Table of Contents
Shareholder Letter | 2 |
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Management's Discussion and Analysis | 3 |
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Expense Example | 5 |
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Fund Overview | 7 |
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Schedule of Investments | 8 |
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Statement of Assets and Liabilities | 13 |
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Statement of Operations | 15 |
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Statements of Changes in Net Assets | 16 |
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Notes to Financial Statements | 17 |
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Financial Highlights | 26 |
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Fund Information | 31 |
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Directors and Officers | 32 |
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DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Dear Fellow Shareholder,
As stewards of our customers’ savings, the management team and Directors of the Davis New York Venture Fund recognize the importance of candid, thorough, and regular communication with our shareholders. In our annual and semi-annual reports, we include all of the required quantitative information, such as financial statements, detailed footnotes, performance reports, fund holdings, and performance attribution.
In addition, we produce a Quarterly Review. In this Review, we give a more qualitative perspective on fund performance, discuss our thoughts on individual holdings, and share our investment outlook. You may obtain a copy of the current Quarterly Review either on our website, www.davisfunds.com, or by calling 1-800-279-0279.
Sincerely,
Christopher C. Davis
President
March 3, 2006
2
DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Management’s Discussion and Analysis
Market Environment
During the six-month period ended January 31, 2006, the stock market, as measured by the Standard & Poor’s 500® Index1, returned 4.67%. U.S. economic activity, as measured by the inflation-adjusted gross domestic product (“GDP”), increased by 4.1% in the third quarter and increased by 1.6% in the fourth quarter of 2005. Interest rates, as measured by the 10-year Treasury bond, began August 2005 at about 4.2%, increased to about 4.5%, and ended January 2006 at about 4.4%.
Performance Overview
Davis New York Venture Fund’s Class A shares delivered a total return on net asset value of 7.79% for the six-month period ended January 31, 20062. Over the same time period the Standard & Poor’s 500® Index1 returned 4.67%. The Fund’s investment strategy is to use the Davis Investment Discipline to invest the majority of the Fund’s assets in equity securities issued by large companies with market capitalizations of at least $10 billion.
Diversified financial companies were the most important contributors3 to the Fund’s performance over the six-month period. The Fund benefited both by investing a larger percentage of its assets in diversified financial companies than did the S&P 500® Index, and as a group, the individual diversified financial companies that the Fund owned out-performed the average diversified financial company included in the Index. American Express4, JPMorgan Chase, and Moody’s were among the top contributors to performance.
The Fund’s largest holdings were in insurance companies, which made important contributions to performance. American International Group and Loews were among the top contributors to performance.
Energy companies were also important contributors to performance over the six-month period. Energy companies were the strongest performing sector of the S&P 500® Index. EOG Resources and Devon Energy were among the top contributors to the Fund’s performance over the six-month period.
The Fund’s holdings in consumer discretionary companies detracted from the Fund’s performance. H&R Block, Comcast, and AutoZone were among the top detractors from performance. The Fund no longer owns AutoZone.
Altria, a food, beverage, and tobacco company, was among the most important contributors to performance during the period. Tyco, a capital goods company, Lexmark, a technology hardware & equipment company, and Hershey, a food and beverage company, were among the most important detractors from performance.
The Fund had approximately 11% of its assets invested in foreign companies at January 31, 2006. As a group, the foreign companies owned by the Fund out-performed the S&P 500® Index over the six-month period.
3
DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Management’s Discussion and Analysis – Continued
This Semi-Annual Report is authorized for use by existing shareholders. Prospective shareholders must receive a current Davis New York Venture Fund prospectus, which contains more information about investment strategies, risks, charges, and expenses. Please read the prospectus carefully before investing or sending money.
Davis New York Venture Fund’s investment objective is long-term growth of capital. There can be no assurance that the Fund will achieve its objective. The primary risks of an investment in the Davis New York Venture Fund are: (1) market risk, (2) company risk, (3) financial services risk, (4) foreign country risk, (5) headline risk, and (6) selection risk. See the prospectus for a full description of each risk.
1 The S&P 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks. Investments cannot be made directly in the index.
2 Total return assumes reinvestment of dividends and capital gain distributions. Past performance is not a guarantee of future results. Investment return and principal value will vary so that, when redeemed, an investor’s shares may be worth more or less than when purchased. Below are the average annual total returns for Davis New York Venture Fund’s Class A shares for the periods ended January 31, 2006. Returns for other classes of shares will vary from the following returns:
(Without a 4.75% sales charge taken into consideration)
Fund Name | One Year | Five Years | Ten Years | Inception |
Davis New York Venture A | 13.26% | 3.95% | 11.64% | 13.42% - 02/17/69 |
(With the maximum 4.75% sales charge taken into consideration) | |
| Fund Name | One Year | Five Years | Ten Years | Inception |
| Davis New York Venture A | 7.89% | 2.94% | 11.10% | 13.27% - 02/17/69 |
| | | | | | |
Fund performance changes over time and current performance may be higher or lower than stated. For more current information please call Davis Funds Shareholder Services at 1-800-279-0279.
3 A company’s contribution to the Fund’s performance is a product of both its appreciation or depreciation and its weighting within the portfolio. For example, a 5% holding that rises 20% has twice as much impact as a 1% holding that rises 50%.
4 This Management Discussion and Analysis discusses a number of individual companies. The information provided in this report does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. The Schedule of Investments lists the Fund’s holdings of each company discussed.
Shares of the Davis New York Venture Fund are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested.
4
DAVIS NEW YORK VENTURE FUND
EXPENSE EXAMPLE (Unaudited)
| Beginning | Ending | Expenses Paid |
| Account Value | Account Value | During Period* |
| (08/01/05) | (01/31/06) | (08/01/05-01/31/06) |
Class A | | | |
Actual | $1,000.00 | $1,077.94 | $4.61 |
Hypothetical | $1,000.00 | $1,020.77 | $4.48 |
Class B | | | |
Actual | $1,000.00 | $1,073.78 | $8.57 |
Hypothetical | $1,000.00 | $1,016.94 | $8.34 |
Class C | | | |
Actual | $1,000.00 | $1,073.79 | $8.57 |
Hypothetical | $1,000.00 | $1,016.94 | $8.34 |
Class R | | | |
Actual | $1,000.00 | $1,076.65 | $5.91 |
Hypothetical | $1,000.00 | $1,019.51 | $5.75 |
Class Y | | | |
Actual | $1,000.00 | $1,079.82 | $3.30 |
Hypothetical | $1,000.00 | $1,022.03 | $3.21 |
Hypothetical assumes 5% annual return before expenses.
*Expenses are equal to the Class’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). See page 6 for a description of the “Expense Example.” The annualized expense ratios for the six-month period ended January 31, 2006 are as follows:
| Annualized Expense Ratio |
| |
Class A | 0.88% |
Class B | 1.64% |
Class C | 1.64% |
Class R | 1.13% |
Class Y | 0.63% |
| |
5
DAVIS NEW YORK VENTURE FUND
EXPENSE EXAMPLE (Unaudited) – (Continued)
The following disclosure provides important information regarding the Fund’s Expense Example. Please refer to this information when reviewing the Expense Example for each Class.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including advisory and administrative fees, distribution and/or service (12b-1) fees, and other Fund expenses. The Expense Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for each class is from 08/01/05 to 01/31/06. Please note that the Expense Example is general and does not reflect certain transaction or account specific costs, which may increase your total costs of investing in the Fund. If these transaction or account specific costs were included in the Expense Example, the expenses would have been higher.
Actual Expenses
The information represented in the row entitled “Actual” provides information about actual account values and actual expenses. You may use the information in this row, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid for on your account during this period.
Hypothetical Example for Comparison Purposes
The information represented in the row entitled “Hypothetical” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the information in the row entitled “Hypothetical” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
6
DAVIS NEW YORK VENTURE FUND
FUND OVERVIEW
At January 31, 2006 (Unaudited)
Portfolio Makeup | | Sector Weightings | |
(% of Fund’s Net Assets) | | (% of Long Term Portfolio) | |
| | | | | |
Common Stock | 99.2% | | Diversified Financials | 16.7% | |
Short Term Investments, | | | Insurance | 16.4% | |
Convertible Bonds, Other | | | Energy | 12.2% | |
Assets & Liabilities | 0.8% | | Banks | 11.4% | |
| | | Food, Beverage, & Tobacco | 8.1% | |
| | | Technology | 5.3% | |
| | | Food & Staples Retailing | 5.0% | |
| | | Materials | 4.4% | |
| | | Media | 4.3% | |
| | | Capital Goods | 3.5% | |
| | | Other | 3.5% | |
| | | Health Care | 3.3% | |
| | | Real Estate | 1.7% | |
| | | Transportation | 1.6% | |
| | | Consumer Services | 1.3% | |
| | | Automobiles & Components | 1.3% | |
| | | | | |
| | | | | |
| | | | | |
Top 10 Holdings |
Security | Industry | % of Fund’s Net Assets |
American Express Co. | Consumer Finance | 5.29% |
Altria Group, Inc. | Food, Beverage, & Tobacco | 5.19% |
American International Group, Inc. | Multi-Line Insurance | 4.53% |
JPMorgan Chase & Co. | Diversified Financial Services | 3.58% |
Costco Wholesale Corp. | Food & Staples Retailing | 3.52% |
Golden West Financial Corp. | Thrift & Mortgage Finance | 3.49% |
ConocoPhillips | Energy | 3.49% |
Tyco International Ltd. | Capital Goods | 3.49% |
Progressive Corp. (Ohio) | Property & Casualty Insurance | 3.02% |
HSBC Holdings PLC | Commercial Banks | 2.93% |
7
DAVIS NEW YORK VENTURE FUND
SCHEDULE OF INVESTMENTS
January 31, 2006 (Unaudited)
| | Value |
Shares | Security | (Note 1) |
COMMON STOCK – (99.24%) |
AUTOMOBILES & COMPONENTS – (1.26%) | | | |
| 8,088,000 | | Harley-Davidson, Inc. | $ | 432,950,640 | |
CAPITAL GOODS – (3.49%) | | | |
| 46,096,306 | | Tyco International Ltd. | | 1,200,808,771 | |
CAPITAL MARKETS – (3.13%) | | | |
| 8,451,920 | | Ameriprise Financial, Inc. | | 343,908,625 | |
| 4,702,705 | | Julius Baer Holding, Ltd. AG | | 377,776,060 | |
| 3,842,580 | | Morgan Stanley | | 236,126,541 | |
| 1,991,400 | | State Street Corp. | | 120,400,044 | |
| | | | | 1,078,211,270 | |
COMMERCIAL BANKS – (7.80%) | | | |
| 5,726,000 | | Commerce Bancorp, Inc. | | 191,477,440 | |
| 5,849,300 | | Fifth Third Bancorp | | 219,436,489 | |
| 60,813,752 | | HSBC Holdings PLC | | 1,010,471,975 | |
| 30,372,130 | | Lloyds TSB Group PLC | | 275,292,916 | |
| 15,879,800 | | Wells Fargo & Co. | | 990,264,328 | |
| | | | | 2,686,943,148 | |
COMMERCIAL SERVICES & SUPPLIES – (1.05%) | | | |
| 5,015,400 | | D&B Corp.* (b) | | 362,513,112 | |
