fund, Inc., and Selected Capital Preservation Trust (collectively the Selected Funds), and Clipper Fund, Inc. The Adviser also provides advisory or
sub-advisory services to other parties including other registered investment companies, private accounts, offshore funds, and managed money/wrap accounts. Davis Investments, LLC, an entity controlled by Christopher Davis, is the Advisers sole
general partner. Christopher Davis is Chairman of the Adviser and, as the sole member of the general partner, controls the Adviser. Davis Distributors, LLC (the Distributor), a subsidiary of the Adviser, serves as the distributor or
principal underwriter of the funds that the Adviser administers, including Davis Funds, Selected Funds, Clipper Fund and offshore funds. Davis Selected AdvisersNY, Inc. (Sub-Adviser), a wholly owned subsidiary of the Adviser,
performs investment management, research and other services for the Davis Funds on behalf of the Adviser under sub-advisory agreements with the Adviser.
Advisory Agreement with Davis Selected Advisers, L.P. and Sub-Advisory Agreement with Davis Selected Advisers-NY, Inc.
Pursuant to an advisory agreement, Davis Global Fund and Davis International
Fund pay the Adviser a fee at an annual rate of 0.55% on their total net assets. These fees may be higher than those of some other mutual funds but are not necessarily higher than those paid by funds with similar objectives. Advisory fees are
allocated among each Class of shares in proportion to each Class relative total net assets. The aggregate advisory fees paid by the Fund to the Adviser for the periods indicated were:
The Funds paid the following aggregate advisory fees to the Adviser:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended October 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Davis Global Fund
|
|
$
|
746,240
|
|
|
$
|
733,546
|
|
|
$
|
574,882
|
|
Davis International Fund
|
|
$
|
310,242
|
|
|
|
265,785
|
|
|
|
292,005
|
|
In accordance with the provisions of the 1940 Act, the Advisory Agreement and Sub-Advisory Agreement will terminate
automatically on assignment and are subject to cancellation on 60 days written notice by the Board of Directors, the vote of the holders of a majority of the Funds outstanding shares or the Adviser. The continuance of the Advisory
Agreement and Sub-Advisory Agreement must be approved, at least annually, by the Funds Board of Directors or by the vote of holders of a majority of the outstanding shares of the Funds. In addition, any new agreement or the continuation of the
existing agreement must be approved by a majority of Directors who are not parties to the agreements or interested persons of any such party. The Advisory Agreement also makes provisions for portfolio transactions and brokerage policies of the Fund,
which are discussed above under Portfolio Transactions.
The Adviser has entered into a Sub-Advisory Agreement with its wholly
owned subsidiary, Davis Selected AdvisersNY, Inc., where the Sub-Adviser performs research and other services on behalf of the Adviser. Under the Agreement, the Adviser pays all of the Sub-Advisers direct and indirect costs of operation.
All of the fees paid to the Sub-Adviser are paid by the Adviser and not the Funds.
The Adviser is contractually committed to waive fees
and/or reimburse the Funds expenses to the extent necessary to cap total annual fund operating expenses (Class A shares, 1.30%; Class B shares, 2.30%; Class C shares, 2.30%; Class Y shares, 1.05%) until March 1, 2015; after that date,
there is no assurance that the Adviser will continue to cap expenses. The expense cap cannot be terminated prior to March 1, 2015, without the consent of the board of directors.
Davis
Global Fund and Davis International Fund Statement of Additional Information 41
Pursuant to the Advisory Agreement, the Adviser, subject to the general supervision of the Funds Board
of Directors, provides management and investment advice and furnishes statistical, executive and clerical personnel, bookkeeping, office space and equipment necessary to carry out its investment advisory functions and such corporate managerial
duties as requested by the Board of Directors of the Funds. The Funds bear all expenses other than those specifically assumed by the Adviser under the Advisory Agreement, including preparation of its tax returns, financial reports to regulatory
authorities, dividend determinations, transactions and accounting matters related to its custodian bank, transfer agency, custodial and investor services, and qualification of its shares under federal and state securities laws. The Funds reimburse
the Adviser for providing certain services, including accounting and administrative services, and investor services. Such reimbursements are detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended October 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Davis Global Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and Administrative Services
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
Shareholder Services
|
|
$
|
7,936
|
|
|
$
|
7,358
|
|
|
$
|
8,472
|
|
Davis International Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and Administrative Services
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
Shareholder Services
|
|
$
|
1,151
|
|
|
$
|
869
|
|
|
$
|
739
|
|
Approval of the Advisory and Sub-Advisory Agreements.
The Board of Directors is scheduled to meet four times a
year. The Directors believe that matters bearing on the Advisory and Sub-Advisory Agreements are considered at most, if not all, of their meetings. The Independent Directors are advised by independent legal counsel selected by the Independent
Directors. A discussion of the Directors considerations in the annual approval of Advisory and Sub-Advisory Agreements is included in the Funds next annual or semi-annual report following the annual approval.
Unique Nature of Each Fund.
The Adviser may serve as the investment adviser or sub-adviser to other funds that have investment objectives and
principal investment strategies similar to those of the Davis Funds. While the Davis Funds may have many similarities to these other funds, the investment performance of each fund will be different due to a number of differences between the funds,
including differences in sales charges, expense ratios and cash flows.
Code of Ethics
. The Adviser, Sub-Adviser, Distributor and the
Davis Funds have adopted a Code of Ethics, meeting the requirements of Rule 17j-1 under the 1940 Act that regulate the personal securities transactions of the Advisers investment personnel, other employees and affiliates with access to
information regarding securities transactions of the Davis Funds. Such employees may invest in securities, including securities that may be purchased or held by the Davis Funds. A copy of the Code of Ethics is on public file with, and available
from, the SEC.
Continuing Regulation.
The Adviser, like most other asset managers, is subject to ongoing inquiries from the SEC and/or
the Financial Industry Regulatory Authority (FINRA) regarding industry practices.
Litigation.
In August 2008, a class
action lawsuit was filed in the United States District Court for the District of Arizona on behalf of investors in Davis New York Venture Fund (DNYVF) against Davis Selected Advisers L.P. (DNYVFs adviser) and Davis Distributors,
LLC (DNYVFs principal distributor). The plaintiffs claim that the defendants (Davis Entities) charged DNYVF excessive and disproportionate fees to manage DNYVF and distribute DNYVFs shares. The lawsuit seeks monetary damages
and other relief. The Davis Entities believe that the action is without merit and have undertaken a vigorous defense in these proceedings. Although no determination can be made at this time, it is not anticipated that this lawsuit will have a
material adverse effect on the Davis Entities, their assets, or the Funds.
Proxy Voting Policies and Record
. The Board of Directors
has directed the Adviser to vote the Funds portfolio securities in conformance with the Advisers Proxy Voting Policies and Procedures. These policies and procedures are summarized in Appendix C. Information regarding how the Funds voted
proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Funds website, www.davisfunds.com, without charge, by calling Davis Funds Investor Services at 1-800-279-0279, or on
the Commissions website (www.sec.gov).
Davis
Global Fund and Davis International Fund Statement of Additional Information 42
P
ORTFOLIO
M
ANAGERS
Davis Global Fund and Davis International Fund are Team Managed.
Davis Advisors uses a system of multiple portfolio managers to
manage both Davis Global Fund and Davis International Fund. Under this approach, the portfolios of the Funds are divided into segments managed by individual portfolio managers. Christopher Davis is the portfolio manager responsible for overseeing
and allocating segments of the Funds assets to the other portfolio managers. Danton Goei and Tania Pouschine are jointly and primarily responsible for the day-to-day management of the Funds portfolio. In addition, a limited portion of
the Funds asset may be managed by Davis Advisors research analysts, subject to review by subject to review by Christopher Davis and the Portfolio Review Committee. Portfolio managers decide how their respective segments will be invested.
All investment decisions are made within the parameters established by the Funds investment objectives, strategies, and restrictions.
Davis
Global Fund and Davis International Fund Statement of Additional Information 43
The Following Tables Reflect Information as of October 31, 2013:
Davis Global Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
Managers
|
|
Dollar Range of
Fund
Shares
Owned
(1)
|
|
Number
of
RICs
(3)
|
|
|
Assets
(2)
in RICs
|
|
|
Number
of
OPIV
(4)
|
|
|
Assets
(2)
in
OPIV
(4)
|
|
|
Number
of
OA
(5)
|
|
|
Assets in OA
(5)
|
|
C. Davis
|
|
Over $1 Million
|
|
|
16
|
|
|
$
|
17,882,160,466.80
|
|
|
|
9
|
|
|
$
|
521,017,794.43
|
|
|
|
69
|
|
|
$
|
3,625,393,882.91
|
|
D. Goei
|
|
$100k-$500k
|
|
|
12
|
|
|
$
|
3,688,718,683.00
|
|
|
|
9
|
|
|
$
|
191,227,593.60
|
|
|
|
52
|
|
|
$
|
642,057,670.77
|
|
T. Pouschine
|
|
$100k-$500k
|
|
|
3
|
|
|
$
|
121,382,457.62
|
|
|
|
5
|
|
|
$
|
96,834,609.75
|
|
|
|
26
|
|
|
$
|
95,293,554.62
|
|
|
|
|
|
Davis International Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
Managers
|
|
Dollar Range of
Fund
Shares
Owned
(1)
|
|
Number
of
RICs
(3)
|
|
|
Assets
(2)
in RICs
|
|
|
Number
of
OPIV
(4)
|
|
|
Assets
(2)
in
OPIV
(4)
|
|
|
Number
of
OA
(5)
|
|
|
Assets in OA
(5)
|
|
C. Davis
|
|
$50k-$100k
|
|
|
16
|
|
|
$
|
17,959,417,694.82
|
|
|
|
9
|
|
|
$
|
521,017,794.43
|
|
|
|
69
|
|
|
$
|
3,625,393,882.91
|
|
D. Goei
|
|
$100k-$500k
|
|
|
12
|
|
|
$
|
3,737,668,899.00
|
|
|
|
9
|
|
|
$
|
191,227,593.60
|
|
|
|
52
|
|
|
$
|
642,057,670.77
|
|
T. Pouschine
|
|
$50k-$100k
|
|
|
3
|
|
|
$
|
146,421,384.97
|
|
|
|
5
|
|
|
$
|
96,834,609.75
|
|
|
|
26
|
|
|
$
|
95,293,554.62
|
|
(1)
|
Ownership disclosure is made using the following ranges: None; $1$10,000; $10,001$50,000; $50,001$100,000; $100,001$500,000;
$500,001 -$1 million; over $1 million.
|
(2)
|
Assets means total assets managed by the portfolio manager. Some or all of these assets may be co-managed with another portfolio manager
who will also be credited with managing the same assets. The sum of assets managed by Davis Advisors portfolio managers may exceed the total assets managed by Davis Advisors.
|
(3)
|
RIC means Registered Investment Company.
|
(4)
|
OPIV means Other Pooled Investment Vehicles.
|
(5)
|
OA means Other Accounts. These accounts are primarily private accounts and sponsors of managed money/wrap accounts.
|
Structure of Compensation
Christopher Davis
compensation for services provided to the Adviser consists of a base salary. The Advisers portfolio managers are provided benefits packages including life insurance,
health insurance, and participation in the Advisers 401(k) plan comparable to that received by other company employees.