CONSUMER DURABLES & APPAREL – (0.19%) | | | |
| 1,083,036 | | Hunter Douglas NV | | 64,473,322 | |
CONSUMER FINANCE – (5.29%) | | | |
| 34,737,100 | | American Express Co. | | 1,821,960,895 | |
CONSUMER SERVICES – (1.26%) | | | |
| 17,739,200 | | H&R Block, Inc. (b) | | 433,900,832 | |
DIVERSIFIED FINANCIAL SERVICES – (8.16%) | | | |
| 19,081,316 | | Citigroup Inc. | | 888,807,699 | |
| 31,030,640 | | JPMorgan Chase & Co. | | 1,233,467,940 | |
| 8,928,200 | | Moody’s Corp. | | 565,333,624 | |
| 2,588,000 | | Principal Financial Group, Inc. | | 122,050,080 | |
| | | | | 2,809,659,343 | |
ENERGY – (12.15%) | | | |
| 18,586,186 | | ConocoPhillips | | 1,202,526,234 | |
| 14,458,786 | | Devon Energy Corp. | | 986,233,793 | |
| 11,544,100 | | EOG Resources, Inc. | | 975,938,214 | |
| 6,796,700 | | Occidental Petroleum Corp. | | 664,105,557 | |
| 4,371,700 | | Transocean Inc.* | | 354,763,455 | |
| | | | | 4,183,567,253 | |
8
DAVIS NEW YORK VENTURE FUND
SCHEDULE OF INVESTMENTS - (Continued)
January 31, 2006 (Unaudited)
| | Value |
Shares | Security | (Note 1) |
COMMON STOCK – (Continued) |
FOOD & STAPLES RETAILING – (5.03%) | | | |
| 24,330,600 | | Costco Wholesale Corp. (b) | $ | 1,213,123,716 | |
| 11,233,000 | | Wal-Mart Stores, Inc. | | 517,953,630 | |
| | | | | 1,731,077,346 | |
FOOD, BEVERAGE, & TOBACCO – (8.05%) | | | |
| 24,694,700 | | Altria Group, Inc. | | 1,786,414,598 | |
| 29,619,207 | | Diageo PLC | | 440,772,987 | |
| 8,097,950 | | Heineken Holding NV | | 269,425,223 | |
| 5,405,900 | | Hershey Co. | | 276,782,080 | |
| | | | | 2,773,394,888 | |
HEALTH CARE EQUIPMENT & SERVICES – (3.27%) | | | |
| 5,061,600 | | Cardinal Health, Inc. | | 364,637,664 | |
| 7,613,500 | | Caremark Rx, Inc.* | | 375,345,550 | |
| 7,902,900 | | HCA Inc. | | 387,874,332 | |
| | | | | 1,127,857,546 | |
HOUSEHOLD & PERSONAL PRODUCTS – (0.80%) | | | |
| 9,785,000 | | Avon Products, Inc. | | 277,111,200 | |
INSURANCE BROKERS – (1.59%) | | | |
| 8,617,400 | | Aon Corp. | | 294,887,428 | |
| 8,294,700 | | Marsh & McLennan Cos, Inc. | | 252,075,933 | |
| | | | | 546,963,361 | |
INTERNET RETAIL – (0.38%) | | | |
| 2,367,750 | | Expedia, Inc.* | | 61,668,049 | |
| 2,367,750 | | IAC/InterActiveCorp* | | 68,664,750 | |
| | | | | 130,332,799 | |
LIFE & HEALTH INSURANCE – (0.18%) | | | |
| 1,493,400 | | Sun Life Financial Inc. | | 63,155,886 | |
MATERIALS – (4.36%) | | | |
| 2,990,500 | | BHP Billiton PLC | | 55,249,189 | |
| 4,019,100 | | Martin Marietta Materials, Inc. (b) | | 340,739,298 | |
| 1,284,000 | | Rio Tinto PLC | | 65,488,993 | |
| 13,079,700 | | Sealed Air Corp.* (b) | | 722,915,019 | |
| 4,400,520 | | Vulcan Materials Co. | | 316,309,378 | |
| | | | | 1,500,701,877 | |
MEDIA – (4.30%) | | | |
| 27,144,700 | | Comcast Corp., Special Class A* | | 751,501,019 | |
| 1,620,900 | | Gannett Co., Inc. | | 100,171,620 | |
| 4,778,665 | | Lagardere S.C.A. | | 380,925,584 | |
| 3,944,000 | | Liberty Media Corp., Class A* | | 32,971,840 | |
| 2,800,000 | | News Corp., Class A | | 44,128,000 | |
9
DAVIS NEW YORK VENTURE FUND
SCHEDULE OF INVESTMENTS - (Continued)
January 31, 2006 (Unaudited)
| | Value |
Shares | Security | (Note 1) |
COMMON STOCK – (Continued) |
MEDIA – (Continued) | | | |
| 1,124,000 | | NTL Inc.* (d) | $ | 71,087,380 | |
| 8,941,680 | | WPP Group PLC | | 99,261,152 | |
| | | | | 1,480,046,595 | |
MULTI-LINE INSURANCE – (6.67%) | | | |
| 23,810,210 | | American International Group, Inc. | | 1,558,616,347 | |
| 7,492,200 | | Loews Corp. | | 739,405,218 | |
| | | | | 2,298,021,565 | |
PROPERTY & CASUALTY INSURANCE – (6.56%) | | | |
| 11,203 | | Berkshire Hathaway Inc., Class A* | | 1,002,556,470 | |
| 13,275 | | Berkshire Hathaway Inc., Class B* | | 38,922,300 | |
| 1,609,200 | | Chubb Corp. | | 151,828,020 | |
| 79,630 | | Markel Corp.* | | 26,596,420 | |
| 9,890,100 | | Progressive Corp. (Ohio) (b) | | 1,038,856,104 | |
| | | | | 2,258,759,314 | |
REAL ESTATE – (1.72%) | | | |
| 800,100 | | CenterPoint Properties Trust | | 39,716,964 | |
| 10,749,204 | | General Growth Properties, Inc. | | 554,658,926 | |
| | | | | 594,375,890 | |
REINSURANCE – (1.33%) | | | |
| 617,200 | | Everest Re Group, Ltd. | | 59,652,380 | |
| 6,293,762 | | Transatlantic Holdings, Inc. (b) | | 398,709,823 | |
| | | | | 458,362,203 | |
SOFTWARE & SERVICES – (2.74%) | | | |
| 12,836,300 | | Iron Mountain Inc.* (b) | | 535,016,984 | |
| 14,552,800 | | Microsoft Corp. | | 409,734,084 | |
| | | | | 944,751,068 | |
TECHNOLOGY HARDWARE & EQUIPMENT – (2.56%) | | | |
| 10,125,000 | | Dell Inc.* | | 296,814,375 | |
| 6,654,400 | | Hewlett-Packard Co. | | 207,484,192 | |
| 5,940,100 | | Lexmark International, Inc., Class A* (b) | | 288,510,657 | |
| 4,830,300 | | Nokia Oyj, ADR | | 88,780,914 | |
| | | | | 881,590,138 | |
TELECOMMUNICATION SERVICES – (0.83%) | | | |
| 6,609,500 | | SK Telecom Co., Ltd., ADR | | 153,538,685 | |
| 5,678,000 | | Telewest Global, Inc.* | | 132,439,350 | |
| | | | | 285,978,035 | |
THRIFT & MORTGAGE FINANCE – (3.49%) | | | |
| 17,033,500 | | Golden West Financial Corp. (b) | | 1,202,905,770 | |
10
DAVIS NEW YORK VENTURE FUND
SCHEDULE OF INVESTMENTS - (Continued)
January 31, 2006 (Unaudited)
| | Value |
Shares/Principal | Security | (Note 1) |
COMMON STOCK – (Continued) |
TRANSPORTATION – (1.60%) | | | |
| 54,524,000 | | China Merchants Holdings International Co., Ltd. | $ | 141,972,196 | |
| 47,430,000 | | Cosco Pacific Ltd. | | 96,599,401 | |
| 370,560 | | Kuehne & Nagel International AG, Registered | | 103,984,043 | |
| 2,794,000 | | United Parcel Service, Inc., Class B | | 209,298,540 | |
| | | | | 551,854,180 | |
| | | Total Common Stock – (identified cost $21,899,364,490) | | 34,182,228,247 | |
CONVERTIBLE BONDS – (0.25%) | |
| | | |
TELECOMMUNICATION SERVICES – (0.25%) | | | |
$ | 68,500,000 | | Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11 (e) | | | |
| | | (identified cost $68,500,000) | | 84,474,200 | |
REPURCHASE AGREEMENTS – (0.88%) |
| 101,803,000 | | Banc of America Securities LLC Joint Repurchase Agreement, 4.46%, | | | |
| | | 02/01/06, dated 01/31/06, repurchase value of $101,815,612 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a | | | |
| | | pooled cash account, 4.50%-6.50%, 04/01/14-02/01/36 | | | |
| | | total market value $103,839,060) | | 101,803,000 | |
| 101,803,000 | | Nomura Securities International, Inc. Joint Repurchase Agreement, | | | |
| | | 4.46%, 02/01/06, dated 01/31/06, repurchase value of $101,815,612 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a | | | |
| | | pooled cash account, 5.00%-6.03%, 02/01/34-01/01/36 | | | |
| | | total market value $103,839,060) | | 101,803,000 | |
| 98,597,000 | | UBS Financial Services Inc. Joint Repurchase Agreement, 4.46%, | | | |
| | | 02/01/06, dated 01/31/06, repurchase value of $98,609,215 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a | | | |
| | | pooled cash account, 4.27%-6.05%, 11/01/27-05/01/38, | | | |
| | | total market value $100,568,940) | | 98,597,000 | |
| | | Total Repurchase Agreements – (identified cost $302,203,000) | | 302,203,000 | |
INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED – (0.00%) |
MONEY MARKET INSTRUMENTS – (0.00%) | | | |
| 766,350 | | UBS Private Money Market LLC, 4.34682% (identified cost $766,350) | | 766,350 | |
| | | | | | |
11
DAVIS NEW YORK VENTURE FUND
SCHEDULE OF INVESTMENTS - (Continued)
January 31, 2006 (Unaudited)
| | | Total Investments – (identified cost $22,270,833,840) – (100.37%)(a) | $ | 34,569,671,797 | |
| | | Liabilities Less Other Assets – (0.37%) | | (126,325,194 | ) |
| | | Net Assets – (100.00%) | $ | 34,443,346,603 | |
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $22,282,872,678. At January 31, 2006 unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:
| | | Unrealized appreciation | $ | 12,849,725,561 | |
| | | Unrealized depreciation | | (562,926,442 | ) |
| | | Net unrealized appreciation | $ | 12,286,799,119 | |
(b) Affiliated company. Represents ownership of at least 5% of the voting securities of the issuer and is an affiliate, as defined in the Investment Company Act of 1940, at or during the six months ended January 31, 2006. The aggregate fair value of the securities of affiliated companies held by the Fund as of January 31, 2006, amounts to $6,537,191,315. Transactions during the period in which the issuers were affiliates are as follows:
Security | | Shares July 31, 2005 | | Gross Additions | | Gross Reductions | | Shares January 31, 2006 | | Dividend Income |
Costco Wholesale Corp. | | 20,947,600 | | 3,383,000 | | – | | 24,330,600 | $ | 5,206,993 |
D&B Corp. | | 5,015,400 | | – | | – | | 5,015,400 | | – |
Golden West Financial Corp. | | 14,755,000 | | 2,278,500 | | – | | 17,033,500 | | 2,247,980 |
H&R Block, Inc. | | 8,869,600 | | 8,869,600 | | – | | 17,739,200 | | 4,434,800 |
Iron Mountain Inc. | | 12,836,300 | | – | | – | | 12,836,300 | | – |
Julius Baer Holding, Ltd. AG (c) | | 2,687,260 | | 2,015,445 | | – | | 4,702,705 | | – |
Lexmark International, Inc., Class A | | 5,550,100 | | 390,000 | | – | | 5,940,100 | | – |
Martin Marietta Materials, Inc. | | 4,019,100 | | – | | – | | 4,019,100 | | 1,848,786 |
Progressive Corp. (Ohio) | | 9,890,100 | | – | | – | | 9,890,100 | | 593,406 |
Sealed Air Corp. | | 13,079,700 | | – | | – | | 13,079,700 | | – |
Transatlantic Holdings, Inc. | | 6,264,462 | | 29,300 | | – | | 6,293,762 | | 1,503,471 |
(c) | Not an affiliate as of January 31, 2006. |
(d) | Security is partially on loan – See Note 7 of the Notes to Financial Statements. |
(e) | Illiquid Security – See Note 11 of the Notes to Financial Statements. |
See Notes to Financial Statements
12
DAVIS NEW YORK VENTURE FUND
STATEMENT OF ASSETS AND LIABILITIES
At January 31, 2006 (Unaudited)
ASSETS: | | | |
| Investments in securities, at value (see accompanying Schedule of Investments): | | | |
| Unaffiliated companies (including securities loaned of $739,967) (cost of $18,551,402,656) | $ | 28,031,714,132 | |
| Affiliated companies (cost of $3,718,664,834) | | 6,537,191,315 | |
| Collateral for securities loaned (cost of $766,350) (Note 7) | | 766,350 | |
| Cash | | 368,204 | |
| Receivables: | | | |
| Dividends and interest | | 21,912,068 | |
| Capital stock sold | | 185,777,638 | |
| Prepaid expenses | | 869,415 | |
| Total assets | | 34,778,599,122 | |
LIABILITIES: | | | |
| Return of collateral for securities loaned (Note 7) | | 766,350 | |
| Payables: | | | |
| Investment securities purchased | | 189,419,586 | |
| Capital stock redeemed | | 107,821,315 | |
| Accrued expenses | | 8,487,806 | |
| Accrued management fees | | 14,981,968 | |
| Distribution and service plan fees (Note 4) | | 13,775,494 | |
| Total liabilities | | 335,252,519 | |
NET ASSETS | $ | 34,443,346,603 | |
| | | | |
NET ASSETS CONSIST OF: | | | |
| Par value of shares of capital stock | $ | 50,679,989 | |
| Additional paid-in capital | | 24,758,204,332 | |
| Net unrealized appreciation on investments and foreign currency transactions | | 12,298,632,653 | |
| Undistributed net investment loss | | (21,544,797 | ) |
| Accumulated net realized losses from investments and foreign currency transactions | | (2,642,625,574 | ) |
| Net Assets | $ | 34,443,346,603 | |
| | | | |
13
DAVIS NEW YORK VENTURE FUND
STATEMENT OF ASSETS AND LIABILITIES – (Continued)
At January 31, 2006 (Unaudited)
| | |
CLASS A SHARES | | | |
Net assets | $ | 20,249,595,302 | |
Shares outstanding | | 589,297,613 | |
Net asset value and redemption price per share | $ | 34.36 | |
Maximum offering price per share (100/95.25 of $34.36)* | $ | 36.07 | |
| | | |
CLASS B SHARES | | | |
Net assets | $ | 4,917,144,290 | |
Shares outstanding | | 149,281,782 | |
Net asset value, offering, and redemption price per share) | $ | 32.94 | |
| | | |
CLASS C SHARES | | | |
Net assets | $ | 5,767,059,438 | |
Shares outstanding | | 173,961,667 | |
Net asset value, offering, and redemption price per share) | $ | 33.15 | |
| | | |
CLASS R SHARES | | | |
Net assets | $ | 196,454,119 | |
Shares outstanding | | 5,711,376 | |
Net asset value, offering, and redemption price per share) | $ | 34.40 | |
| | | |
CLASS Y SHARES | | | |
Net assets | $ | 3,313,093,454 | |
Shares outstanding | | 95,347,340 | |
Net asset value, offering, and redemption price per share) | $ | 34.75 | |
| | | |
*On purchases of $100,000 or more, the offering price is reduced.
See Notes to Financial Statements
14
DAVIS NEW YORK VENTURE FUND
STATEMENT OF OPERATIONS
For the six months ended January 31, 2006 (Unaudited)
Investment Income: | | | |
| Income: | | | |
| Dividends: | | | |
| Unaffiliated companies (Net of foreign withholding taxes of $1,510,837) | $ | 217,677,164 | |
| Affiliated companies | | 15,835,436 | |
| Interest | | 8,226,142 | |
| Lending fees | | 42,527 | |
| Total income | | 241,781,269 | |
| Expenses: | | | | | |
| Management fees (Note 3) | $ | 78,967,677 | | | |
| Custodian fees | | 2,128,981 | | | |
| Transfer agent fees: | | | | | |
| Class A | | 10,660,306 | | | |
| Class B | | 3,745,838 | | | |
| Class C | | 3,536,931 | | | |
| Class R | | 78,336 | | | |
| Class Y | | 1,600,741 | | | |
| Audit fees | | 43,200 | | | |
| Legal fees | | 42,936 | | | |
| Accounting fees (Note 3) | | 199,998 | | | |
| Reports to shareholders | | 1,674,170 | | | |
| Directors’ fees and expenses | | 255,203 | | | |
| Registration and filing fees | | 699,844 | | | |
| Miscellaneous | | 199,077 | | | |
| Payments under distribution plan (Note 4): | | | | | |
| Class A | | 23,410,293 | | | |
| Class B | | 25,483,504 | | | |
| Class C | | 26,792,210 | | | |
| Class R | | 348,883 | | | |
| Total expenses | | 179,868,128 | |
| Expenses paid indirectly (Note 6) | | (2,270 | ) |
| Reimbursement of expenses by adviser (Note 9) | | (2,128,249 | ) |
| Net expenses | | 177,737,609 | |
| Net investment income | | 64,043,660 | |
| | | | |
Realized and Unrealized Gain (Loss) on Investments: | | | |
| Net realized loss from: | | | |
| Investment transactions | | (17,796,459 | ) |
| Foreign currency transactions | | (2,119,941 | ) |
| Net increase in unrealized appreciation of investments and foreign currency transactions | | 2,332,346,920 | |
| Net realized and unrealized gain on investments and foreign currency | | 2,312,430,520 | |
| Net increase in net assets resulting from operations | $ | 2,376,474,180 | |
See Notes to Financial Statements
15
DAVIS NEW YORK VENTURE FUND
STATEMENTS OF CHANGES IN NET ASSETS
| Six months ended January 31, 2006 (Unaudited) | | Year ended July 31, 2005 | |
Operations: | | | | | | |
Net investment income | $ | 64,043,660 | | $ | 189,811,107 | |
Net realized loss from investments and foreign currency transactions | | (19,916,400 | ) | | (285,213,915 | ) |
Net increase in unrealized appreciation of investments and foreign currency transactions | | 2,332,346,920 | | | 4,015,938,596 | |
Net increase in net assets resulting from operations | | 2,376,474,180 | | | 3,920,535,788 | |
| | | | | | |
Dividends and Distributions to Shareholders From: | | | | | | |
Net investment income: | | | | | | |
Class A | | (151,675,878 | ) | | (111,730,128 | ) |
Class B | | (2,177,346 | ) | | (190,262 | ) |
Class C | | (3,205,871 | ) | | (1,043,962 | ) |
Class R | | (851,754 | ) | | (138,456 | ) |
Class Y | | (32,418,523 | ) | | (17,850,940 | ) |
| | | | | | |
Capital Share Transactions: | | | | | | |
net increase (decrease) in assets resulting from capital share transactions (Note 5) | | | | | | |
Class A | | 1,490,418,035 | | | 2,499,500,913 | |
Class B | | (659,742,084 | ) | | (805,439,656 | ) |
Class C | | 389,144,002 | | | 474,156,855 | |
Class R | | 91,007,049 | | | 79,639,063 | |
Class Y | | 678,181,946 | | | 833,185,852 | |
| | | | | | |
Total increase in net assets | | 4,175,153,756 | | | 6,870,625,067 | |
| | | | | | |
Net Assets: | | | | | | |
Beginning of period | | 30,268,192,847 | | | 23,397,567,780 | |
End of period* | $ | 34,443,346,603 | | $ | 30,268,192,847 | |
| | | | | | |
*Including undistributed net investment income (loss) of | $ | (21,544,797 | ) | $ | 104,740,915 | |
| | | | | | |
| | | | | | |
| | | | | | |
See Notes to Financial Statements
16
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 2006 (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a separate series of Davis New York Venture Fund, Inc., which is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund's investment objective is growth of capital. The Fund offers shares in five classes, Class A, Class B, Class C, Class R, and Class Y. The Class A shares are sold with a front-end sales charge and the Class B and Class C shares are sold at net asset value and may be subject to a contingent deferred sales charge upon redemption. Class R and Class Y shares are sold at net asset value and are not subject to any contingent deferred sales charge. Class R shares generally are available only to retirement and benefit plans. Class Y shares are only available to certain qualified investors. Income, expenses (other than those attributable to a specific class), and gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by each class. Operating expenses directly attributable to a specific class, such as distribution and transfer agent fees, are charged against the operations of that class. All classes have identical rights with respect to voting (exclusive of each Class's distribution arrangement), liquidation, and distributions. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation – Portfolio securities listed on national securities exchanges are valued at the last reported sales price on the day of valuation. Securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the average of closing bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by a significant event occurring after the close of their primary markets, are valued at fair value as determined in good faith by the Board of Directors. Short-term obligations are valued at amortized cost, which approximates fair value. The valuation procedures are reviewed and subject to approval by the Board of Directors.
Master Repurchase Agreements – The Fund, along with other affiliated funds, may transfer uninvested cash balances into one or more master repurchase agreement accounts. These balances are invested in one or more repurchase agreements, secured by U.S. Government securities. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
Currency Translation – The market values of all assets and liabilities denominated in foreign currencies are recorded in the financial statements after translation to the U.S. Dollar based upon the mean between the bid and offered quotations of the currencies against U.S. Dollars on the date of valuation. The cost basis of such assets and liabilities is determined based upon historical exchange rates. Income and expenses are translated at average exchange rates in effect as accrued or incurred.
Foreign Currency – The Fund may enter into forward purchases or sales of foreign currencies to hedge certain foreign currency denominated assets and liabilities against declines in market value relative to the U.S. Dollar. Forward currency contracts are marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss. When the forward currency contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the forward currency contract at the time it was opened and value at the time it was closed. Investments in forward currency contracts may expose the Fund to risks resulting from unanticipated movements in foreign currency exchange rates or failure of the counter-party to the agreement to perform in accordance with the terms of the contract.
17
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Reported net realized foreign exchange gains or losses arise from sales and maturities of investments, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. The Fund includes foreign currency gains and losses realized on the sale of investments together with market gains and losses on such investments in the statement of operations.
Federal Income Taxes – It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income, including any net realized gains on investments not offset by loss carryovers, to shareholders. Therefore, no provision for Federal Income or Excise Tax is required. At January 31, 2006, the Fund had available for Federal Income Tax purposes unused capital loss carryovers of $2,281,535,000 of which $4,237,000 expires in 2009, $458,003,000 expires in 2010, $1,141,176,000 expires in 2011, $435,021,000 expires in 2012, and $243,098,000 expires in 2013. In addition, at January 31, 2006, the Fund had approximately $329,150,000 of post October 2004 losses available to offset future capital gains, if any, which expire in 2014.
Securities Transactions and Related Investment Income – Securities transactions are accounted for on the trade date (date the order to buy or sell is executed) with realized gain or loss on the sale of securities being determined based upon identified cost. Dividend income is recorded on the ex-dividend date. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.
Dividends and Distributions to Shareholders – Dividends and distributions to shareholders are recorded on the ex-dividend date. Net investment income (loss), net realized gains (losses) and net unrealized appreciation (depreciation) of investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, and net operating losses. The character of dividends and distributions made during the fiscal year from net investment income and net realized securities gains may differ from their ultimate characterization for Federal Income Tax purposes. Also, due to the timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations.
Indemnification - Under the Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, some of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims.
18
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Use of Estimates in Financial Statements – In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Actual results may differ from these estimates.
NOTE 2 – PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term securities) for the six months ended January 31, 2006, were $2,648,121,802 and $859,668,711, respectively.
NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Advisory fees are paid monthly to Davis Advisors (the “Adviser”), the Fund’s investment adviser. The annual rate is 0.75% of the average net assets for the first $250 million, 0.65% of the average net assets on the next $250 million, 0.55% of the average net assets on the next $2.5 billion, 0.54% of the average net assets on the next $1 billion, 0.53% of the average net assets on the next $1 billion, 0.52% of the average net assets on the next $1 billion, 0.51% of the average net assets on the next $1 billion, 0.50% of the average net assets on the next $3 billion, 0.485% of the average net assets on the next $8 billion, 0.47% of the average net assets on the next $7 billion, and 0.455% of the average net assets in excess of $25 billion. Advisory fees paid during the six months ended January 31, 2006, approximated 0.49% of average net assets.
Boston Financial Data Services, Inc. (“BFDS”) is the Fund’s primary transfer agent. The Adviser is also paid for certain transfer agent services. The fee for these services for the six months ended January 31, 2006, amounted to $974,328. State Street Bank & Trust Co. (“State Street Bank”) is the Fund’s primary accounting provider. Fees for such services are included in the custodian fee as State Street Bank also serves as the Fund’s custodian. The Adviser is also paid for certain accounting services. The fee amounted to $199,998 for the six months ended January 31, 2006. Certain directors and the officers of the Fund are also directors and officers of the general partner of the Adviser.
Davis Selected Advisers-NY, Inc. (“DSA-NY”), a wholly-owned subsidiary of the Adviser, acts as sub-adviser to the Fund. DSA-NY performs research and portfolio management services for the Fund under a Sub-Advisory Agreement with the Adviser. The Fund pays no fees directly to DSA-NY.
19
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 4 – DISTRIBUTION AND UNDERWRITING FEES
Class A shares of the Fund are sold at net asset value plus a sales charge and are redeemed at net asset value.
During the six months ended January 31, 2006, Davis Distributors, LLC, the Fund’s Underwriter (the “Underwriter” or “Distributor”) received $13,737,292 from commissions earned on sales of Class A shares of the Fund, of which $2,112,941 was retained by the Underwriter and the remaining $11,624,351 was reallowed to investment dealers. The Underwriter paid the costs of prospectuses in excess of those required to be filed as part of the Fund's registration statement, sales literature and other expenses assumed or incurred by it in connection with such sales.
The Underwriter is reimbursed for amounts paid to dealers as a service fee or commissions with respect to Class A shares sold by dealers, which remain outstanding during the period. The service fee is paid at an annual rate up to 1/4 of 1.00% of the average net assets maintained by the responsible dealers. The service fee for Class A shares of the Fund for the six months ended January 31, 2006, was $23,410,293.
Class B shares of the Fund are sold at net asset value and are redeemed at net asset value less a contingent deferred sales charge if redeemed within six years of purchase.
The Fund pays a distribution fee to reimburse the Distributor for commission advances on the sale of the Fund's Class B shares. Payments under the Class B Distribution Plan are limited to an annual rate of equal to the lesser of 1.25% of the average daily net asset value of the Class B shares or the maximum amount provided by applicable rule or regulation of the National Association of Securities Dealers, Inc., ("NASD"), which currently is 1.00%. Therefore, the effective rate of the Class B Distribution Plan is currently 1.00%, of which 0.75% may be used to pay distribution expenses and 0.25% may be used to pay shareholder service fees. The NASD rule also limits the aggregate amount the Fund may pay for distribution to 6.25% of gross Fund sales since inception of the Rule 12b-1 plan, plus interest, at 1.00% over the prime rate on unpaid amounts. The Distributor intends to seek full payment (plus interest at prime plus 1.00%) of distribution charges that exceed the 1.00% annual limit in some future period or periods when the plan limits have not been reached.
During the six months ended January 31, 2006, Class B shares of the Fund made distribution plan payments, which included distribution fees of $19,113,713 and service fees of $6,369,791.
Commission advances by the Distributor during the six months ended January 31, 2006 on the sale of Class B shares of the Fund amounted to $4,192,442, all of which was reallowed to qualified selling dealers.
The Distributor intends to seek payment from Class B shares of the Fund in the amount of $318,693,702 representing the cumulative commission advances by the Distributor on the sale of the Fund's Class B shares, plus interest, reduced by cumulative distribution fees paid by the Fund and cumulative contingent deferred sales charges paid by redeeming shareholders. The Fund has no contractual obligation to pay any such distribution charges and the amount, if any, timing and condition of such payment are solely within the discretion of the Directors who are not interested persons of the Fund or the Distributor.
20
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 4 – DISTRIBUTION AND UNDERWRITING FEES – (Continued)
| CLASS B SHARES – (Continued) |
A contingent deferred sales charge is imposed upon redemption of certain Class B shares of the Fund within six years of the original purchase. The charge is a declining percentage starting at 4% of the lesser of net asset value of the shares redeemed or the total cost of such shares. During the six months ended January 31, 2006, the Distributor received $2,382,217 in contingent deferred sales charges from Class B shares of the Fund.