Danton Goeis and Tania Pouschines
compensation for services provided to the Adviser consists of: (i) a base salary; (ii) an
annual discretionary bonus; (iii) awards of equity (Units) in Davis Selected Advisers, L.P. including Units, and/or phantom Units; and (iv) an incentive plan whereby the Adviser purchases shares in selected mutual funds managed
by the Adviser. At the end of specified periods, generally five-years following the date of purchase, some, all, or none of the Fund shares will be registered in the employees name based on fund performance, after expenses on a pre-tax basis,
versus the Funds benchmark index, as described in the Funds prospectus or, in limited cases, based on performance ranking among established peer groups. The Adviser does not purchase incentive shares in every fund these portfolio
managers manage or assist on. In limited cases, such incentive compensation is tied on a memorandum basis to the performance of the portion of the Fund (sleeve) managed by the analyst versus the Funds benchmark. The Advisers
portfolio managers are provided benefits packages including life insurance, health insurance, and participation in the Advisers 401(k) plan comparable to that received by other company employees.
Potential Conflicts of Interest
Potential conflicts of interest may arise in connection with the management of multiple accounts, including potential conflicts of interest related to the
knowledge and timing of the Funds trades, investment opportunities, broker selection and Fund investments. Portfolio managers and other investment professionals may be privy to the size, timing and possible market impact of a Funds
trades. It is theoretically possible that Portfolio Managers could use this information to the advantage of other accounts
Davis
Global Fund and Davis International Fund Statement of Additional Information 44
they manage and to the possible detriment of a Fund. It is possible that an investment opportunity may be suitable for both a Fund and other accounts managed by portfolio managers, but may not be
available in sufficient quantities for both the Fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a Fund and another account. Management of multiple portfolios and/or other
accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account. The Adviser seeks to manage such competing interests for the time and attention of portfolio managers. For
example, many of Davis Advisors portfolio managers focus on a small set of model accounts with similar accounts being managed by investing in the same securities and using the same investment weightings that are used in connection with the
management of the model accounts.
If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one
portfolio or other account, a portfolio may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible portfolios and other accounts. Large clients may generate more revenue for
the Adviser than do smaller accounts. Accounts which pay higher management fees usually generate more revenue than accounts of the same size paying lower management fees. A portfolio manager may be faced with a conflict of interest when allocating
limited investment opportunities given the benefit to the Adviser of favoring accounts that pay a higher fee or generate more income for the Adviser. To deal with these situations, the Adviser has adopted procedures for allocating limited investment
opportunities across multiple accounts.
With respect to securities transactions for the portfolios, the Adviser determines which broker to
use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds, other pooled investment vehicles that are not registered mutual funds, and other
accounts managed for organizations and individuals), the Adviser may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, the Adviser may place separate,
non-simultaneous, transactions for a portfolio and another account which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the portfolio or the other account.
Substantial investment of the Adviser or Davis Family assets in certain mutual funds may lead to conflicts of interest. A portion of a portfolio
managers compensation may include awards of equity in Davis Advisors. A portfolio manager may face a conflict of interest given that the Adviser is more heavily invested in some funds than in other funds. A portion of the portfolio
managers compensation may also include an incentive plan whereby the Adviser purchases shares in certain funds managed by Davis Advisors. A portfolio manager may face a conflict of interest given that his long-term compensation may be more
heavily determined by the performance of one fund, or portion of a fund, than by another fund which he also manages. To mitigate these potential conflicts of interest, the Adviser has adopted policies and procedures intended to ensure that all
clients are treated fairly over time. Davis Advisors does not receive an incentive based fee on any account.
Davis Advisors expects that,
over long periods of time, most clients pursuing similar investment strategies should experience similar, but not identical, investment performance. Many factors affect investment performance, including, but not limited to: (1) the timing of
cash deposits and withdrawals to and from an account; (2) the possibility that Davis Advisors may not purchase or sell a given security on behalf of all clients pursuing similar strategies; (3) price and timing differences when buying or
selling securities; and (4) clients pursuing similar investment strategies but imposing different investment restrictions. Davis Advisors has adopted written trading policies designed to minimize possible conflicts of interest in trading for
its clients.
Conflicts of interest may also arise regarding proxy voting. Davis Advisors has adopted written proxy voting policies designed
to minimize possible conflicts of interest when voting proxies on behalf of its clients.
D
ISCLOSURE
OF
P
ORTFOLIO
H
OLDINGS
Portfolio Holdings Information is Protected.
Information about the Funds portfolio holdings is proprietary information which the Adviser is
committed to protecting. Davis Funds have adopted procedures reasonably designed to ensure that portfolio holdings information is not released on a selective
Davis
Global Fund and Davis International Fund Statement of Additional Information 45
basis except to qualified persons rendering services to the Fund which require that those persons receive information concerning the Funds portfolio holdings. Neither the Fund nor the
Adviser receives compensation with respect to the disclosure of portfolio holdings.
Public Disclosure of Portfolio Holdings.
Information about the Funds portfolio holdings which has previously been made public may be freely disclosed. Information about portfolio holdings may become public by (1) publication on the Davis Funds website,
(2) quarterly filings with the SEC on Form N-CSR or Form N-Q, or (3) other publication determined by the Advisers Chief Legal Officer or his designee, in writing stating his rationale, to be public. The publicly disclosed portfolio
may exclude certain securities when allowed by applicable regulations and deemed to be in the best interest of a fund.
Davis Funds generally
publish their portfolio holdings on Davis Funds website (
www.davisfunds.com
) as of the end of each fiscal quarter with a 60-day lag. Davis Funds Executive Vice President, or his designee, currently the Funds Chief Compliance
Officer, may authorize publication of portfolio holdings on a more frequent basis.
The Adviser manages other accounts such as separate
accounts, private accounts, unregistered products, and portfolios sponsored by companies other than the Adviser. These other accounts may be managed in a similar fashion to certain Davis Funds and thus may have similar portfolio holdings. Such
accounts may be subject to different portfolio holdings disclosure policies that permit public disclosure of portfolio holdings information in different forms and at different times than the Funds portfolio holdings disclosure policies.
Additionally, clients of such accounts have access to their portfolio holdings and may not be subject to the Funds portfolio holdings disclosure policies.
Statistical Information.
The Funds portfolio holdings procedures do not prevent the release of aggregate, composite or descriptive information that, in the opinion of the Funds Chief
Compliance Officer or her designee, does not present material risks of dilution, arbitrage, market timing, insider trading or other inappropriate trading that may be detrimental to the Fund. Information excluded from the definition of portfolio
holdings information generally includes, without limitation: (1) descriptions of allocations among asset classes, regions, countries or industries/sectors; (2) aggregated data such as average or median ratios, market capitalization, credit
quality or duration; (3) performance attributions by industry, sector or country; or (4) aggregated risk statistics.
Release of
Non-Public Portfolio Holdings Information.
Davis Funds or the Adviser may disclose non-public information about the Funds portfolio holdings to third parties in a number of situations, including the following: (1) disclosure of
specific securities (not a material portion of the entire portfolio) to broker-dealers in connection with the purchase or sale by the Fund of such securities; (2) requests for price quotations on specific securities (not a material portion of
the entire portfolio) from broker-dealers for the purpose of enabling the Funds service providers to calculate the Funds net asset value; (3) requests for bids on one or more securities; (4) disclosures in connection with
litigation involving Fund portfolio securities; (5) disclosure to regulatory authorities; (6) statements to the press by portfolio managers from time to time about the Funds portfolio and securities held by the Fund which may or may
not have been previously disclosed; and (7) attendance by employees of the Adviser at due diligence meetings with existing or potential investors in which specific Fund holdings are discussed and other information which the employee reasonably
believes cannot be used in a manner which would be harmful to the Fund. In addition, the Adviser may provide a wide variety of information about the Fund (other than portfolio holdings) to existing and potential investors and intermediaries working
on behalf of such investors. Such information may not be available from publicly available information and may consist of statistical and analytical information concerning the Funds portfolio as a whole and how it has performed, without naming
specific portfolio securities held by the Fund.