Class C shares of the Fund are sold at net asset value and are redeemed at net asset value less a contingent deferred sales charge of 1.00% if redeemed within one year of purchase. The Fund pays a distribution fee to reimburse the Distributor for commission advances on the sale of the Fund's Class C shares. Payments under the Class C Distribution Plan are limited to an annual rate of equal to the lesser of 1.25% of the average daily net asset value of the Class C shares or the maximum amount provided by applicable rule or regulation of the NASD, which currently is 1.00%. Therefore, the effective rate of the Class C Distribution Plan is currently 1.00%, of which 0.75% may be used to pay distribution expenses and 0.25% may be used to pay shareholder service fees. Class C shares are subject to the same 6.25% and 1.00% limitations applicable to the Class B Distribution Plan.
During the six months ended January 31, 2006, Class C shares of the Fund made distribution plan payments, which included distribution fees of $20,094,158 and service fees of $6,698,052.
Commission advances by the Distributor during the six months ended January 31, 2006 on the sale of Class C shares of the Fund amounted to $6,367,549, all of which was reallowed to qualified selling dealers. During the six months January 31, 2006, the Distributor received $223,655 in contingent deferred sales charges from Class C shares of the Fund.
Class R shares of the Fund are sold and redeemed at net asset value. Payments under the Class R Distribution Plan are limited to an annual rate of 0.75% of the average daily net asset value of the Class R shares or the maximum amount provided by applicable rule or regulation of the NASD, which currently is 1.00%. The effective rate of the Class R Distribution Plan is currently 0.50%, of which 0.25% may be used to pay distribution expenses and 0.25% may be used to pay shareholder service fees. Class R shares are subject to the same 6.25% and 1.00% limitations applicable to the Class B Distribution Plan.
During the six months ended January 31, 2006, Class R shares of the Fund made distribution plan payments, which included distribution fees and service fees of $174,442 for each.
21
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 5 - CAPITAL STOCK
At January 31, 2006, there were 3,000,000,000 shares of capital stock ($0.05 par value per share) authorized, 2,125,000,000 of which shares are classified as Davis New York Venture Fund. Transactions in capital stock were as follows:
Class A | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | 101,346,275 | | $ | 3,363,668,706 | | | 166,584,140 | | $ | 5,032,860,658 | |
Shares issued in reinvestment of distributions | 4,192,588 | | | 142,129,647 | | | 3,462,382 | | | 104,739,483 | |
| 105,538,863 | | | 3,505,798,353 | | | 170,046,522 | | | 5,137,600,141 | |
Shares redeemed | (61,211,462 | ) | | (2,015,380,318 | ) | | (87,405,898 | ) | | (2,638,099,228 | ) |
Net increase | 44,327,401 | | $ | 1,490,418,035 | | | 82,640,624 | | $ | 2,499,500,913 | |
| | | | | | | | | | | |
Class B | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | 5,113,665 | | $ | 162,018,413 | | | 12,661,172 | | $ | 364,329,137 | |
Shares issued in reinvestment of distributions | 61,287 | | | 1,993,658 | | | 6,001 | | | 174,369 | |
| 5,174,952 | | | 164,012,071 | | | 12,667,173 | | | 364,503,506 | |
Shares redeemed | (26,084,054 | ) | | (823,754,155 | ) | | (40,494,793 | ) | | (1,169,943,162 | ) |
Net decrease | (20,909,102 | ) | $ | (659,742,084 | ) | | (27,827,620 | ) | $ | (805,439,656 | ) |
| | | | | | | | | | | |
Class C | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | 21,671,325 | | $ | 691,636,164 | | | 35,123,857 | | $ | 1,024,314,882 | |
Shares issued in reinvestment of distributions | 90,402 | | | 2,959,751 | | | 33,016 | | | 965,026 | |
| 21,761,727 | | | 694,595,915 | | | 35,156,873 | | | 1,025,279,908 | |
Shares redeemed | (9,609,234 | ) | | (305,451,913 | ) | | (18,985,186 | ) | | (551,123,053 | ) |
Net increase | 12,152,493 | | $ | 389,144,002 | | | 16,171,687 | | $ | 474,156,855 | |
| | | | | | | | | | | |
22
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 5 - CAPITAL STOCK - (Continued)
Class R | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | 3,300,724 | | $ | 109,698,425 | | | 3,032,631 | | $ | 92,446,812 | |
Shares issued in reinvestment of distributions | 24,825 | | | 842,813 | | | 4,563 | | | 138,272 | |
| 3,325,549 | | | 110,541,238 | | | 3,037,194 | | | 92,585,084 | |
Shares redeemed | (593,193 | ) | | (19,534,189 | ) | | (423,685 | ) | | (12,946,021 | ) |
Net increase | 2,732,356 | | $ | 91,007,049 | | | 2,613,509 | | $ | 79,639,063 | |
| | | | | | | | | | | |
Class Y | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | 25,293,081 | | $ | 846,951,563 | | | 39,188,485 | | $ | 1,201,424,907 | |
Shares issued in reinvestment of distributions | 714,047 | | | 24,463,232 | | | 436,774 | | | 13,347,827 | |
| 26,007,128 | | | 871,414,795 | | | 39,625,259 | | | 1,214,772,734 | |
Shares redeemed* | (5,770,189 | ) | | (193,232,849 | ) | | (12,553,449 | ) | | (381,586,882 | ) |
Net increase | 20,236,939 | | $ | 678,181,946 | | | 27,071,810 | | $ | 833,185,852 | |
| | | | | | | | | | | |
* Amounts for the year ended July 31, 2005 include redemptions as a result of in-kind transfers of securities (see Note 10 in the Notes to Financial Statements).
NOTE 6 - EXPENSES PAID INDIRECTLY
Under an agreement with State Street Bank, custodian fees are reduced for earnings on cash balances maintained at the custodian by the Fund. Such reductions amounted to $2,270 during the six months ended January 31, 2006.
NOTE 7 - SECURITIES LOANED
Davis New York Venture Fund (the “Fund”) has entered into a securities lending arrangement with UBS Financial Services, Inc. Under the terms of the agreement, the Fund receives fee income from lending transactions; in exchange for such fees, UBS Financial Services, Inc. is authorized to loan securities on behalf of the Fund, against receipt of collateral at least equal to the value of the securities loaned. As of January 31, 2006, the Fund had on loan securities valued at $739,967; cash of $766,350 was received as collateral for the loans. The Fund bears the risk of any deficiency in the amount of the collateral available for return to a borrower due to a loss in an approved investment.
23
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
The Fund may borrow up to 5% of its assets from a bank to purchase portfolio securities, or for temporary and emergency purposes. The purchase of securities with borrowed funds creates leverage in the Fund. The Fund has entered into an agreement, which enables it to participate with certain other funds managed by the Adviser in an unsecured line of credit with a bank, which permits borrowings up to $50 million, collectively. Interest is charged based on its borrowings, at a rate equal to the overnight Federal Funds Rate plus 0.75%. The Fund had no borrowings outstanding for the six months ended January 31, 2006.
NOTE 9 - PAYMENTS BY AFFILIATES
The Adviser voluntarily reimbursed the Fund for balance earnings credits on certain Fund demand deposit accounts held at BFDS during the period January 1, 2001 to May 31, 2005. These credits were previously retained by BFDS and not directly transferred to the Fund. The amount paid to the Fund was $2,128,249.
NOTE 10 - IN-KIND REDEMPTION
During the year ended July 31, 2005, shareholders redeemed 2,268,469 shares in exchange for Fund portfolio securities valued at $67,571,498. The Fund realized a gain of $6,610,672 for the year ended July 31, 2005. This gain is not taxable for Federal Income Tax purposes.
NOTE 11 - ILLIQUID SECURITIES
Securities may be considered illiquid if they lack a readily available market or if valuation has not changed for a certain period of time. The aggregate value of illiquid securities in Davis New York Venture Fund amounted to $84,474,200 or 0.25% of the Fund’s net assets, as of January 31, 2006.
Security | | Acquisition Date | | Principal | | Units | | Cost per Unit | | Valuation per Unit as of January 31, 2006 | |
Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11 | | 4/4/05 | | $ | 68,500,000 | | 685,000 | | $ | 100.00 | | $ | 123.32 | |
| | | | | | | | | | | | | | |
24
DAVIS NEW YORK VENTURE FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 12 - LITIGATION MATTERS
On June 2, 2004, a proposed class action lawsuit was filed in the United States District Court for the Southern District of New York on behalf of investors in certain mutual funds (“Funds”) managed by Davis Selected Advisers L.P. (“Davis Advisors”) including the Davis New York Venture Fund. The plaintiffs claim that Davis Advisors and its affiliates, and the individual directors of the Funds (collectively the “Defendants”) used Fund assets to pay brokers to market the Funds and that the Defendants disguised such payments as brokerage commissions and further failed to disclose such payments in public filings or elsewhere. The lawsuit seeks damages of unspecified amounts. Three substantially identical proposed class action lawsuits were filed against the Defendants later in June and July 2004 in the United States District Court for the Southern District of New York. All four suits were consolidated into a single action. In October 2005, the District Court issued an order dismissing the consolidated amended class action complaint. The plaintiffs subsequently sought a motion for reconsideration, which was denied in November 2005. In December 2005, the plaintiffs filed an appeal with the United States Court of Appeals for the Second Circuit. Davis Advisors believes the actions are without merit and the Defendants intend to vigorously defend the proceedings. Although no determination can be made at this time, the Fund does not expect this lawsuit to have a material adverse effect on the assets or results of the Fund.
25
DAVIS NEW YORK VENTURE FUND
FINANCIAL HIGHLIGHTS
CLASS A
Financial Highlights for a share of capital stock outstanding throughout each period.
| Six months
ended
January 31, 2006 | | Year ended July 31, | |
| (Unaudited) | | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 32.13 | | $ | 27.83 | | $ | 23.73 | | $ | 21.47 | | $ | 25.99 | | $ | 30.64 | |
| | | | | | | | | | | | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | | | | | | | | | | | | | |
Net Investment Income | | 0.10 | 3 | | 0.30 | 3 | | 0.17 | | | 0.18 | | | 0.12 | | | 0.11 | |
Net Realized and Unrealized Gains (Losses) | | 2.40 | | | 4.23 | | | 4.12 | | | 2.21 | | | (4.61 | ) | | (2.07 | ) |
Total from Investment Operations | | 2.50 | | | 4.53 | | | 4.29 | | | 2.39 | | | (4.49 | ) | | (1.96 | ) |
| | | | | | | | | | | | | | | | | | |
Dividends and Distributions: | | | | | | | | | | | | | | | | | | |
Dividends from Net Investment Income | | (0.27 | ) | | (0.23 | ) | | (0.19 | ) | | (0.13 | ) | | (0.03 | ) | | (0.04 | ) |
Distributions in Excess of Net Investment Income | | – | | | – | | | – | | | – | | | – | | | (0.01 | ) |
Distributions from Realized Gains | | – | | | – | | | – | | | – | | | – | | | (2.64 | ) |
Total Dividends and Distributions | | (0.27 | ) | | (0.23 | ) | | (0.19 | ) | | (0.13 | ) | | (0.03 | ) | | (2.69 | ) |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, End of Period | $ | 34.36 | | $ | 32.13 | | $ | 27.83 | | $ | 23.73 | | $ | 21.47 | | $ | 25.99 | |
| | | | | | | | | | | | | | | | | | |
Total Return1 | | 7.79% | | | 16.34% | | | 18.10% | | | 11.19% | | | (17.29)% | | | (6.70)% | |
| | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | |
Net Assets, End of Period (000,000 omitted) | $ | 20,250 | | $ | 17,508 | | $ | 12,868 | | $ | 9,581 | | $ | 8,734 | | $ | 10,678 | |
Ratio of Expenses to Average Net Assets | | 0.88%*4 | | | 0.89% | | | 0.92% | | | 0.95% | | | 0.92% | | | 0.89% | |
Ratio of Net Investment Income to Average Net Assets | | 0.62%* | | | 0.98% | | | 0.77% | | | 0.85% | | | 0.49% | | | 0.50% | |
Portfolio Turnover Rate2 | | 3% | | | 3% | | | 6% | | | 10% | | | 22% | | | 15% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Per share calculations were based on average shares outstanding for the period. |
4 | Had the Advisor not reimbursed certain expenses, the ratio of expense to average net assets for the six months ended January 31, 2006 would have been 0.89%. |
See Notes to Financial Statements
26
DAVIS NEW YORK VENTURE FUND
FINANCIAL HIGHLIGHTS
CLASS B
Financial Highlights for a share of capital stock outstanding throughout each period.
| Six months
ended
January 31, 2006 | | Year ended July 31, | |
| (Unaudited) | | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 30.69 | | $ | 26.60 | | $ | 22.70 | | $ | 20.58 | | $ | 25.09 | | $ | 29.85 | |
| | | | | | | | | | | | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | | | | | | | | | | | | | |
Net Investment Income (Loss) | | (0.02 | )4 | | 0.05 | 4 | | (0.02 | ) 4 | | 0.01 | 4 | | (0.09 | ) | | (0.03 | ) |
Net Realized and Unrealized Gains (Losses) | | 2.28 | | | 4.04 | | | 3.92 | | | 2.11 | | | (4.42 | ) | | (2.09 | ) |
Total from Investment Operations | | 2.26 | | | 4.09 | | | 3.90 | | | 2.12 | | | (4.51 | ) | | (2.12 | ) |
| | | | | | | | | | | | | | | | | | |
Dividends and Distributions: | | | | | | | | | | | | | | | | | | |
Dividends from Net Investment Income | | (0.01 | ) | | – | 3 | | – | 3 | | – | | | – | | | – | |
Distributions from Realized Gains | | – | | | – | | | – | | | – | | | – | | | (2.64 | ) |
Total Dividends and Distributions | | (0.01 | ) | | – | 3 | | – | 3 | | – | | | – | | | (2.64 | ) |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, End of Period | $ | 32.94 | | $ | 30.69 | | $ | 26.60 | | $ | 22.70 | | $ | 20.58 | | $ | 25.09 | |
| | | | | | | | | | | | | | | | | | |
Total Return1 | | 7.38% | | | 15.38% | | | 17.18% | | | 10.30% | | | (17.98) % | | | (7.46) % | |
| | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | |
Net Assets, End of Period (000,000 omitted) | $ | 4,917 | | $ | 5,223 | | $ | 5,267 | | $ | 4,917 | | $ | 4,874 | | $ | 6,303 | |
Ratio of Expenses to Average Net Assets | | 1.64%*5 | | | 1.69% | | | 1.73% | | | 1.77% | | | 1.72% | | | 1.71% | |
Ratio of Net Investment Income (Loss) to Average Net Assets | | (0.14) %* | | | 0.18% | | | (0.04) % | | | 0.03% | | | (0.31) % | | | (0.32) % | |
Portfolio Turnover Rate2 | | 3% | | | 3% | | | 6% | | | 10% | | | 22% | | | 15% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Less than $0.005 per share. |
4 | Per share calculations were based on average shares outstanding for the period. |
5 | Had the Advisor not reimbursed certain expenses, the ratio of expense to average net assets for the six months ended January 31, 2006 would have been 1.67%. |
See Notes to Financial Statements
27
DAVIS NEW YORK VENTURE FUND
FINANCIAL HIGHLIGHTS
CLASS C
Financial Highlights for a share of capital stock outstanding throughout each period.
| Six months
ended
January 31, 2006 | | Year ended July 31, | |
| (Unaudited) | | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 30.89 | | $ | 26.77 | | $ | 22.85 | | $ | 20.71 | | $ | 25.24 | | $ | 30.00 | |
| | | | | | | | | | | | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | | | | | | | | | | | | | |
Net Investment Income (Loss) | | (0.02 | )4 | | 0.05 | 4 | | – | 3,4 | | – | 3 | | (0.08 | ) | | (0.02 | ) |
Net Realized and Unrealized Gains (Losses) | | 2.30 | | | 4.08 | | | 3.93 | | | 2.14 | | | (4.45 | ) | | (2.10 | ) |
Total from Investment Operations | | 2.28 | | | 4.13 | | | 3.93 | | | 2.14 | | | (4.53 | ) | | (2.12 | ) |
| | | | | | | | | | | | | | | | | | |
Dividends and Distributions: | | | | | | | | | | | | | | | | | | |
Dividends from Net Investment Income | | (0.02 | ) | | (0.01 | ) | | (0.01 | ) | | – | | | – | | | – | |
Distributions from Realized Gains | | – | | | – | | | – | | | – | | | – | | | (2.64 | ) |
Total Dividends and Distributions | | (0.02 | ) | | (0.01 | ) | | (0.01 | ) | | – | | | – | | | (2.64 | ) |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, End of Period | $ | 33.15 | | $ | 30.89 | | $ | 26.77 | | $ | 22.85 | | $ | 20.71 | | $ | 25.24 | |
| | | | | | | | | | | | | | | | | | |
Total Return1 | | 7.38% | | | 15.42% | | | 17.19% | | | 10.33% | | | (17.95) % | | | (7.42) % | |
| | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | |
Net Assets, End of Period (000,000 omitted) | $ | 5,767 | | $ | 4,998 | | $ | 3,899 | | $ | 3,122 | | $ | 3,004 | | $ | 3,825 | |
Ratio of Expenses to Average Net Assets | | 1.64%*5 | | | 1.68% | | | 1.70% | | | 1.74% | | | 1.70% | | | 1.68% | |
Ratio of Net Investment Income (Loss) to Average Net Assets | | (0.14) %* | | | 0.19% | | | (0.01) % | | | 0.06% | | �� | (0.29) % | | | (0.29) % | |
Portfolio Turnover Rate2 | | 3% | | | 3% | | | 6% | | | 10% | | | 22% | | | 15% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Less than $0.005 per share. |
4 | Per share calculations were based on average shares outstanding for the period. |
5 | Had the Advisor not reimbursed certain expenses, the ratio of expense to average net assets for the six months ended January 31, 2006 would have been 1.65%. |
See Notes to Financial Statements
28
DAVIS NEW YORK VENTURE FUND
FINANCIAL HIGHLIGHTS
CLASS R
Financial Highlights for a share of capital stock outstanding throughout each period.
| Six months
ended
January 31, 2006 | | Year ended July 31, | | August 20, 2003 (Inception of class) through July 31, | |
| (Unaudited) | | 2005 | | 2004 | |
| | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 32.13 | | $ | 27.83 | | $ | 23.98 | |
| | | | | | | | | |
Income From Investment Operations: | | | | | | | | | |
Net Investment Income | | 0.05 | 3 | | 0.23 | 3 | | 0.13 | 3 |
Net Realized and Unrealized Gains | | 2.41 | | | 4.23 | | | 3.86 | |
Total from Investment Operations | | 2.46 | | | 4.46 | | | 3.99 | |
| | | | | | | | | |
Dividends and Distributions: | | | | | | | | | |
Dividends from Net Investment Income | | (0.19 | ) | | (0.16 | ) | | (0.14 | ) |
Total Dividends and Distributions | | (0.19 | ) | | (0.16 | ) | | (0.14 | ) |
| | | | | | | | | |
Net Asset Value, End of Period | $ | 34.40 | | $ | 32.13 | | $ | 27.83 | |
| | | | | | | | | |
Total Return1 | | 7.66% | | | 16.04% | | | 16.67% | |
| | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | |
Net Assets, End of Period (000,000 omitted) | $ | 196 | | $ | 96 | | $ | 10 | |
Ratio of Expenses to Average Net Assets | | 1.13%* | | | 1.15% | | | 1.15%* | |
Ratio of Net Investment Income to Average Net Assets | | 0.37%* | | | 0.72% | | | 0.51%* | |
Portfolio Turnover Rate2 | | 3% | | | 3% | | | 6% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Per share calculations were based on average shares outstanding for the period. |
See Notes to Financial Statements
29
DAVIS NEW YORK VENTURE FUND
FINANCIAL HIGHLIGHTS
CLASS Y
Financial Highlights for a share of capital stock outstanding throughout each period.
| Six months
ended
January 31, 2006 | | Year ended July 31, | |
| (Unaudited) | | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 32.53 | | $ | 28.18 | | $ | 24.01 | | $ | 21.72 | | $ | 26.29 | | $ | 30.96 | |
| | | | | | | | | | | | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | | | | | | | | | | | | | |
Net Investment Income | | 0.15 | 3 | | 0.40 | 3 | | 0.28 | | | 0.25 | | | 0.26 | | | 0.13 | |
Net Realized and Unrealized Gains (Losses) | | 2.44 | | | 4.28 | | | 4.16 | | | 2.24 | | | (4.73 | ) | | (2.02 | ) |
Total from Investment Operations | | 2.59 | | | 4.68 | | | 4.44 | | | 2.49 | | | (4.47 | ) | | (1.89 | ) |
| | | | | | | | | | | | | | | | | | |
Dividends and Distributions: | | | | | | | | | | | | | | | | | | |
Dividends from Net Investment Income | | (0.37 | ) | | (0.33 | ) | | (0.27 | ) | | (0.20 | ) | | (0.10 | ) | | (0.12 | ) |
Distributions in Excess of Net Investment Income | | – | | | – | | | – | | | – | | | – | | | (0.02 | ) |
Distributions from Realized Gains | | – | | | – | | | – | | | – | | | – | | | (2.64 | ) |
Total Dividends and Distributions | | (0.37 | ) | | (0.33 | ) | | (0.27 | ) | | (0.20 | ) | | (0.10 | ) | | (2.78 | ) |
| | | | | | | | | | | | | | | | | | |
Net Asset Value, End of Period | $ | 34.75 | | $ | 32.53 | | $ | 28.18 | | $ | 24.01 | | $ | 21.72 | | $ | 26.29 | |
| | | | | | | | | | | | | | | | | | |
Total Return1 | | 7.98% | | | 16.68% | | | 18.53% | | | 11.53% | | | (17.04) % | | | (6.41) % | |
| | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | |
Net Assets, End of Period (000,000 omitted) | $ | 3,313 | | $ | 2,444 | | $ | 1,354 | | $ | 1,057 | | $ | 946 | | $ | 1,465 | |
Ratio of Expenses to Average Net Assets | | 0.63%* | | | 0.58% | | | 0.58% | | | 0.61% | | | 0.62% | | | 0.62% | |
Ratio of Net Investment Income to Average Net Assets | | 0.87%* | | | 1.29% | | | 1.11% | | | 1.19% | | | 0.79% | | | 0.77% | |
Portfolio Turnover Rate2 | | 3% | | | 3% | | | 6% | | | 10% | | | 22% | | | 15% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Per share calculations were based on average shares outstanding for the period. |
See Notes to Financial Statements
30
DAVIS NEW YORK VENTURE FUND
FUND INFORMATION
Portfolio Proxy Voting Policies and Procedures
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.
In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s Form N-PX filing is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.
Form N–Q
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available without charge upon request by calling 1-800-279-0279 or on the fund’s website at www.davisfunds.com or on the SEC’s website at www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
31
DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
DIRECTORS
For the purposes of their service as directors to the Davis Funds, the business address for each of the directors is 2949 E. Elvira Road, Suite 101, Tucson, AZ 85706. Each Director serves until their retirement, resignation, death or removal. Subject to exceptions and exemptions which may be granted by the Independent Directors, effective January 1, 2006, Directors must retire at the close of business on the last day of the calendar year in which the Director attains age seventy-four (74).
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors
| | | | | |
Marc P. Blum (born 9/9/42) | Director | Director since 1986 | Chief Executive Officer, World Total Return Fund, LLLP; Of Counsel to Gordon, Feinblatt, Rothman, Hoffberger and Hollander, LLC (law firm). | 12 | Director, Legg Mason Trust (asset management company) and Rodney Trust Company (Delaware). |
| | | | | |
Thomas S. Gayner (born 12/16/61) | Director | Director since 2004 | Executive Vice President and Chief Investment Officer, Markel Corporation (insurance company). | 12 | none |
| | | | | |
Jerry D. Geist (born 5/23/34) | Director | Director since 1986 | Chairman, Santa Fe Center Enterprises (energy project development); Retired Chairman and President, Public Service Company of New Mexico. | 12 | Director, CH2M-Hill, Inc. (engineering); Chairman, Santa Fe Center Enterprises; Investment Committee for Microgeneration Technology Fund, UTECH Funds. |
| | | | | |
D. James Guzy (born 3/7/36) | Director | Director since 1982 | Chairman, PLX Technology, Inc. (semi-conductor manufacturer). | 12 | Director, Intel Corp. (semi-conductor manufacturer), Cirrus Logic Corp. (semi-conductor manufacturer), Alliance Technology Fund (a mutual fund), Micro Component Technology, Inc. (micro-circuit handling and testing equipment manufacturer), LogicVision, Inc. (semi-conductor software company), and Tessera Technologies, Inc. (semi-conductor packaging company). |
32
DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors - Continued
| | | | | |
G. Bernard Hamilton (born 3/18/37) | Director | Director since 1978 | Managing General Partner, Avanti Partners, L.P. (investment partnership). | 12 | none |
| | | | | |
Samuel H. Iapalucci (born 07/19/52) | Director | Director since 2006 | Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc. (engineering). | 12 | none |
| | | | | |
Robert P. Morgenthau (born 3/22/57) | Director | Director since 2002 | Chairman, Northroad Capital Management, LLC (an investment management firm) since June 2002; President of Private Advisory Services of Bank of America (an investment management firm) from 2001 until 2002; prior to that a managing director and global head of marketing and distribution for Lazard Asset Management (an investment management firm) for ten years. | 12 | none |
| | | | | |
33
DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors - Continued
| | | | | |
Theodore B. Smith, Jr. (born 12/23/32) | Director | Director since 1994 | Chairman, John Hassall Inc. (fastener manufacturing); Chairman, Cantrock Realty and Mayor, Incorporated Village of Mill Neck, NY. | 12 | none |
| | | | | |
Christian R. Sonne (born 5/6/36) | Director | Director since 1990 | General Partner, Tuxedo Park Associates (land holding and development firm); President and Chief Executive Officer, Mulford Securities Corporation (private investment fund) until 1990; formerly Vice President, Goldman Sachs & Co. (investment banking); Chairman, Board of Trustees, American Scandinavian Foundation. | 12 | none |
| | | | | |
Marsha Williams (born 3/28/51) | Director | Director since 1999 | Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a real estate investment trust); Former Chief Administrative Officer, Crate & Barrel (home furnishings retailer); former Vice President and Treasurer, Amoco Corporation (oil & gas company). | 15 | Director, the Selected Funds (consisting of three portfolios) since 1996; Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering). |
34
DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Inside Directors*
| | | | | |
Jeremy H. Biggs (born 8/16/35) | Director/ Chairman | Director since 1994 | Vice Chairman, Member of the Investment Policy Committee and Member of the International Investment Committee, all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P. | 12 | none |
| | | | | |
Andrew A. Davis (born 6/25/63) | Director | Director since 1997 | President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser. | 15 | Director, the Selected Funds (consisting of three portfolios) since 1998. |
| | | | | |
Christopher C. Davis (born 7/13/65) | Director | Director since 1997 | Chief Executive Officer, President or Vice President of each Davis Fund, Selected Fund, and the Clipper Fund; Chairman and Chief Executive Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser, including sole member of the Adviser’s general partner, Davis Investments, LLC; Employee of Shelby Cullom Davis & Co. (registered broker/dealer). | 15 | Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (newspaper publisher). |
* Jeremy H. Biggs, Andrew A. Davis, and Christopher C. Davis own partnership units (directly, indirectly or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.