Davis Funds portfolio holdings procedures prohibit release of non-public information
concerning the Funds portfolio holdings to individual investors, institutional investors, intermediaries which distribute the Funds shares and other parties which are not employed by the Adviser or its affiliates. Information about the
Funds portfolio holdings may be reviewed by third parties for legitimate business purposes, but only if: (1) the Advisers Chief Operating Officer, or his designee, currently the Funds Chief Compliance Officer, considers the
application for review of the Funds portfolio holdings and, in his or her business judgment, the requesting third party: (i) has a legitimate business purpose for reviewing the portfolio holdings and (ii) does not pose a material
risk to the Fund; and (2) the third party enters into an acceptable confidentiality
Davis
Global Fund and Davis International Fund Statement of Additional Information 46
agreement (including a duty not to trade). Davis Funds Board of Directors is notified of the application for review of the Funds portfolio holdings by any such third parties at the
next scheduled quarterly meeting of the Board of Directors, at which time the Board reviews the application by each such party and considers whether the release of the Funds portfolio holding information to the third parties is in the best
interest of the Fund and its shareholders.
Third Parties Receiving Portfolio Holdings Information.
As of January 1, 2014, each of
the following third-party service providers have been approved to receive non-public information concerning Davis Funds portfolio holdings: (1) KPMG LLP (serves as the Funds independent registered public accounting firm);
(2) Linedata (trading software); (3) ITG (Investment Technology Group, provides brokerage and trading reports); (4) Wilshire Associates (provides investment performance attribution reports); (5) State Street Bank and Trust
Company (serves as the Funds custodian bank and securities lending agent); (6) Linda Rubey (provides freelance financial writing and editing services); (7) Greenberg Traurig LLP (counsel for Davis Funds); (8) K&L Gates LLP
(counsel for the Adviser); (9) RR Donnelley (Software Development); (10) Thomson Reuters (provide analytical reports to the Directors); (11) Deloitte & Touche (serves as the Advisers auditor); (12) Global Trading
Analytics (provides analytical reports); (13) MSCI/ISS/RiskMetrics Group and ADP/Broadridge Financial Solutions; (14) Electra Information Systems (share reconciliation); and (15) Morningstar Direct (investment performance attribution
reports). .
Administration.
The Funds Chief Compliance Officer oversees the release of portfolio holdings information, including
authorizing the release of portfolio holdings information.
D
ISTRIBUTION
OF
F
UND
S
HARES
The Distributor.
Davis Distributors, LLC (Distributor),
2949 East Elvira Road, Suite 101, Tucson, Arizona 85756, is a wholly owned subsidiary of the Adviser and, pursuant to a Distributing Agreement, acts as principal underwriter of the Davis Funds shares on a continuing basis. By the terms of the
Distributing Agreement, the Distributor (or an affiliate) pays for all expenses in connection with the preparation, printing and distribution of advertising and sales literature for use in offering the Davis Funds shares to the public,
including reports to shareholders to the extent they are used as sales literature. The Distributor (or an affiliate) also pays for the preparation and printing of prospectuses other than those forwarded to existing shareholders. The continuance and
assignment provisions of the Distributing Agreement are the same as those of the Advisory Agreement.
The Distributor has agreements with
securities dealers and other financial institutions for distributing shares of the Funds and/or providing services to shareholders. The Distributor may pay such firms service fees for accounts for which representatives of the dealers are responsible
and provide services. The sources for these payments include the distribution fees paid by Class A, B, C, and R shares and the Distributor or Adviser may also use their own resources.
The Distributor received the following amounts in total sales charges (which the Funds do not pay) on the sale of Class A shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended October 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Davis Global Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales charges
|
|
$
|
26,348
|
|
|
$
|
20,013
|
|
|
$
|
53,232
|
|
Amount re-allowed to dealers
|
|
$
|
22,286
|
|
|
$
|
16,945
|
|
|
$
|
45,104
|
|
Davis International Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales charges
|
|
$
|
8,975
|
|
|
$
|
8,650
|
|
|
$
|
20,528
|
|
Amount re-allowed to dealers
|
|
$
|
7,564
|
|
|
$
|
7,102
|
|
|
$
|
17,320
|
|
For the year ended October 31, 2013, the Distributor received compensation on redemptions and repurchases of shares
in the following amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A shares
|
|
|
Class B shares
|
|
|
Class C shares
|
|
Davis Global Fund
|
|
|
none
|
|
|
$
|
1,913
|
|
|
$
|
735
|
|
Davis International Fund
|
|
|
none
|
|
|
|
none
|
|
|
|
none
|
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 47
The Distributor received the following amounts as reimbursements under the Funds Distribution plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended October 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Davis Global Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A shares
|
|
$
|
47,698
|
|
|
$
|
47,601
|
|
|
$
|
62,372
|
|
Class B shares
|
|
$
|
14,788
|
|
|
$
|
17,661
|
|
|
$
|
27,427
|
|
Class C shares
|
|
$
|
79,697
|
|
|
$
|
85,195
|
|
|
$
|
118,446
|
|
Class Y shares do not have a Distribution plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
Davis International Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A shares
|
|
$
|
7,836
|
|
|
$
|
6,214
|
|
|
$
|
3,707
|
|
Class B shares
|
|
$
|
1,241
|
|
|
$
|
1,252
|
|
|
$
|
878
|
|
Class C shares
|
|
$
|
2,494
|
|
|
$
|
1,770
|
|
|
$
|
1,989
|
|
Class Y shares do not have a Distribution plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Plans.
Class A, B, and C shares all use distribution plans to pay asset-based sales charges or
distribution and/or services fees in connection with the distribution of shares, including payments to financial intermediaries for providing distribution assistance. Financial intermediaries that receive these fees may pay some or all of them to
their investment professionals. Because these fees are paid out of a Class assets on an on-going basis, over time these fees will increase the cost of an investment and may cost more than other types of sales and marketing charges.
The Distribution Plans were approved by the Board of Directors of each Davis Fund in accordance with Rule 12b-1 under the 1940 Act. Rule 12b-1 regulates
the manner in which a mutual fund may assume costs of distributing and promoting the sale of its shares. Payments pursuant to a Distribution Plan are included in the operating expenses of the Class.
How Share Classes Affect Payments to Brokers.
A financial advisor may receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and C contingent deferred sales charges and/or asset-based sales charges have the same purpose as the front-end sales charge on sales of Class A shares: to compensate the
Distributor for concessions and expenses it (or an affiliate) pays to dealers and financial institutions for selling shares.
Recordkeeping
Fees.
Certain dealers (and other financial intermediaries) have chosen to maintain omnibus accounts with the Davis Funds. In an omnibus account, a fund maintains a single account in the name of the dealer and the dealer maintains all
of the individual shareholder accounts. Likewise, for many retirement plans, a third-party administrator may open an omnibus account with the Davis Funds and the administrator will then maintain all of the participant accounts. The Adviser, on
behalf of Davis Funds, enters into agreements whereby Davis Funds, and sometimes the Adviser in addition, compensate the dealer or administrator for recordkeeping services. This compensation is not treated as a distribution expense.
Class A Shares.
Payments under the Class A Distribution Plan may be up to an annual rate of 0.25% of the average daily net asset value
of the Class A shares. Such payments are made to reimburse the Distributor for the fees it (or an affiliate) pays to its salespersons and other firms for selling Class A shares, servicing its shareholders and maintaining its shareholder
accounts. Normally, servicing fees are paid at an annual rate of 0.25% of the average net asset value of the accounts serviced and maintained on the books of each Davis Fund. In addition, when the Distributor (or an affiliate) pays a commission to a
broker-dealer for qualifying purchases of Class A shares at net asset value, the Fund may reimburse the Distributor for this commission. The Fund will not reimburse this commission if the result would be that Class A shares would pay
Distribution Plan fees in excess of 0.25% of average net assets. Payments under the Class A Distribution Plan also may be used to reimburse the Distributor for other distribution costs (excluding overhead) not covered in any year by any portion
of the sales charges the Distributor retains.
Class B Shares.
Payments under the Class B Distribution Plan are limited to an annual
rate equal to the lesser of 1.25% of the average daily net asset value of the Class B shares or the maximum amount provided by applicable rule or regulation of the Financial Industry Regulatory Authority, which currently is 1%. Therefore, the
effective rate of the Class B Distribution Plan at present is 1%. In accordance with current
Davis
Global Fund and Davis International Fund Statement of Additional Information 48
applicable rules, such payments also are limited to 6.25% of gross sales of Class B shares plus interest at 1% over the prime rate on any unpaid amounts. The Distributor (or an affiliate) pays
broker/dealers up to 4% in commissions on new sales of Class B shares. The Fund pays the distribution fee on Class B shares in order: (i) to pay the Distributor commissions on Class B shares which have been sold and (ii) to enable the
Distributor to pay services fees on Class B shares which have been sold. From these distribution payments, the Distributor currently uses up to 0.25% of average net assets for the payment of service and maintenance fees to its salespersons and other
firms for shareholder servicing and maintenance of its shareholder accounts.
Class C Shares.
Payments under the Class C Distribution
Plan are limited to an annual rate 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 Financial Industry Regulatory Authority, which
currently is 1%. Therefore, the effective rate of the Class C Distribution Plan at present is 1%. Class C shares are subject to the same 6.25% and 1% limitations applicable to the Class B Distribution Plan. The Fund pays the distribution fee on
Class C shares in order: (i) to pay the Distributor commissions on Class C shares which have been sold and (ii) to enable the Distributor (or an affiliate) to pay services fees on Class C shares which have been sold. From these
distribution payments, the Distributor currently uses up to 0.25% of average net assets for the payment of service and maintenance fees to its salespersons and other firms for shareholder servicing and maintenance of its shareholder accounts.
Additional Information Concerning the Distribution Plans.
In addition, to the extent that any investment advisory fees paid by the
Davis Funds may be deemed to be indirectly financing any activity that primarily is intended to result in the sale of Fund shares within the meaning of Rule 12b-1, the Distribution Plans authorize the payment of such fees.
The Distribution Plans continue annually so long as they are approved in the manner provided by Rule 12b-1 or unless earlier terminated by vote of
the majority of the Independent Directors or a majority of the Funds outstanding Class of shares. The Distributor is required to furnish quarterly written reports to the Board of Directors detailing the amounts expended under the Distribution
Plans. The Distribution Plans may be amended, provided that all such amendments comply with the applicable requirements then in effect under Rule 12b-1. Currently, Rule 12b-1 provides that as long as the Distribution Plans are in effect,
the Davis Funds must commit the selection and nomination of candidates for new Independent Directors to the sole discretion of the existing Independent Directors.
Dealer Compensation.
Dealers or others may receive different levels of compensation depending on which class of shares they sell. The Distributor may make expense reimbursements for special
training of a dealers registered representatives or personnel of dealers and other firms who provide sales or other services with respect to the Davis Funds and/or their shareholders, or to defray the expenses of meetings, advertising or
equipment. Any such amounts may be paid by the Distributor from the fees it receives under the Class A, B, and C Distribution Plans.
In
addition, the Distributor (or an affiliate) may, from time to time, pay additional cash compensation or other promotional incentives to authorized dealers or agents who sell shares of the Davis Funds. In some instances, such cash compensation or
other incentives may be offered only to certain dealers or agents who employ registered representatives who have sold or may sell significant amounts of shares of the Davis Funds during a specified period of time. These payments are more fully
described in the prospectus.
Fund Supermarkets.
The Davis Funds participate in various Fund Supermarkets in which a
supermarket sponsor (usually a registered broker-dealer) offers many mutual funds to the supermarket sponsors clients. The Davis Funds pay the supermarket sponsor a negotiated fee for distributing the shares and for continuing services
provided to their shareholders. A portion of the supermarket sponsors fee (that portion related to sales, marketing or distribution of shares) is paid with fees authorized under the Distribution Plans.
A portion of the supermarket sponsors fee (that portion related to investor services such as new account setup, shareholder accounting, shareholder
inquiries, transaction processing, and shareholder confirmations and reporting) is paid as a shareholder servicing fee of each Davis Fund. Each Davis Fund typically would be paying these shareholder servicing fees directly, were it not that the
supermarket sponsor holds all customer accounts in a single omnibus account with each Davis Fund. If the supermarket sponsors fees exceed the sum available from the Distribution Plans and shareholder servicing fees, then the Adviser pays the
remainder out of its profits.
Davis
Global Fund and Davis International Fund Statement of Additional Information 49
O
THER
I
MPORTANT
S
ERVICE
P
ROVIDERS
Custodian.
State Street Bank and Trust Company (State Street or the
Custodian), One Lincoln Street, Boston, MA 02111, serves as custodian of each Davis Funds assets. The Custodian maintains all of the instruments representing the Davis Funds investments and all cash. The Custodian delivers
securities against payment on sale and pays for securities against delivery on purchase. The Custodian also remits the Davis Funds assets in payment of their expenses, pursuant to instructions of officers or resolutions of the Board of
Directors. The Custodian also provides certain fund accounting services to the Funds.
Transfer Agent.
Boston Financial Data Services,
Inc., P.O. Box 8406, Boston, MA 02266-8406, serves as the Funds transfer agent.
Independent Registered Public
Accounting Firm.
KPMG LLP (KPMG), 1225
17
th
Street, Suite 800, Denver, CO 80202, serves as the
Funds independent registered public accounting firm. KPMG audits the Funds financial statements, performs other related audit services, and meets with the Audit Committee of the Board of Directors. KPMG LLP also acts as the independent
registered public accounting firm to certain other funds advised by the Adviser. In addition, KPMG prepares the Funds federal and state income tax returns and related forms. Audit and non-audit services provided by KPMG to the Fund must be
pre-approved by the Audit Committee.
Counsel.
Greenberg Traurig LLP, 77 W Wacker Dr., Suite 3100, Chicago, IL 60601, serves as counsel
to the Davis Funds and also serves as counsel for the Independent Directors.
S
ECTION
III:
C
LASSES
OF
S
HARES
, P
URCHASES
, E
XCHANGES
AND
R
EDEMPTIONS
This Statement of Additional Information should be read in conjunction with the Funds prospectus. This Statement of Additional Information supplements the information available in the prospectus.
S
ELECTING
T
HE
A
PPROPRIATE
C
LASS
OF
S
HARES
Each of the Davis Funds offers Class A, B, C and Y shares. In addition, Davis New York
Venture Fund offers Class R shares. Depending on the amount of the purchase and the anticipated length of time of the investment, investors may choose to purchase one Class of shares rather than another. Investors who would rather pay the entire
cost of distribution, or sales charge, at the time of investment rather than spreading such cost over time, might consider Class A shares. Other investors might consider Class B or C shares, in which case 100% of the purchase price is invested
immediately. If you have significant Davis Funds holdings you may not be eligible to invest in Class B or C Shares. See How to Choose a Share Class, in the prospectus for details.
Class A shares
With certain exceptions described below, Class A shares
are sold with a front-end sales charge at the time of purchase and are not subject to a sales charge when they are redeemed.
Class B
shares
Class B shares are sold without a sales charge at the time of purchase, but are subject to a deferred sales charge if they are
redeemed within six years after purchase. Class B shares will automatically convert to Class A shares seven years after the end of the calendar month in which the shareholders order to purchase was accepted.
Class B Shares for Funds offered in this statement of additional information are no longer offered for new purchases. New Class B share account
applications will be returned and any investments for existing Class B share accounts that are received will be made in Class A shares of Davis Government Money Market Fund. Investors may continue to exchange Class B Shares of other Davis Funds
for Class B Shares of the Funds offered in this statement of additional information and to exchange Class B Shares of Funds offered in this statement of additional information for Class B Shares of other Davis Funds. See A
PPENDIX
D:
Q&A: Davis Funds (other than Davis New York Venture Fund) will no longer offer Class B Shares for sale after April 30, 2013.
Davis
Global Fund and Davis International Fund Statement of Additional Information 50
Class C shares
Class C shares are purchased at their net asset value per share without the imposition of a front-end sales charge but are subject to a 1% deferred sales charge if redeemed within one year after purchase
and do not have a conversion feature.
Class Y shares
Class Y shares are sold at net asset value without the imposition of Rule 12b-1 charges. Class Y shares are only available through certain institutions which have entered into agreements with Davis
Distributors LLC.
Shares issued by Davis Government Money Market Fund
The four classes of Davis Government Money Market Fund shares are available so as to enable investors to facilitate exchanges since, with the exception of exchanges from Class A shares to Class Y
shares, shares may be exchanged only for shares of the same class. Davis Government Money Market shares are sold directly without sales charges; however, front-end or deferred sales charges may be imposed, in certain cases, on their exchange into
shares of other Davis Funds (see Exchange of Shares). Shares of the Davis Government Money Market Fund are offered at net asset value. However, in the case of certain exchanges, the Money Market Fund shares received may be subject to an
escrow, pursuant to a Statement of Intention, or a contingent deferred sales load. See Exchange of Shares.
Class A
Shares.
Class A shares of the Davis Funds (other than shares of Davis Government Money Market Fund) are sold at their net asset value plus a sales charge. The amounts of the sales charges are shown in the prospectus.
Reduction of Class A Sales Charge.
There are a number of ways to reduce the sales charge imposed on the purchase of the Davis Funds
Class A shares, as described below. These reductions are based on the fact that there is less sales effort and expense involved with respect to purchases by affiliated persons and purchases made in large quantities. The examples listed below
are descriptive of the types of fact patterns which qualify for a reduction of sales charge. It is not possible to list every potential qualifying transaction. The Distributor uses its discretion to determine whether or not any specific transaction
is similar enough to the examples listed below to qualify for a reduction of sales charge. If you claim any reduction of sales charges, you or your dealer must notify the Distributor (or State Street Bank and Trust Company if the investment is
mailed to State Street Bank and Trust Company) when the purchase is made. Enough information must be given to verify that you are entitled to such reduction.
(1) Immediate Family or Group Purchases.
Certain purchases made by or for more than one person may be considered to constitute a single purchase, including: (i) purchases for immediate family
members, (immediate family members consist of spouses and children under 21); (ii) purchases by trust or other fiduciary accounts and purchases by Individual Retirement Accounts for employees of a single employer; and
(iii) purchases made by an organized group of persons, whether incorporated or not, if the group has a purpose other than buying shares of mutual funds. For further information on group purchase reductions, contact the Adviser or your dealer.
(2) Other Groups.
Certain purchases made by or for more than one person may be considered to constitute a single purchase, including:
(i) purchases by trust or other fiduciary accounts and purchases by Individual Retirement Accounts for employees of a single employer; and (ii) purchases made by an organized group of persons, whether incorporated or not, if the group has
a purpose other than buying shares of mutual funds. For further information on group purchase reductions, contact the Adviser or your dealer.
(3) Statement of Intention.
Another way to reduce the sales charge is by signing a Statement of Intention (Statement). See Appendix B:
Terms and Conditions of a Statement of Intention. If you enter into a Statement of Intention you (or any single purchaser) may state that you intend to invest at least $100,000 in the Funds Class A shares over a
13-month period. The amount you say you intend to invest may include Class A shares that you already own (except purchases into Davis Government Money Market Fund unless the shares were exchanged from another Davis Fund and the shares were
previously subject to a sales
Davis
Global Fund and Davis International Fund Statement of Additional Information 51
charge) valued at public offering price, the day prior to the period covered by the Statement. A Statement may be backdated up to 90 days to include purchases made during that period, but the
total period covered by the Statement may not exceed 13 months and purchases made prior to the start of the 13-month period will not be re-adjusted to reflect a lower sales charge.
Shares having a value of up to 5% of the amount you state you intend to invest will be held in escrow to make sure that any additional sales charges are paid. If any of the Funds shares
are in escrow pursuant to a Statement and such shares are exchanged for shares of another Davis Fund, the escrow will continue with respect to the acquired shares.
No additional sales charge will be payable if you invest the amount you have indicated. Each purchase under a Statement will be made as if you were buying the total amount indicated at one time. For
example, if you indicate that you intend to invest $100,000, you will pay a sales charge of 3-1/2% on each purchase.