35
DAVIS NEW YORK VENTURE FUND
2949 East Elvira Road, Tucson, Arizona 85706
| Directors | Officers |
| Jeremy H. Biggs | Jeremy H. Biggs |
| Marc P. Blum | Chairman |
| Andrew A. Davis | Christopher C. Davis |
| Christopher C. Davis | President |
| Thomas S. Gayner | Andrew A. Davis |
| Jerry D. Geist | Vice President |
| D. James Guzy | Kenneth C. Eich |
| G. Bernard Hamilton | Executive Vice President & Principal |
| Samuel H. Iapalucci | Executive Officer |
| Robert P. Morgenthau | Sharra L. Reed |
| Theodore B. Smith, Jr. | Vice President & Chief Compliance Officer |
| Christian R. Sonne | Douglas A. Haines |
| Marsha Williams | Vice President & Principal Accounting Officer |
| | Thomas D. Tays |
| | Vice President & Secretary |
Investment Adviser | |
Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”) | |
2949 East Elvira Road, Suite 101 | |
Tucson, Arizona 85706 | |
(800) 279-0279 | |
| |
Distributor | |
Davis Distributors, LLC | |
2949 East Elvira Road, Suite 101 | |
Tucson, Arizona 85706 | |
| |
Transfer Agent | |
Boston Financial Data Services, Inc. | |
c/o The Davis Funds | |
P.O. Box 8406 | |
Boston, Massachusetts 02266-8406 | |
| |
Custodian | |
State Street Bank and Trust Co. | |
One Lincoln Street | |
Boston, Massachusetts 02111 | |
| |
Counsel | |
Seyfarth Shaw LLP | |
55 East Monroe Street, Suite 4200 | |
Chicago, Illinois 60603-5803 | |
| |
Independent Registered Public Accounting Firm | |
KPMG LLP | |
707 Seventeenth Street, Suite 2700 | |
Denver, Colorado 80202 | |
For more information about Davis New York Venture Fund including management fee, charges, and expenses, see the current prospectus, which must precede or accompany this report. The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge upon request by calling 1-800-279-0279 and on the Fund’s website at www.davisfunds.com. Quarterly Fact sheets are available on the Fund’s website at www.davisfunds.com.
36
Table of Contents
Management's Discussion and Analysis | 2 |
| |
Expense Example | 5 |
| |
Fund Overview | 7 |
| |
Schedule of Investments | 8 |
| |
Statement of Assets and Liabilities | 11 |
| |
Statement of Operations | 12 |
| |
Statements of Changes in Net Assets | 13 |
| |
Notes to Financial Statements | 14 |
| |
Financial Highlights | 21 |
| |
Fund Information | 24 |
| |
Directors and Officers | 25 |
| |
DAVIS RESEARCH FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Management’s Discussion and Analysis
Market Environment
During the six-month period ended January 31, 2006, the stock market, as measured by the Standard & Poor’s 500® Index1, returned 4.67%. U.S. economic activity, as measured by the inflation-adjusted gross domestic product (“GDP”), increased by 4.1% in the third quarter and increased by 1.6% in the fourth quarter of 2005. Interest rates, as measured by the 10-year Treasury bond, began August 2005 at about 4.2%, increased to about 4.5%, and ended January 2006 at about 4.4%.
Performance Overview
Davis Research Fund’s Class A shares delivered a total return on net asset value of 3.75% for the six-month period ended January 31, 20062. Over the same time period, the Standard & Poor’s 500® Index1 returned 4.67%. The Fund’s investment strategy is to use the Davis Investment Discipline to invest the majority of its assets in equity securities issued by medium and large-capitalization companies.
Energy companies were the most significant contributors3 to the Fund’s performance. These companies out-performed both, the S&P 500® Index, and the energy companies included within the Index. EOG Resources4 and Devon Energy were among the top contributors to performance.
Diversified financial companies also made strong contributions to the Fund’s performance. These companies out-performed both, the S&P 500® Index, and the diversified financial companies included within the Index. Groupe Bruxelles and JPMorgan Chase were among the top contributors to performance.
The Fund made significant investments in information technology companies. These companies out-performed both, the S&P 500® Index, and the information technology companies included within the Index. Hewlett- Packard and Microsoft were among the most important contributors to performance, while Dell was among the most important detractors from performance.
Consumer discretionary companies were the most significant detractors from performance. Consumer discretionary companies in general performed poorly; the Fund was over-weighted in this sector. While Lagardere and Continental were among the top contributors to performance, AutoZone, Sears, Home Depot, Comcast, TJX, Lowe’s, and EchoStar were among the top detractors from performance. The Fund no longer owns AutoZone, Sears, and TJX.
The Fund’s portfolio managers have identified a number of investment opportunities in foreign companies. The Fund had approximately 25% of its assets invested in foreign companies at January 31, 2006. As a group, the companies which the Fund owned, out-performed the S&P 500® Index.
2
DAVIS RESEARCH FUND
2949 East Elvira Road, Suite 101
Management’s Discussion and Analysis – (Continued)
This Semi-Annual Report is authorized for use by existing shareholders. Prospective shareholders must receive a current Davis Research Fund prospectus, which contains more information about investment strategies, risks, charges, and expenses. Please read the prospectus carefully before investing or sending money.
Davis Research Fund’s investment objective is long-term growth of capital. There can be no assurance that the Fund will achieve its objective. The primary risks of an investment in the Davis Research Fund are: (1) market risk, (2) company risk, (3) foreign country risk, (4) medium-capitalization risk, (5) focused portfolio risk, (6) headline risk, and (7) selection risk. See the prospectus for a full description of each risk.
Class A, B, and C shares of the Davis Research Fund have been registered with the Securities and Exchange Commission, and in selected states, where eligible investors are residents. Shares of the Davis Research Fund are currently not available for public sale in any other states or jurisdictions. Currently, only the directors, officers, and employees of the Fund or its investment adviser and sub-adviser (and the investment adviser itself and affiliated companies), are eligible to purchase Fund shares. The Adviser reserves the right to reject any offer to purchase shares.
1 The S&P 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks. Investments cannot be made directly in the Index.
2 Total return assumes reinvestment of dividends and capital gain distributions. Past performance is not a guarantee of future results. Investment return and principal value will vary, so that when redeemed, an investor’s shares may be worth more or less than when purchased. Below are the average annual total returns for Davis Research Fund’s Class A shares for the periods ended January 31, 2006. Returns for other classes of shares will vary from the following returns.
(Without a 4.75% sales charge taken into consideration)
Fund Name | One Year | Three Years | Inception |
Davis Research Fund A | 14.70% | 20.04% | 10.19% - 10/31/01 |
| (With the maximum 4.75% sales charge taken into consideration) | |
| Fund Name | One Year | Three Years | Inception |
| Davis Research Fund A | 9.29% | 18.11% | 8.93% - 10/31/01 |
| | | | | | |
Fund performance changes over time and current performance may be higher or lower than stated. For more current information please call Davis Funds Shareholder Services at 1-800-279-0279.
3
DAVIS RESEARCH FUND
2949 East Elvira Road, Suite 101
Management’s Discussion and Analysis – (Continued)
3 A company’s contribution to the Fund’s performance is a product of both, its appreciation or depreciation, and its weighting within the portfolio. For example, a 5% holding that rises 20% has twice as much impact as a 1% holding that rises 50%.
4 This Management Discussion and Analysis discusses a number of individual companies. The information provided in this report does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. The Schedule of Investments lists the Fund’s holdings of each company discussed.
Shares of the Davis Research Fund are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested.
4
DAVIS RESEARCH FUND
EXPENSE EXAMPLE (Unaudited)
| Beginning | Ending | Expenses Paid |
| Account Value | Account Value | During Period* |
| (08/01/05) | (01/31/06) | (08/01/05-01/31/06) |
Class A | | | |
Actual | $1,000.00 | $1,037.45 | $4.88 |
Hypothetical | $1,000.00 | $1,020.42 | $4.84 |
Class B | | | |
Actual | $1,000.00 | $1,028.47 | $12.78 |
Hypothetical | $1,000.00 | $1,012.60 | $12.68 |
Class C | | | |
Actual | $1,000.00 | $1,029.92 | $12.79 |
Hypothetical | $1,000.00 | $1,012.60 | $12.68 |
Hypothetical assumes 5% annual return before expenses.
* Expenses are equal to the Class’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). See page 6 for a description of the “Expense Example.” The annualized expense ratios for the six-month period ended January 31, 2006 are as follows:
| Annualized Expense Ratio |
| |
Class A | 0.95% |
Class B | 2.50% |
Class C | 2.50% |
5
DAVIS RESEARCH FUND
EXPENSE EXAMPLE (Unaudited) – (Continued)
The following disclosure provides important information regarding the Fund’s Expense Example. Please refer to this information when reviewing the Expense Example for each Class.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including advisory and administrative fees, distribution and/or service (12b-1) fees, and other Fund expenses. The Expense Example is intended to help you understand your ongoing costs (in Dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for each class is from 08/01/05 to 01/31/06. Please note that the Expense Example is general and does not reflect certain transaction or account specific costs, which may increase your total costs of investing in the Fund. If these transaction or account specific costs were included in the Expense Example, the expenses would have been higher.
Actual Expenses
The information represented in the row entitled “Actual” provides information about actual account values and actual expenses. You may use the information in this row, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid for on your account during this period.