If during the 13-month
period you invest less than the amount you have indicated, you will pay an additional sales charge. For example, if you state that you intend to invest $250,000 and actually invest only $100,000, you will, by retroactive adjustment, pay a sales
charge of 3-1/2%. The sales charge you actually pay will be the same as if you had purchased the shares in a single purchase.
A Statement
does not bind you to buy, nor does it bind the Adviser or Distributor to sell, the shares covered by the Statement.
(4) Rights of
Accumulation (All Davis Funds Combined).
Another way to reduce the sales charge is under a right of accumulation. This means that the larger purchase entitled to a lower sales charge does not have to be in dollars invested at one time or in a
single Davis Fund. The larger purchases that you (or any single purchaser) make at any one time can be determined by adding to the amount of a current purchase to the value of any Davis Fund shares (at offering price) already owned by
you. Money market fund shares are not counted in determining the total amount of Fund shares you own unless the shares were exchanged from another Davis Fund and the shares were previously subject to a sales charge.
For example, if you own $100,000 worth (at offering price) of shares, including Class A, B and C shares of all Davis Funds except money market fund
shares (unless the shares were exchanged from another Davis Fund and the shares were previously subject to a sales charge) and invest $5,000 in additional shares, the sales charge on that $5,000 investment would be 3-1/2%, not 4-3/4%.
Lastly, the right of accumulation also applies to the Class A, B and C shares of the other Davis Funds that you own. Thus, the amount of current
purchases of the Funds Class A shares that you make may be added to the value of the Class A, B and C shares of the other Davis Funds (valued at their current offering price, excluding money market fund shares unless the shares were
exchanged from another Davis Fund and the shares were previously subject to a sales charge) already owned by you in determining the applicable sales charge.
In all of the above instances where you wish to assert this right of combining the shares you own of the other Davis Funds, you or your dealer must notify the Distributor (or State Street Bank and Trust
Company, if the investment is mailed to State Street Bank and Trust Company) of the pertinent facts. Enough information must be given to permit verification as to whether you are entitled to a reduction in sales charges.
(5) Combining Statement of Intention(s) and/or Rights of Accumulation.
A Statement of Intention for the Funds Class A shares and for
the Class A shares of the other Davis Funds may be aggregated. Also, the Funds Class A shares and the Class A, B and C shares of the other Davis Funds that you already own, valued at the current offering price the day prior to
the period covered by your Statement of Intention, may be included in the amount you have stated you intend to invest pursuant to your Statement.
(6) Purchases for Employee Benefit Plans.
Trustees or other fiduciary accounts and Individual Retirement Accounts (IRA) of a single employer are treated as purchases of a single person.
Purchases of and ownership by an individual and such individuals spouse under an IRA are combined with their other purchases and ownership.
Davis
Global Fund and Davis International Fund Statement of Additional Information 52
Class A shares Sales at Net Asset Value.
There are situations where the sales charge will not
apply to the purchase of Class A shares. A sales charge is not imposed on these transactions either because the purchaser deals directly with the Fund (as in employee purchases), or because a responsible party (such as a financial institution)
is providing the necessary services usually provided by a registered representative. Although the investor pays no front-end sales charge, a contingent deferred sales charge of 0.50% may be imposed if the Distributor paid a sales commission to a
broker or agent and the shares purchased at net asset value without a sales load are redeemed within the first year after purchase. In addition, if investors effect purchases in Fund shares through a broker or agent, the broker or agent may charge a
fee. The situations where the sales charge will not apply are described in the prospectus.
The Fund also may issue Class A shares at net
asset value incident to a merger with or acquisition of assets of an investment company. The Fund occasionally may be provided with an opportunity to purchase substantially all the assets of a public or private investment company or to merge another
such company into the Fund. This offers the Fund the opportunity to obtain significant assets. No dealer concession is involved. It is industry practice to effect such transactions at net asset value, as it would adversely affect the Funds
ability to do such transactions if the Fund had to impose a sales charge.
Class B Shares.
Class B shares are offered at net asset
value, without a front-end sales charge. The Distributor receives and usually re-allows commissions to firms responsible for the sale of such shares. With certain exceptions described below, the Davis Funds (except for Davis Government Money Market
Fund) impose a deferred sales charge of 4% on shares redeemed during the first year after purchase, 3% on shares redeemed during the second or third year after purchase, 2% on shares redeemed during the fourth or fifth year after purchase and 1% on
shares redeemed during the sixth year after purchase. Class B shares will be subject to a maximum Rule 12b-1 fee at the annual rate of 1% of the Class average daily net asset value. The Davis Funds will not accept any purchase of Class B
shares in the amount of $50,000 or more per investor.
Class B shares that have been outstanding for seven years will automatically convert to
Class A shares without imposition of a front-end sales charge. The Class B shares so converted will no longer be subject to the higher expenses borne by Class B shares. Because the net asset value per share of the Class A shares may be
higher or lower than that of the Class B shares at the time of conversion, although the dollar value will be the same, a shareholder may receive more or less Class A shares than the number of Class B shares converted. Under a private Internal
Revenue Service Ruling, such a conversion will not constitute a taxable event under the federal income tax law. In the event that this ceases to be the case, the Board of Directors will consider what action, if any, is appropriate and in the best
interests of the Class B shareholders. In addition, certain Class B shares held by certain defined contribution plans automatically convert to Class A shares based on increases of plan assets.
Class B Shares for Funds offered in this statement of additional information are no longer be offered for new purchases. New Class B share account
applications will be returned and any investments for existing Class B share accounts that are received will be made in Class A shares of Davis Government Money Market Fund. Investors may continue to exchange Class B Shares of other Davis Funds
for Class B Shares of the Funds offered in this statement of additional information and to exchange Class B Shares of Funds offered in this statement of additional information for Class B Shares of other Davis Funds. See A
PPENDIX
D:
Q&A: Davis Funds (other than Davis New York Venture Fund) will no longer offer Class B Shares for sale after April 30, 2013.
Class B Special Distribution Arrangement.
Davis Funds have entered into an agreement with Merrill Lynch to waive the Contingent Deferred Sales
Charge (CDSC) of Class B shares sold to Qualifying Retirement Plans. Under this agreement Class B shares of the Davis Funds are made available to Retirement Plan participants such as 401(k) or 403(b) plans at net asset value with the
waiver of the CDSC if:
(i)
|
The Retirement Plan is record-kept on a daily valuation basis by Merrill Lynch and, on the date the Retirement Plan sponsor signs the Merrill Lynch Record Keeping
Service Agreement, the Retirement Plan has less than $3 million in assets invested in broker/dealer funds not advised or managed by Merrill Lynch Asset Management, L.P. (MLAM) that are made available pursuant to a Services Agreement
between Merrill Lynch and the Funds principal underwriter or distributor and in funds advised or managed by MLAM (collectively, the Applicable Investments); or
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 53
(ii)
|
The Retirement Plan is record-kept on a daily valuation basis by an independent record keeper whose services are provided through a contract of alliance arrangement
with Merrill Lynch, and on the date the Retirement Plan Sponsor signs the Merrill Lynch Record Keeping Service Agreement, the Retirement Plan has less than $3 million in assets, excluding money market funds, invested in Applicable Investments; or
|
(iii)
|
The Retirement Plan has less than 500 eligible employees, as determined by the Merrill Lynch plan conversion manager, on the date the Retirement Plan Sponsor signs the
Merrill Lynch Record Keeping Service Agreement.
|
Retirement Plans record-kept on a daily basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently investing in Class B shares of the Davis Funds convert to Class A shares once the Retirement Plan has reached $3 million invested in Applicable Investments. The
Retirement Plan will receive a Retirement Plan level share conversion.
Class C Shares.
Class C shares are offered at net asset value
without a sales charge at the time of purchase. Class C shares redeemed within one year of purchase will be subject to a 1% charge on redemption. Class C shares do not have a conversion feature. The Davis Funds will not accept any purchases of Class
C shares when Class A shares may be purchased at net asset value.
The Distributor will pay a commission to the firm responsible for
the sale of Class C shares.
No other fees will be paid by the Distributor during the one-year period following purchase. The Distributor will be reimbursed for the commission paid from 12b-1 fees paid by the Funds during the one-year period. If
Class C shares are redeemed within one year of purchase, the 1% redemption charge will be paid to the Distributor. After Class C shares have been outstanding for more than one year, the Distributor will make quarterly payments to the firm
responsible for the sale of the shares in amounts equal to 0.75% of the annual average daily net asset value of such shares for sales fees and 0.25% of the annual average daily net asset value of such shares for service and maintenance fees.
Contingent Deferred Sales Charges.
Any contingent deferred sales charge (CDSC) imposed on the redemption of Class A,
B or C shares is a percentage of the lesser of: (i) the net asset value of the shares redeemed; or (ii) the original cost of such shares. No CDSC is imposed when you redeem amounts derived from: (a) increases in the value of shares
redeemed above the net cost of such shares, or (b) certain shares with respect to which the Fund did not pay a commission on issuance, including shares acquired through reinvestment of dividend income and capital gains distributions. On request
for a redemption, shares not subject to the CDSC will be redeemed first. Thereafter, shares held the longest will be redeemed.
The CDSC on
Class A, B and C shares that are subject to a CDSC will be waived if the redemption relates to the following: (a) in the event of the total disability of the last surviving shareholder (as evidenced by a determination by the federal Social
Security Administration) occurring after the purchase of the shares being redeemed; (b) in the event of the death of the last surviving shareholder; (c) for redemptions made pursuant to an automatic withdrawal plan, if: (i) there are
at least four withdrawals a year (except for retirement accounts subject to a required minimum distribution, in which case it may run once a year); and (ii) the aggregate value of the redeemed shares does not exceed 12% of the accounts
value on an annual basis**; (d) for redemptions from a qualified retirement plan or IRA that constitute a tax-free return of excess contributions to avoid tax penalty; (e) on redemptions of shares sold to directors, officers and employees
of any fund for which the Adviser acts as investment adviser, or officers and employees of the Adviser, Sub-Adviser or Distributor, including former directors and officers and extended family members of all of the foregoing and any employee benefit
or payroll deduction plan established by or for such persons; and (f) on redemptions pursuant to the right of the Funds to liquidate a shareholders account if the aggregate net asset value of the shares held in such account falls below an
established minimum amount.
**
|
An Automatic Withdrawal Plan may be established as either a percentage or a fixed dollar amount. The shares that may be redeemed without a sales charge are recalculated
as a percentage of the current market value of the account as of the date of each withdrawal. If established as a percentage, no sales charge will be incurred regardless of market fluctuations. If established as a fixed dollar amount, a sales charge
may be incurred if the market value of the account decreases. If you redeem shares in addition to those redeemed pursuant to the Automatic Withdrawal Plan, a deferred sales charge may be imposed on those shares and on any subsequent redemptions
within a 12-month period, regardless of whether such redemptions are pursuant to an Automatic Withdrawal Plan.
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 54
Subject to various limitations, shares in different Davis Funds may be exchanged at relative net asset
value. If a sales charge is due on Class A shares, and has not been previously paid, then the sales charge will be deducted at the time of the exchange. If any Class of Davis Fund shares being exchanged are subject to a sales charge, Statement
of Intention, or other limitation, the limitation will continue to apply to the shares received in the exchange. When an investor exchanges any Class of shares in a Davis Fund for shares in Davis Government Money Market Fund, the holding period for
any deferred sales charge does not continue during the time that the investor owns Davis Government Money Market Fund shares. For example, Class B shares are subject to a declining sales charge for six years. Any period that an investor owns shares
of Davis Government Money Market Fund will be added to the six-year declining sales charge period.
Class Y Shares.
Class Y shares are
sold at net asset value without the imposition of Rule 12b-1 charges. Class Y shares are offered to: (i) trust companies, bank trusts, endowments, pension plans or foundations (Institutions) acting on behalf of their own account or
one or more clients for which such Institution acts in a fiduciary capacity and investing at least $5,000,000 at any one time; (ii) any state, county, city, department, authority or similar agency that invests at least $5,000,000
(Government Entities); (iii) any investor with an account established under a wrap account or other similar fee-based program sponsored and maintained by a registered broker-dealer approved by the Davis Funds
Distributor (Wrap Program Investors); (iv) a 401(k) plan, 457 plan, employer sponsored 403(b) plan, profit sharing and money purchase pension plan, defined benefit plan, or non-qualified deferred compensation plan where plan level
or omnibus accounts are held on the books of the Fund if at least $500,000 is invested; (v) the Adviser and its affiliates; and (vi) through a registered investment adviser (RIA) who initially invests for clients an aggregate of at least
$100,000 in Davis Funds through a fund supermarket or other mutual fund trading platform sponsored by a broker-dealer or trust company and which has entered into an agreement with Davis Distributors, LLC
Wrap Program Investors may purchase Class Y shares through the sponsors of such programs who have entered into agreements with Davis Distributors, LLC.
Wrap Program Investors should be aware that both Class A and Y shares are made available by the Davis Funds at net asset value to sponsors of wrap programs. However, Class A shares are subject to additional expenses under the Funds
Rule 12b-1 Plan and sponsors of wrap programs utilizing Class A shares generally are entitled to payments under the Plan. If the Sponsor has selected Class A shares, investors should discuss these charges with their programs sponsor
and weigh the benefits of any services to be provided by the sponsor against the higher expenses paid by Class A shareholders.
Conversion from Class A, B, or C shares into Class Y shares
For shareholders who currently hold Class A, B, or C shares, but are authorized under certain circumstances to purchase Class Y shares, those shareholders may convert their eligible existing shares
to Class Y shares of the Fund provided that the Class Y shares received in the conversion are held in a fee-based account and their dealer has entered into an agreement with the Distributor. Shares that are subject to a CDSC are not eligible to
convert to Class Y shares until the applicable CDSC period has expired. Under current interpretations of applicable federal income tax law by the Internal Revenue Service (the IRS), this voluntary conversion to Class Y shares is not
treated as a taxable event. If those laws or the IRS interpretation of those laws should change, this conversion feature may be suspended.
Investment Minimums.
The Distributor may waive the investment minimums for any and all Classes of shares at its discretion. The Distributor may
determine that it is appropriate to waive the investment minimum for participants in certain fee based programs sponsored by financial intermediaries. The Distributor may determine that it is appropriate to treat related investors as a single
investment account. Examples may include trust funds of the same bank, separate accounts of the same insurance company, clients whose funds are managed by a single bank, insurance company, investment adviser, broker-dealer, or clients of a financial
intermediary that maintains an omnibus account with the Fund.
Davis
Global Fund and Davis International Fund Statement of Additional Information 55
H
OW
T
O
P
URCHASE
S
HARES
Davis Funds and the Distributor reserve the right to reject any purchase order for any reason. Each Davis Fund
prospectus provides full directions on how to purchase shares.
Broker-Dealers may remit payment.
Your broker-dealer may order and
remit payment for the shares on your behalf. The broker-dealer can also order the shares from the Distributor by telephone or wire. Please note that the following rules and provisions apply with respect to purchases of Fund shares through a
broker-dealer:
(A)
|
The Distributor has entered into agreements with broker-dealers to receive on its behalf purchase and redemptions orders;
|
(B)
|
Such broker-dealers are authorized to designate other intermediaries to receive purchase and redemption orders on behalf of the Distributor;
|
(C)
|
The Funds will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, its brokers authorized designee, receives
the order; and
|
(D)
|
A Client order will be priced at the Funds net asset value next computed after they are received by an authorized broker-dealer or the broker-dealers
authorized designee.
|
S
PECIAL
S
ERVICES
Each Davis Funds prospectus describes a number of special services offered by the Davis Funds. This Statement of Additional Information
supplements that discussion.
Prototype Retirement Plans.
The Distributor and certain qualified dealers have available prototype
retirement plans (e.g., profit sharing, money purchase, Simplified Employee Pension (SEP) plans, model 403(b) and 457 plans for charitable, educational and governmental entities) sponsored by the Davis Funds for corporations and
self-employed individuals. The Distributor and certain qualified dealers also have prototype Individual Retirement Account (IRA) plans (deductible IRAs and non-deductible IRAs, including Roth IRAs), Education Savings Accounts
and SIMPLE IRA plans for both individuals and employers. These plans utilize the shares of the Davis Funds as their investment vehicles. State Street Bank and Trust Company acts as custodian or trustee for certain retirement plans and charges each
participant an annual custodial fee of $15 per Social Security Number regardless of the number of plans established. For a detailed explanation of the custodial fees charged to an IRA, please refer to the prospectus.
In-Kind Purchases.
Shares of the Davis Funds are continuously offered at their public offering price next determined after an order is accepted.
The methods available for purchasing shares of a Fund are described in the Funds prospectus. In addition, shares of the Davis Funds may be purchased using securities if the Adviser determines that doing so is in the best interest of the
applicable Fund and its shareholders. The Adviser must review the securities that are offered in exchange for the in-kind purchase to determine that the securities delivered to the Fund: (i) meet the investment objective, strategy
and policies of the Fund; (ii) do not cause the violation of any investment restrictions at the time of acceptance; (iii) are readily marketable; (iv) may be accurately and objectively valued on a daily basis; and (v) represent
securities that are desirable for the Fund to own given the Funds investment strategy and the Advisers view of market conditions. The Adviser reserves the right to reject all or any part of the securities offered in exchange for shares
of the Fund. On any such in-kind purchase, the following conditions will apply:
(1)
|
The securities offered by the investor in exchange for shares of a Fund must not be in any way restricted as to resale or otherwise be illiquid;
|
(2)
|
The securities must have a value that is readily ascertainable (and not established only by evaluation procedures) as evidenced by a listing on the NYSE, AMEX or NASDAQ
or other appropriate method; and
|
(3)
|
The transaction involves a net purchase of $1 million or more in Fund shares.
|
Davis Funds believe that this ability to purchase shares of a Fund using securities provides a means by which holders of certain securities may obtain diversification and continuous professional
management of their investments without the expense of selling those securities in the public market. Benefits to the Fund include the ability to purchase desirable securities without brokerage commissions.
Davis
Global Fund and Davis International Fund Statement of Additional Information 56
An investor who wishes to make an in-kind purchase must provide the Adviser with a full and exact written
description of each security that he or she proposes to deliver to the applicable Davis Fund. The Fund will advise the investor as to those securities that it is prepared to accept and will provide the forms required to be completed and signed by
the investor. The investor should then send the securities, in proper form for transfer and with the necessary forms, to the Adviser and certify that there are no legal or contractual restrictions on the free transfer and sale of the securities. The
securities will be valued as of the close of business on the day of receipt by the Fund in the same manner as portfolio securities of the Fund are valued. The number of shares of the Fund, having a net asset value as of the close of business on the
day of receipt equal to the value of the securities delivered by the investor, will be issued to the investor, less applicable stock transfer taxes, if any.
The exchange of securities by the investor pursuant to this in-kind offer will constitute a taxable transaction and may result in a gain or loss for federal income tax purposes. Each investor should
consult his tax adviser to determine the tax consequences under Federal and state law of making such an in-kind purchase. This service may be discontinued at any time without prior notice.
E
XCHANGE
O
F
S
HARES
The prospectus describes exchange procedures. This Statement of Additional Information supplements that discussion.
Market Timing.
Davis Funds have not entered into any arrangements, which permit organizations or individuals to market time the Funds.
Although the Davis Funds will not knowingly permit investors to excessively trade the Funds, shareholders seeking to engage in market timing may employ a variety of strategies to avoid detection, and, there can be no guarantee that all market timing
will be prevented, despite the Davis Funds best efforts. The Funds receive purchase and sales order through financial intermediaries and cannot always know or reasonably detect excessive trading which may be facilitated by these intermediaries
or by the use of omnibus accounts by intermediaries. Davis Funds reserve the right to terminate or amend the exchange privilege at any time by filing amended registration statements.