Hypothetical Example for Comparison Purposes
The information represented in the row entitled “Hypothetical” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, such as sales charges (loads). Therefore, the information in the row entitled “Hypothetical”, is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
6
DAVIS RESEARCH FUND
FUND OVERVIEW
At January 31, 2006 (Unaudited) |
Portfolio Makeup | | Sector Weightings | |
(% of Fund’s Net Assets) | | (% of Stock Holdings) | |
| | | | | |
Common Stock | 99.9% | | Media | 21.0% | |
Short Term Investments, | | | Technology | 18.8% | |
Other Assets & Liabilities | 0.1% | | Retail | 13.3% | |
| | | Materials | 6.6% | |
| | | Energy | 6.4% | |
| | | Food & Staples Retailing | 6.4% | |
| | | Diversified Financials | 5.8% | |
| | | Automobiles & Components | 5.0% | |
| | | Health Care | 4.8% | |
| | | Food, Beverage, & Tobacco | 4.2% | |
| | | Household & Personal Products | 3.2% | |
| | | Insurance | 1.8% | |
| | | Telecommunication Services | 1.7% | |
| | | Consumer Services | 1.0% | |
Top 10 Holdings
Security | Industry | % of Fund’s Net Assets |
Lagardere S.C.A. | Media | 9.73% |
Amazon.com, Inc. | Internet Retail | 5.28% |
Microsoft Corp. | Software & Services | 4.80% |
Dell Inc. | Technology Hardware & Equipment | 4.79% |
AutoNation, Inc. | Automotive Retail | 4.61% |
Altria Group, Inc. | Food, Beverage, & Tobacco | 4.21% |
Wal-Mart Stores, Inc. | Food & Staples Retailing | 4.13% |
Groupe Bruxelles Lambert S.A. | Diversified Financial Services | 3.75% |
News Corp., Class A | Media | 3.56% |
Devon Energy Corp. | Energy | 3.21% |
7
DAVIS RESEARCH FUND
SCHEDULE OF INVESTMENTS
January 31, 2006 (Unaudited)
| | Value |
Shares | Security | (Note 1) |
COMMON STOCK – (99.91%) |
AUTOMOBILES & COMPONENTS – (5.03%) | | | |
| 10,800 | | Continental AG | $ | 1,051,202 | |
| 22,300 | | Harley-Davidson, Inc. | | 1,193,719 | |
| | | | | 2,244,921 | |
AUTOMOTIVE RETAIL – (4.61%) | | | |
| 92,300 | | AutoNation, Inc.* | | 2,057,367 | |
CONSUMER SERVICES – (0.94%) | | | |
| 7,500 | | Apollo Group, Inc., Class A* | | 417,562 | |
DIVERSIFIED FINANCIAL SERVICES – (5.80%) | | | |
| 15,000 | | Groupe Bruxelles Lambert S.A. | | 1,675,084 | |
| 23,000 | | JPMorgan Chase & Co. | | 914,250 | |
| | | | | 2,589,334 | |
ENERGY – (6.41%) | | | |
| 21,000 | | Devon Energy Corp. | | 1,432,410 | |
| 16,900 | | EOG Resources, Inc. | | 1,428,726 | |
| | | | | 2,861,136 | |
FOOD & STAPLES RETAILING – (6.39%) | | | |
| 20,200 | | Costco Wholesale Corp. | | 1,007,172 | |
| 40,000 | | Wal-Mart Stores, Inc. | | 1,844,400 | |
| | | | | 2,851,572 | |
FOOD, BEVERAGE, & TOBACCO – (4.21%) | | | |
| 26,000 | | Altria Group, Inc. | | 1,880,840 | |
HEALTH CARE EQUIPMENT & SERVICES – (4.79%) | | | |
| 18,600 | | Cardinal Health, Inc. | | 1,339,944 | |
| 11,600 | | Zimmer Holdings, Inc.* | | 799,820 | |
| | | | | 2,139,764 | |
HOME IMPROVEMENT RETAIL – (3.40%) | | | |
| 19,300 | | Home Depot, Inc. | | 782,615 | |
| 11,600 | | Lowe’s Cos, Inc. | | 737,180 | |
| | | | | 1,519,795 | |
HOUSEHOLD & PERSONAL PRODUCTS – (3.16%) | | | |
| 49,900 | | Avon Products, Inc. | | 1,413,168 | |
INTERNET RETAIL – (5.28%) | | | |
| 52,800 | | Amazon.com, Inc.* | | 2,359,896 | |
MATERIALS – (6.62%) | | | |
| 37,700 | | BHP Billiton PLC | | 696,504 | |
| 16,200 | | Companhia Vale do Rio Doce, ADR | | 718,956 | |
| 10,000 | | Monsanto Co. | | 846,100 | |
| 13,600 | | Rio Tinto PLC | | 693,653 | |
| | | | | 2,955,213 | |
8
DAVIS RESEARCH FUND
SCHEDULE OF INVESTMENTS – (Continued)
January 31, 2006 (Unaudited)
| | Value |
Shares/Principal | Security | (Note 1) |
COMMON STOCK – (Continued) |
MEDIA – (21.01%) | | | |
| 43,000 | | Comcast Corp., Special Class A* | $ | 1,190,455 | |
| 32,400 | | EchoStar Communications Corp., Class A* | | 892,782 | |
| 54,500 | | Lagardere S.C.A. | | 4,344,402 | |
| 101,000 | | News Corp., Class A | | 1,591,760 | |
| 122,800 | | WPP Group PLC | | 1,363,197 | |
| | | | | 9,382,596 | |
PROPERTY & CASUALTY INSURANCE – (1.80%) | | | |
| 9 | | Berkshire Hathaway Inc., Class A* | | 805,410 | |
SOFTWARE & SERVICES – (4.80%) | | | |
| 76,100 | | Microsoft Corp. | | 2,142,595 | |
TECHNOLOGY HARDWARE & EQUIPMENT – (13.99%) | | | |
| 48,200 | | Cisco Systems, Inc.* | | 895,315 | |
| 73,000 | | Dell Inc.* | | 2,139,995 | |
| 42,600 | | Hewlett-Packard Co. | | 1,328,268 | |
| 13,400 | | International Business Machines Corp. | | 1,089,420 | |
| 43,500 | | Nokia Oyj | | 795,528 | |
| | | | | 6,248,526 | |
TELECOMMUNICATION SERVICES – (1.67%) | | | |
| 32,500 | | Sprint Nextel Corp. | | 743,925 | |
| | | Total Common Stock – (identified cost $34,581,612) | | 44,613,620 | |
SHORT TERM INVESTMENTS – (2.20%) |
$ | 331,000 | | Banc of America Securities LLC Joint Repurchase Agreement, 4.46%, | | | |
| | | 02/01/06, dated 01/31/06, repurchase value of $331,041 (collateralized | | | |
| | | by: U.S. Government agency mortgages in a pooled cash account, | | | |
| | | 4.50%-6.50%, 04/01/14-02/01/36, total market value $337,620) | | 331,000 | |
| 331,000 | | Nomura Securities International, Inc. Joint Repurchase Agreement, 4.46%, | | | |
| | | 02/01/06, dated 01/31/06, repurchase value of $331,041 (collateralized | | | |
| | | by: U.S. Government agency mortgages in a pooled cash account, | | | |
| | | 5.00%-6.03%, 02/01/34-01/01/36, total market value $337,620) | | 331,000 | |
| 321,000 | | UBS Financial Services Inc. Joint Repurchase Agreement, 4.46%, | | | |
| | | 02/01/06, dated 01/31/06, repurchase value of $321,040 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a pooled | | | |
| | | cash account, 4.27%-6.05%, 11/01/27-05/01/38, total | | | |
| | | market value $327,420) | | 321,000 | |
| | | Total Short Term Investments – (identified cost $983,000) | | 983,000 | |
9
DAVIS RESEARCH FUND
SCHEDULE OF INVESTMENTS – (Continued)
January 31, 2006 (Unaudited)
| | | Total Investments – (102.11%) – (identified cost $35,564,612) – (a) | $ | 45,596,620 | |
| | | Liabilities Less Other Assets – (2.11%) | | (943,595 | ) |
| | | Net Assets – (100%) | $ | 44,653,025 | |
*Non-Income Producing Security.
(a) Aggregate cost for Federal Income Tax purposes is $36,512,356. At January 31, 2006, unrealized appreciation (depreciation) of securities for Federal Income Tax purposes is as follows:
| | | Unrealized appreciation | $ | 9,614,779 | |
| | | Unrealized depreciation | | (530,515 | ) |
| | | Net unrealized appreciation | $ | 9,084,264 | |
10
DAVIS RESEARCH FUND
STATEMENT OF ASSETS AND LIABILITIES
At January 31, 2006 (Unaudited)
ASSETS: | | | |
| Investments in securities, at value (cost of $35,564,612) (see accompanying Schedule of Investments) | $ | 45,596,620 | |
| Cash | | 2,475 | |
| Receivables: | | | |
| Dividends and interest | | 3,775 | |
| Capital stock sold | | 108 | |
| Prepaid expenses | | 3,300 | |
| Total assets | | 45,606,278 | |
LIABILITIES: | | | |
| Payables: | | | |
| Investment securities purchased | | 906,859 | |
| Accrued expenses | | 16,938 | |
| Accrued management fees | | 29,456 | |
| Total liabilities | | 953,253 | |
NET ASSETS | $ | 44,653,025 | |
| | | | |
NET ASSETS CONSIST OF: | | | |
| Par value of shares of capital stock | $ | 165,764 | |
| Additional paid-in capital | | 35,197,638 | |
| Overdistributed net investment income | | (787,795 | ) |
| Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currency | | 10,031,729 | |
| Accumulated net realized gains from investments and foreign currency transactions | | 45,689 | |
| Net Assets | $ | 44,653,025 | |
| | | |
CLASS A SHARES: | | | |
Net assets | $ | 44,650,187 | |
Shares outstanding | | 3,315,057 | |
Net asset value and redemption price per share | $ | 13.47 | |
Maximum offering price per share (100/95.25 of $13.47)* | $ | 14.14 | |
| | | |
CLASS B SHARES: | | | |
Net assets | $ | 1,418 | |
Shares outstanding | | 108 | |
Net asset value, offering, and redemption price per share | $ | 13.13 | |
| | | |
CLASS C SHARES: | | | |
Net assets | $ | 1,420 | |
Shares outstanding | | 108 | |
Net asset value, offering, and redemption price per share | $ | 13.15 | |
| | | | | |
*On purchases of $100,000 or more, the offering price is reduced.
See Notes to Financial Statements
11
DAVIS RESEARCH FUND
STATEMENT OF OPERATIONS
For the six months ended January 31, 2006 (Unaudited)
Investment Income: | | | |
| Income: | | | |
| Dividends | $ | 137,270 | |
| Interest | | 28,173 | |
| Total income | | 165,443 | |
| Expenses: | | | | | |
| Management fees (Note 3) | $ | 148,322 | | | |
| Custodian fees | | 17,883 | | | |
| Transfer agent fees: | | | | | |
| Class A | | 407 | | | |
| Class B | | 17 | | | |
| Class C | | 17 | | | |
| Audit fees | | 6,000 | | | |
| Legal fees | | 69 | | | |
| Accounting fees (Note 3) | | 3,000 | | | |
| Reports to shareholders | | 4 | | | |
| Directors’ fees and expenses | | 300 | | | |
| Registration and filing fees | | 8,027 | | | |
| Miscellaneous | | 4,213 | | | |
| Payments under distribution plan (Note 4): | | | | | |
| Class B | | 5 | | | |
| Class C | | 5 | | | |
| Total expenses | | 188,269 | |
| Expenses paid indirectly (Note 6) | | (44 | ) |
| Reimbursement of expenses by adviser (Note 8) | | (88 | ) |
| Net expenses | | 188,137 | |
| Net investment income | | (22,694 | ) |
| | | | |
Realized and Unrealized Gain on Investments: | | | |
| Net realized gains from: | | | |
| Investment transactions | | 1,013,130 | |
| Foreign currency transactions | | 786 | |
| Net increase in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currency | | 495,948 | |
| Net realized and unrealized gain on investments and foreign currency | | 1,509,864 | |
| Net increase in net assets resulting from operations | $ | 1,487,170 | |
| | | | | | | |
See Notes to Financial Statements
12
DAVIS RESEARCH FUND
STATEMENTS OF CHANGES IN NET ASSETS
| Six months ended January 31, 2006 (Unaudited) | | Year ended July 31, 2005 | |
Operations: | | | | | | |
Net investment income (loss) | $ | (22,694 | ) | $ | 143,375 | |
Net realized gain from investments and foreign currency transactions | | 1,013,916 | | | 3,432,174 | |
Net increase in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currency | | 495,948 | | | 5,043,430 | |
Net increase in net assets resulting from operations | | 1,487,170 | | | 8,618,979 | |
| | | | | | |
Dividends and Distributions to Shareholders From: | | | | | | |
Net investment income: | | | | | | |
Class A | | (710,770 | ) | | (310,780 | ) |
Class B | | (1 | ) | | – | |
Class C | | (1 | ) | | – | |
Realized gains from investment transactions: | | | | | | |
Class A | | (2,754,020 | ) | | – | |
Class B | | (102 | ) | | – | |
Class C | | (102 | ) | | – | |
| | | | | | |
Capital Share Transactions: | | | | | | |
net increase (decrease) in assets resulting from capital share transactions (Note 5) | | | | | | |
Class A | | 8,278,704 | | | 513,826 | |
Class B | | 103 | | | (52 | ) |
Class C | | 103 | | | (52 | ) |
| | | | | | |
Total increase in net assets | | 6,301,084 | | | 8,821,921 | |
| | | | | | |
Net Assets: | | | | | | |
Beginning of period | | 38,351,941 | | | 29,530,020 | |
End of period* | $ | 44,653,025 | | $ | 38,351,941 | |
| | | | | | |
*Including overdistributed net investment income of | $ | (787,795 | ) | $ | (54,329 | ) |
| | | | | | |
| | | | | | |
| | | | | | |
See Notes to Financial Statements
13
DAVIS RESEARCH FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 2006 (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a separate series of Davis New York Venture Fund, Inc., which is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Fund's investment objective is long-term growth of capital. The Fund commenced operations on October 31, 2001. The Fund offers shares in three classes, Class A, Class B, and Class C. The Class A shares are sold with a front-end sales charge and the Class B and Class C shares are sold at net asset value and may be subject to a contingent deferred sales charge upon redemption. Income, expenses (other than those attributable to a specific class), and gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by each class. Operating expenses directly attributable to a specific class, such as distribution and transfer agent fees, are charged against the operations of that class. All classes have identical rights with respect to voting (exclusive of each Class's distribution arrangement), liquidation, and distributions. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation – Portfolio securities listed on national securities exchanges are valued at the last reported sales price on the day of valuation. Securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the average of closing bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by a significant event occurring after the close of their primary markets, are valued at fair value as determined in good faith by the Board of Directors. Short-term obligations are valued at amortized cost, which approximates fair value. These valuation procedures are reviewed and subject to approval by the Board of Directors.
Master Repurchase Agreements – The Fund, along with other affiliated funds, may transfer uninvested cash balances into one or more master repurchase agreement accounts. These balances are invested in one or more repurchase agreements, secured by U.S. Government securities. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
Currency Translation – The market values of all assets and liabilities denominated in foreign currencies are recorded in the financial statements after translation to the U.S. Dollar based upon the mean between the bid and offered quotations of the currencies against U.S. Dollars on the date of valuation. The cost basis of such assets and liabilities is determined based upon historical exchange rates. Income and expenses are translated at average exchange rates in effect as accrued or incurred.
Foreign Currency – The Fund may enter into forward purchases or sales of foreign currencies to hedge certain foreign currency denominated assets and liabilities against declines in market value relative to the U.S. Dollar. Forward currency contracts are marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss. When the forward currency contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the forward currency contract at the time it was opened and value at the time it was closed. Investments in forward currency contracts may expose the Fund to risks resulting from unanticipated movements in foreign currency exchange rates or failure of the counter-party to the agreement to perform in accordance with the terms of the contract.
14
DAVIS RESEARCH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
Reported net realized foreign exchange gains or losses arise from sales and maturities of investments, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. The Fund includes foreign currency gains and losses realized on the sale of investments together with market gains and losses on such investments in the statement of operations.