R
EDEMPTION
O
F
S
HARES
The Funds prospectus describes redemption procedures. This Statement of Additional Information supplements those discussions.
Certificates.
In the past, Davis Funds issued share certificates and some are still outstanding. If shares to be redeemed are represented by a
certificate, the certificate must be sent by certified mail to State Street Bank and Trust Company with a letter of instruction signed by all account owner(s).
Redemption Proceeds.
Redemption proceeds normally are paid to you within seven days after State Street Bank and Trust Company receives your proper redemption request. Payment for redemptions can be
suspended under certain emergency conditions determined by the SEC or if the New York Stock Exchange (NYSE) is closed for reasons other than customary or holiday closings. You may redeem shares on any business day (i.e., any day the NYSE
is open for regular session trading). Redemption proceeds may be withheld until a sufficient period of time has passed for State Street Bank and Trust Company to be reasonably sure that all checks or drafts (including certified or cashiers
checks) for shares purchased have cleared, normally not exceeding fifteen calendar days. You can avoid any redemption delay by paying for your shares with a bank or federal funds wire.
Redemptions are ordinarily paid to you in cash. However, the Board of Directors is authorized to decide if conditions exist making cash payments undesirable. If the Board of Directors should decide to
make payments other than in cash, redemptions could be paid in securities, valued at the value used in computing a Funds net asset value. There would be brokerage costs incurred by the shareholder in selling securities received in redemption
of Fund shares. The Fund must, however, redeem shares solely in cash up to the lesser of $250,000 or 1% of the Funds net asset value, whichever is smaller, during any 90-day period for any one shareholder.
Davis
Global Fund and Davis International Fund Statement of Additional Information 57
Short-Term Trading Fee.
Both the Davis Global Fund and the Davis International Fund assess a 2% fee
on the proceeds of Fund shares that are redeemed (either by selling or exchanging to another Davis Fund) within 30 days of their purchase. The short-term trading fee is paid to the Fund and is intended to offset the trading costs, market impact and
other costs associated with short-term money movements in and out of the Fund. The short-term trading fee is imposed to the extent that fund shares redeemed exceed fund shares that have been held more than 30 days. For shares of the Fund acquired by
exchange, the holding period prior to the exchange is not considered in determining whether to apply the short-term trading fee. The short-term trading fee is not imposed on:
(1)
|
shares redeemed under automatic withdrawal plans;
|
(2)
|
shares redeemed due to death or disability of the shareholder; or
|
(3)
|
shares redeemed from accounts for which the dealer, broker or financial institution of record has entered into an agreement with the Distributor for this purpose.
|
Federal Funds Wire.
You may be eligible to have your redemption proceeds electronically transferred to a commercial bank
account by federal funds wire. There is a $5 charge by State Street Bank and Trust Company for wire service, and receiving banks also may charge for this service. Redemption by federal funds wire is usually credited to your bank account on the next
business day after the sale. Alternatively, redemption through Automated Clearing House usually will arrive at your bank two banking days after the sale. To have redemption proceeds sent by federal funds wire to your bank, you must first fill out
the Banking Instruction section on the account application form and attach a voided check or deposit slip. If the account has already been established, an Account Service Form must be submitted with a medallion guarantee and a copy of a
voided check or deposit slip.
Segregation of Davis Government Money Market Fund Shares.
In order to secure the payment of any sales
charge or CDSC that may be due on shares exchanged into shares of Davis Government Money Market Fund, the number of shares equal in value to the sales charge are segregated and separately maintained in Davis Government Money Market Fund. The purpose
of the segregation is to assure that redemptions utilizing the Davis Government Money Market Fund check writing privilege do not deplete the account without payment of any applicable sales charge and therefore no draft will be honored for
liquidation of shares in excess of the shares in the Davis Government Money Market Fund account that are free of segregation.
S
ECTION
IV: General Information
This Statement of Additional Information should be read in conjunction with the
Funds prospectus. This Statement of Additional Information supplements the information available in the prospectus.
D
ETERMINING
T
HE
P
RICE
O
F
S
HARES
The prospectus describes
procedures used to determine the price of shares. This Statement of Additional Information supplements that discussion.
Net Asset
Value.
The price per share for purchases or redemptions of Fund shares made directly through State Street Bank and Trust Company generally is the value next computed after State Street Bank and Trust Company receives the purchase order or
redemption request in good order. In order for your purchase order or redemption request to be effective on the day you place your order with your broker-dealer or other financial institution, such broker-dealer or financial institution must:
(i) receive your order before 4 p.m. Eastern time; and (ii) promptly transmit the order to State Street Bank and Trust Company. The broker-dealer or financial institution is responsible for promptly transmitting purchase orders or
redemption requests to State Street Bank and Trust Company so that you may receive the same days net asset value. Note that in the case of redemptions and repurchases of Fund shares owned by corporations, trusts or estates, or of shares
represented by outstanding certificates (in the past Davis Funds issued share certificates), State Street Bank and Trust Company may require additional documents to effect the redemption and the applicable price will be determined as of the next
computation following the receipt of the required documentation or outstanding certificates. See Redemption of Shares.
Davis
Funds do not price their shares or accept orders for purchases or redemptions on days when the NYSE is closed.
Davis
Global Fund and Davis International Fund Statement of Additional Information 58
Certain brokers and certain designated intermediaries on their behalf may accept purchase and redemption
orders. The Distributor will be deemed to have received such an order when the broker or the designee has accepted the order. Customer orders are priced at the net asset value next computed after such acceptance. Such order may be transmitted to the
Funds or their agents several hours after the time of the acceptance and pricing.
Valuation of Portfolio Securities.
The valuation of
each Funds portfolio securities is described in the Funds prospectus and annual report.
D
IVIDENDS
A
ND
D
ISTRIBUTIONS
The Funds prospectus describes the Funds dividend and distribution policies. This Statement of Additional Information supplements that
discussion.
There are two sources of income, net income and realized capital gains, paid to you by the Funds. You will receive confirmation
statements for dividends declared and Fund shares purchased through reinvestment of dividends. You also will receive confirmations after each purchase or redemption. Different classes of Fund shares may be expected to have different expense ratios
due to differing distribution services fees and certain other expenses. Classes with higher expense ratios will pay correspondingly lower dividends than classes with lower expense ratios. For tax purposes, information concerning Fund distributions
will be mailed annually to shareholders. Shareholders have the option of receiving all Fund dividends and distributions in cash, of having all dividends and distributions reinvested, or of having income dividends paid in cash and capital gain
distributions reinvested. Reinvestment of all dividends and distributions is automatic for accounts utilizing the Automatic Withdrawal Plan. The reinvestment of dividends and distributions is made at net asset value (without any initial or
contingent deferred sales charge) on the payment date.
Returned Check Policy.
For the protection of Fund shareholders, on receipt of
the second dividend check that has been returned to State Street Bank and Trust Company as undeliverable, undelivered dividends will be invested in additional Fund shares at the current net asset value and the account designated as a dividend
reinvestment account.
Dividends and Distributions Usually Paid Annually.
Income dividends and distributions from net realized capital
gains, if any, are usually distributed annually.
Dividends and Distributions May Change.
Usually dividends and capital gains
distributions are paid as discussed above. However, the Board of Directors reserves the right to suspend payments or to make additional payments.
F
EDERAL
I
NCOME
T
AXES
The Funds prospectus provides a general discussion of federal income taxes. This Statement of Additional Information supplements that discussion. This discussion is not intended to be a full
discussion of all the aspects of the federal income tax law and its effects on the Funds and their shareholders. Shareholders may be subject to state and local taxes on distributions. Each investor should consult his or her own tax adviser regarding
the effect of federal, state and local taxes on any investment in Davis Funds.
Each of the Davis Funds intends to continue to qualify as a
regulated investment company under the Internal Revenue Code and, if so qualified, will not be liable for federal income tax to the extent its earnings are distributed. If a Fund does not qualify as a regulated investment company, it will be subject
to corporate tax on its net investment income and net capital gains at the corporate tax rates. If a Fund does not distribute all of its net investment income or net capital gains, it will be subject to tax on the amount that is not distributed.
If, for any calendar year, the distribution of earnings required under the Internal Revenue Code exceeds the amount distributed, an excise
tax, equal to 4% of the excess, will be imposed on the applicable Fund. Each Davis Fund intends to make distributions during each calendar year sufficient to prevent imposition of the excise tax.
Davis
Global Fund and Davis International Fund Statement of Additional Information 59
From time to time the Funds may be entitled to a tax loss carry-forward. Such carry-forward would be
disclosed in the most current version of the Funds Annual Report. The Regulated Investment Company Modernization Act of 2010 (the Act) was enacted on December 22, 2010. The Act makes significant changes to several tax rules
impacting the Fund. Although the Act provides several benefits, including the unlimited carryforward of future capital losses, there may be a greater likelihood that all or a portion of the Funds pre-enactment capital loss carryforwards may
expire without being utilized due to the fact that post-enactment capital losses are required to be utilized before preenactment capital loss carryforwards.
As they invest in foreign securities, the Funds may be subject to the withholding of foreign taxes on dividends or interest it receives on foreign securities. Foreign taxes withheld will be treated as an
expense of the Fund unless the Fund meets the qualifications and makes the election to enable it to pass these taxes through to shareholders for use by them as a foreign tax credit or deduction. Tax conventions and treaties between certain countries
and the United States may reduce or eliminate such taxes.
Distributions of net investment income and net realized short-term capital gains
will be taxable to shareholders as ordinary income. Distributions of net long-term capital gains will be taxable to shareholders as long-term capital gain regardless of how long the shares have been held. Distributions will be treated the same for
tax purposes whether received in cash or in additional shares. Dividends declared in the last calendar month to shareholders of record in such month and paid by the end of the following January are treated as received by the shareholder in the year
in which they are declared. A gain or loss for tax purposes may be realized on the redemption of shares. If the shareholder realizes a loss on the sale or exchange of any shares held for six months or less and if the shareholder received a capital
gain distribution during that period, then the loss is treated as a long-term capital loss to the extent of such distribution.
We recommend
that you consult with a tax advisor about dividends and capital gains that may be received from the Davis Funds.
P
ROCEDURES
AND
S
HAREHOLDER
R
IGHTS
ARE
D
ESCRIBED
BY
C
URRENT
P
ROSPECTUS
AND
O
THER
D
ISCLOSURE
D
OCUMENTS
Among other disclosures, the Funds most current prospectus, Statement of Additional Information, Annual and Semi-Annual Reports, and other documents describe (a) the procedures which the Funds
follow when interacting with shareholders; and (b) shareholders rights. The Funds procedures and shareholders rights may change from time to time to reflect changing laws, rules, and operations. The Funds prospectus and
other disclosure documents will be amended from time to time to reflect these changes.
P
ERFORMANCE
D
ATA
From time to time, the Funds may advertise information regarding their performance. Such information will be calculated separately for each class of shares. These performance figures are based on
historical results and are not intended to indicate future performance.
Average Annual Total Returns
Average Annual Total Return Before Taxes.
The Funds may advertise their investment performance without reflecting the potential effects of income taxes.
Average Annual Total Return Before Taxes represents the average annual compounded rate of return for the periods presented. Periods of less
than one year are not annualized. Average annual total return measures both the net investment income generated by, and the effect of any realized or unrealized appreciation or depreciation of, the underlying investments in the Funds
portfolio. Average annual total return is calculated separately for each class in accordance with the standardized method prescribed by the SEC by determining the average annual compounded rates of return over the periods indicated which would
equate the initial amount invested to the ending redeemable value, according to the following formula:
|
|
|
|
|
|
|
P(1+T)n = ERV
|
|
|
|
Where:
|
|
P =
|
|
hypothetical initial payment of $1,000
|
|
|
|
|
|
T =
|
|
average annual total return
|
|
|
|
|
|
n =
|
|
number of years
|
|
|
|
|
|
ERV =
|
|
ending redeemable value at the end of the 1-, 5- and 10-year periods of a hypothetical $1,000 payment made at the beginning of such period
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 60
This calculation: (i) assumes all dividends and distributions are reinvested at net asset value on the
appropriate reinvestment dates; and (ii) deducts: (a) the maximum front-end or applicable contingent deferred sales charge from the hypothetical initial $1,000 investment, and (b) all recurring fees, such as advisory fees, charged as
expenses to all shareholder accounts.
Average Annual Total Return After Taxes on Distributions.
The Fund may advertise its investment performance for Class A and/or Y shares on an after-tax basis. After-tax returns are calculated using the
historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown, and after-tax returns shown
are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. The Fund offers Class A, B, C, and Y shares. If returns are negative, returns after taxes on
distributions and sale of Fund shares may be higher than returns before taxes as the resulting capital losses from the sale of Fund shares would be available to offset capital gains from other investments.
Average Annual Total Return After Taxes on Distributions adjusts the before taxes quotation for the effects of paying the highest individual
marginal federal income tax rate on distributions paid by the Fund. Average annual total return after-taxes on distributions is calculated separately for each class in accordance with the standardized method prescribed by the SEC by determining the
average annual compounded rates of return over the periods indicated, that would equate the initial amount invested to the ending redeemable value, according to the following formula:
|
|
|
|
|
|
|
P(1+T)n = ATVD
|
|
|
|
Where:
|
|
P =
|
|
hypothetical initial payment of $1,000
|
|
|
|
|
|
T =
|
|
average annual total return (after taxes on distributions)
|
|
|
|
|
|
n =
|
|
number of years
|
|
|
|
|
|
ATV
D
=
|
|
ending redeemable value, after taxes on fund distributions but not after taxes on sale of fund shares, at the end of the 1, 5, and 10 year periods of a hypothetical $1,000 payment
made at the beginning of such period
|
Average Annual Total Return After-Taxes on Distributions and Sale of Fund Shares.
The Fund may advertise its investment performance for Class A and/or Y shares after taxes on distribution and sale of Fund shares.
Average Annual Total Return After-Taxes on Distributions and Sale of Fund Shares adjusts the after-taxes quotation for the effects of paying
the highest individual marginal federal income tax rate on the sale of Fund shares. Average annual total return after-taxes on distributions and sale of Fund shares is calculated separately for each class in accordance with the standardized method
prescribed by the SEC by determining the average annual compounded rates of return over the periods indicated, that would equate the initial amount invested to the ending redeemable value, according to the following formula:
|
|
|
|
|
|
|
P(1+T)n = ATV
DR
|
|
|
|
Where:
|
|
P =
|
|
hypothetical initial payment of $1,000
|
|
|
|
|
|
T =
|
|
average annual total return (after taxes on distributions and sale of Fund shares)
|
|
|
|
|
|
n =
|
|
number of years
|
|
|
|
|
|
ATV
DR
=
|
|
ending redeemable value, after taxes on Fund distributions and sale of Fund shares, at the end of the period of a hypothetical $1,000 payment made at the beginning of such
period
|
Davis
Global Fund and Davis International Fund Statement of Additional Information 61
Average Annual Total Returns (with and without the effects of Sales Charges).
The Fund may advertise its investment performance for Class A and B shares without reflecting the effects of sales charges.
Average Annual Total Return (with maximum sales charges) is calculated in the same manner as Average Annual Total Return Before
Taxes.
Average Annual Total Return (without any sales charges) adjusts the average annual total return (with maximum sales
charges) quotation by removing the effects of paying a sales charge. The Fund may compare its investment performance against that of a relevant benchmark index. Index performance calculation does not include a sales charge. To facilitate comparisons
between an index and the Fund, the Fund may quote its average annual total return before taxes, without a sales charge.
Other Performance
Measures.
Cumulative Total Return is a measure of a Funds performance encompassing all elements of return. Total return reflects the change in share price over a given period and assumes all distributions are taken in
additional Fund shares. Total return is determined by assuming a hypothetical investment at the beginning of the period, deducting a maximum front-end or applicable contingent deferred sales charge, adding in the reinvestment of all income dividends
and capital gains, calculating the ending value of the investment at the net asset value as of the end of the specified time period and subtracting the amount of the original investment, and by dividing by the original investment. This calculated
amount is then expressed as a percentage by multiplying by 100. Periods of less than one year are not annualized.
Performance Rankings
Lipper Rankings.
From time to time, the Funds may publish the ranking of the performance of its classes of shares by Lipper
Analytical Services, Inc. Lipper is a widely recognized independent mutual fund monitoring service. Lipper monitors the performance of regulated investment companies, including the Funds, and ranks their performance for various periods in categories
based on investment style. The Lipper performance rankings are based on total returns that include the reinvestment of capital gain distributions and income dividends but do not take sales charges or taxes into consideration. Lipper also publishes
peer-group indices of the performance of all mutual funds in a category that it monitors and averages of the performance of the Funds in particular categories.
Morningstar Ratings and Rankings.
From time to time, the Funds may publish the ranking and/or star rating of the performance of its classes of shares by Morningstar, Inc., an independent mutual
fund monitoring service. Morningstar rates and ranks mutual funds in broad investment categories: domestic stock funds, international stock funds, taxable bond funds and municipal bond funds.
Performance Rankings and Comparisons by Other Entities and Publications.
From time to time, the Funds may include in their advertisements and sales literature performance information about the
Funds cited in newspapers and other periodicals such as The New York Times, The Wall Street Journal, Barrons, or similar publications. That information may include performance quotations from other sources, including Lipper and Morningstar.
The performance of the Funds classes of shares may be compared in publications to the performance of various market indices or other investments and averages, performance rankings or other benchmarks prepared by recognized mutual fund
statistical services.
Davis
Global Fund and Davis International Fund Statement of Additional Information 62
Investors also may wish to compare the returns on each Davis Funds share classes to the return on
fixed-income investments available from banks and thrift institutions. Those include certificates of deposit, ordinary interest-paying checking and savings accounts and other forms of fixed- or variable-time deposits and various other instruments
such as Treasury bills. However, none of the Davis Funds returns or share prices are guaranteed or insured by the FDIC or any other agency and will fluctuate daily, while bank depositary obligations may be insured by the FDIC and may provide
fixed rates of return. Repayment of principal and payment of interest on Treasury securities is backed by the full faith and credit of the U.S. Government.
From time to time, the Fund may publish rankings or ratings of the Adviser or Funds transfer agent and of the investor services provided by them to shareholders of the Davis Funds. Those ratings or
rankings of shareholder and investor services by third parties may include comparisons of their services to those provided by other mutual fund families selected by the rating or ranking services. They may be based on the opinions of the rating or
ranking service itself, using its research or judgment, or based on surveys of investors, brokers, shareholders or others.
Other
Performance Statistics
In reports or other communications to shareholders and in advertising material, the performance of the Fund may be
compared to recognized unmanaged indices or averages of the performance of similar securities. Also, the performance of the Fund may be compared to that of other funds of comparable size and objectives as listed in the rankings prepared by Lipper,
Morningstar, or similar independent mutual fund rating services, and the Fund may use evaluations published by nationally recognized independent ranking services and publications. Any given performance comparison should not be considered
representative of the Funds performance for any future period.
In advertising and sales literature the Davis Funds may publish various
statistics relating to investment portfolio such as the average price to book and price to earnings ratios, beta, alpha, R-squared, standard deviation, etc. of the Funds portfolio holdings.
The performance of the Funds may be compared in publications to the performance of various indices and investments for which reliable performance data is
available and to averages, performance rankings or other information prepared by recognized mutual fund statistical services. The Funds Annual Report and Semi-Annual Report contain additional performance information and are available on
request and without charge by calling Davis Funds toll-free at 1-800-279-0279, Monday through Friday, 9 a.m. to 6 p.m. Eastern time.
Davis
Global Fund and Davis International Fund Statement of Additional Information 63