Federal Income Taxes – It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income, including any net realized gains on investments not offset by loss carryovers, to shareholders. Therefore, no provision for Federal Income or excise tax is required.
Securities Transactions and Related Investment Income – Securities transactions are accounted for on the trade date (date the order to buy or sell is executed) with realized gain or loss on the sale of securities being determined based upon identified cost. Dividend income is recorded on the ex-dividend date. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.
Dividends and Distributions to Shareholders – Dividends and distributions to shareholders are recorded on the ex-dividend date. Net investment income (loss), net realized gains (losses) and net unrealized appreciation (depreciation) of investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, net operating losses, passive foreign investment company shares, and distributions in connection with redemption of Fund shares. The character of the dividends and distributions made during the fiscal year from net investment income and net realized securities gains may differ from their ultimate characterization for Federal Income Tax purposes. Also, due to the timing of the dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which income or realized gain was recorded by the Fund. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations.
Indemnification - Under the Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, some of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims.
15
DAVIS RESEARCH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
Use of Estimates in Financial Statements – In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Actual results may differ from these estimates.
NOTE 2 – PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term securities) for the six months ended January 31, 2006, were $13,472,548 and $8,119,140, respectively.
NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Advisory fees are paid to Davis Advisors (the “Adviser”), the Fund’s investment adviser, at the annual rate of 0.75% of the average net assets for the first $250 million, 0.65% of the average net assets on the next $250 million, and 0.55% of the average net assets in excess of $500 million. Advisory fees paid during the six months ended January 31, 2006, approximated 0.75% of average net assets.
Boston Financial Data Services, Inc. (“BFDS”) is the Fund’s primary transfer agent. The Adviser is also paid for certain transfer agent services. The fee for these services for the six months ended January 31, 2006 amounted to $54. State Street Bank and Trust Company (“State Street Bank”) is the Fund’s primary accounting provider. Fees for such services are included in the custodian fee as State Street Bank also serves as the Fund’s custodian. The Adviser is also paid for certain accounting services. The fee amounted to $3,000 for the six months ended January 31, 2006. Certain directors and the officers of the Fund are also directors and officers of the general partner of the Adviser.
Davis Selected Advisers-NY, Inc. (“DSA-NY”), a wholly-owned subsidiary of the Adviser, acts as sub-adviser to the Fund. DSA-NY performs research and portfolio management services for the Fund under a Sub-Advisory Agreement with the Adviser. The Fund pays no fees directly to DSA-NY.
NOTE 4 – DISTRIBUTION AND UNDERWRITING FEES
| Class A shares of the Fund are sold at net asset value plus a sales charge and are redeemed at net asset value. |
During the six months ended January 31, 2006, Davis Distributors, LLC, the Fund’s Underwriter (the “Underwriter” or “Distributor”) received no commissions earned on sales of Class A shares of the Fund.
The Underwriter is reimbursed for amounts paid to dealers as a service fee or commissions with respect to Class A shares sold by dealers, which remain outstanding during the period. The service fee is paid at an annual rate up to 1/4 of 1% of the average net assets maintained by the responsible dealers. There was no service fee for Class A shares of the Fund for the six months ended January 31, 2006.
16
DAVIS RESEARCH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 4 – DISTRIBUTION AND UNDERWRITING FEES – (Continued)
Class B shares of the Fund are sold at net asset value and are redeemed at net asset value less a contingent deferred sales charge if redeemed within six years of purchase.
The Fund pays a distribution fee to reimburse Davis Distributors, LLC (the “Distributor”) for commission advances on the sale of the Fund's Class B shares. Payments under the Class B Distribution Plan are limited to an annual rate of equal to the lesser of 1.25% of the average daily net asset value of the Class B shares or the maximum amount provided by applicable rule or regulation of the National Association of Securities Dealers, Inc., ("NASD"), which is currently 1.00%. Therefore, the effective rate of the Class B Distribution Plan is currently 1.00%, of which 0.75% may be used to pay distribution expenses, and 0.25% may be used to pay shareholder service fees. The NASD rule also limits the aggregate amount the Fund may pay for distribution to 6.25% of gross Fund sales since inception of the Rule 12b-1 plan, plus interest, at 1.00% over the prime rate on unpaid amounts. The Distributor intends to seek full payment (plus interest at prime plus 1.00%) of distribution charges that exceed the 1.00% annual limit in some future period or periods when the plan limits have not been reached.
During the six months ended January 31, 2006, Class B shares of the Fund made distribution payments of $5, and there were no payments made for service fees.
There were no commission advances by the Distributor during the six months ended January 31, 2006 on the sale of Class B shares of the Fund.
The Distributor intends to seek payment from Class B shares of the Fund in the amount of $35, which represents the maximum amount allowed under applicable NASD rules discussed above. The Fund has no contractual obligation to pay any such distribution charges, and the amount, if any, timing and condition of such payments are solely within the discretion of the Directors who are not interested persons of the Fund or the Distributor.
A contingent deferred sales charge is imposed upon redemption of certain Class B shares of the Fund within six years of the original purchase. The charge is a declining percentage starting at 4% of the lesser of net asset value of the shares redeemed or the total cost of such shares. During the six months ended January 31, 2006, the Distributor received no contingent deferred sales charges from Class B shares of the Fund.
17
DAVIS RESEARCH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 4 – DISTRIBUTION AND UNDERWRITING FEES – (Continued)
Class C shares of the Fund are sold at net asset value and are redeemed at net asset value less a contingent deferred sales charge of 1.00% if redeemed within one year of purchase. The Fund pays a distribution fee to reimburse Davis Distributors, LLC (the “Distributor”) for commission advances on the sale of the Fund's 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 National Association of Securities Dealers, Inc., ("NASD"), which currently is 1.00%. Therefore, the effective rate of the Class C Distribution Plan is currently 1.00%, of which 0.75% may be used to pay distribution expenses, and 0.25% may be used to pay shareholder service fees. Class C shares are subject to the same 6.25% and 1.00% limitations applicable to the Class B Distribution Plan.
During the six months ended January 31, 2006, Class C shares of the Fund made distribution payments of $5, and there were no payments made for service fees.
There were no commission advances by the Distributor during the six months ended January 31, 2006 on the sale of Class C shares of the Fund. During the six months ended January 31, 2006, the Distributor received no contingent deferred sales charges from Class C shares of the Fund.
18
DAVIS RESEARCH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 5 - CAPITAL STOCK
At January 31, 2006, there were 3,000,000,000 shares of capital stock ($0.05 par value per share) authorized, 500,000,000 of which shares are classified as Davis Research Fund. Transactions in capital stock were as follows:
Class A | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | 358,047 | | $ | 4,850,871 | | | 35,961 | | $ | 479,265 | |
Shares issued in reinvestment of distributions | 261,836 | | | 3,455,621 | | | 23,294 | | | 310,250 | |
| 619,883 | | | 8,306,492 | | | 59,225 | | | 789,515 | |
Shares redeemed | (2,087 | ) | | (27,788 | ) | | (21,956 | ) | | (275,689 | ) |
Net increase | 617,796 | | $ | 8,278,704 | | | 37,299 | | $ | 513,826 | |
| | | | | | | | | | | |
Class B | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | – | | $ | – | | | – | | $ | – | |
Shares issued in reinvestment of distributions | 8 | | | 103 | | | – | | | – | |
| 8 | | | 103 | | | – | | | – | |
Shares redeemed | – | | | – | | | (4 | ) | | (52 | ) |
Net increase (decrease) | 8 | | $ | 103 | | | (4 | ) | $ | (52 | ) |
| | | | | | | | | | | |
Class C | Six months ended January 31, 2006 (Unaudited) | | | Year ended July 31, 2005 | |
| Shares | | | Amount | | | Shares | | | Amount | |
Shares subscribed | – | | $ | – | | | – | | $ | – | |
Shares issued in reinvestment of distributions | 8 | | | 103 | | | – | | | – | |
| 8 | | | 103 | | | – | | | – | |
Shares redeemed | – | | | – | | | (4 | ) | | (52 | ) |
Net increase (decrease) | 8 | | $ | 103 | | | (4 | ) | $ | (52 | ) |
| | | | | | | | | | | |
19
DAVIS RESEARCH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
January 31, 2006 (Unaudited)
NOTE 6 - EXPENSES PAID INDIRECTLY
Under an agreement with State Street Bank, custodian fees are reduced for earnings on cash balances maintained at the custodian by the Fund. Such reductions amounted to $44 during the six months ended January 31, 2006.
NOTE 7 - BANK BORROWINGS
The Fund may borrow up to 5% of its assets from a bank to purchase portfolio securities, or for temporary and emergency purposes. The purchase of securities with borrowed funds creates leverage in the Fund. The Fund has entered into an agreement, which enables it to participate with certain other Davis Funds in an unsecured line of credit with a bank, which permits borrowings up to $50 million, collectively. Interest is charged based on its borrowings, at a rate equal to the overnight Federal Funds Rate, plus 0.75%. The Fund had no borrowings outstanding for the six months ended January 31, 2006.
NOTE 8 - PAYMENTS BY AFFILIATES
The Adviser voluntarily reimbursed the Fund for balance earnings credits on certain Fund demand deposit accounts held at BFDS during the period January 1, 2001 to May 31, 2005. These credits were previously retained by BFDS and not directly transferred to the Fund. The amount paid to Davis Research Fund amounted to $88.
NOTE 9 - LITIGATION MATTERS
On June 2, 2004, a proposed class action lawsuit was filed in the United States District Court for the Southern District of New York on behalf of investors in certain mutual funds (“Funds”) managed by Davis Selected Advisers L.P. (“Davis Advisors”), including the Davis Research Fund. The plaintiffs claim, that Davis Advisors and its affiliates, and the individual directors of the Funds (collectively the “Defendants”), used Fund assets to pay brokers to market the Funds, and that the Defendants disguised such payments as brokerage commissions, and further failed to disclose such payments in public filings or elsewhere. The lawsuit seeks damages of unspecified amounts. Three substantially identical proposed class action lawsuits were filed against the Defendants later in June and July 2004 in the United States Court for the Southern District of New York. All four suits were consolidated into a single action. In October 2005, the District Court issued an order dismissing the consolidated amended class action complaint. The plaintiffs subsequently sought a motion for reconsideration, which was denied in November 2005. In December 2005, the plaintiffs filed an appeal with the United States Court of Appeals for the Second Circuit. Davis Advisors believes the actions are without merit and the Defendants intend to vigorously defend the proceedings. Although no determination can be made at this time, the Fund does not expect this lawsuit to have a material adverse effect on the assets or results of the Fund.
20
DAVIS RESEARCH FUND
FINANCIAL HIGHLIGHTS
CLASS A
Financial Highlights for a share of capital stock outstanding throughout each period:
| Six months
ended
January 31, 2006 | | Year ended July 31, | October 31, 2001 (Commencement of operations) through July 31, |
| (Unaudited) | | 2005 | | 2004 | | 2003 | | 2002 | |
| | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 14.22 | | $ | 11.10 | | $ | 9.93 | | $ | 8.23 | | $ | 10.00 | |
| | | | | | | | | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | | | | | | | | | | |
Net Investment Income | | – | 3 | | 0.05 | | | 0.06 | | | 0.07 | | | 0.06 | |
Net Realized and Unrealized Gains (Losses) | | 0.49 | | | 3.19 | | | 1.18 | | | 1.69 | | | (1.82 | ) |
Total from Investment Operations | | 0.49 | | | 3.24 | | | 1.24 | | | 1.76 | | | (1.76 | ) |
| | | | | | | | | | | | | | | |
Dividends and Distributions: | | | | | | | | | | | | | | | |
Dividends from Net Investment Income | | (0.22 | ) | | (0.12 | ) | | (0.07 | ) | | (0.06 | ) | | (0.01 | ) |
Distributions from Realized Gains | | (1.02 | ) | | – | | | – | | | – | | | – | |
Total Dividends and Distributions | | (1.24 | ) | | (0.12 | ) | | (0.07 | ) | | (0.06 | ) | | (0.01 | ) |
| | | | | | | | | | | | | | | |
Net Asset Value, End of Period | $ | 13.47 | | $ | 14.22 | | $ | 11.10 | | $ | 9.93 | | $ | 8.23 | |
| | | | | | | | | | | | | | | |
Total Return1 | | 3.75% | | | 29.23% | | | 12.50% | | | 21.56% | | | (17.62)% | |
| | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | |
Net Assets, End of Period (000 omitted) | $ | 44,650 | | $ | 38,349 | | $ | 29,528 | | $ | 26,169 | | $ | 21,623 | |
Ratio of Expenses to Average Net Assets | | 0.95%* | | | 0.93% | | | 0.99% | | | 1.03% | | | 1.05%* | |
Ratio of Net Investment Income (Loss) to Average Net Assets | | (0.11)%* | | | 0.43% | | | 0.60% | | | 0.87% | | | 0.81%* | |
Portfolio Turnover Rate2 | | 21% | | | 54% | | | 44% | | | 119% | | | 45% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Less than $0.005 per share. |
See Notes to Financial Statements
21
DAVIS RESEARCH FUND
FINANCIAL HIGHLIGHTS
CLASS B
Financial Highlights for a share of capital stock outstanding throughout each period:
| Six months
ended
January 31, 2006 | | Year ended July 31, | October 31, 2001 (Commencement of operations) through July 31, |
| (Unaudited) | | 2005 | | 2004 | | 2003 | | 2002 | |
| | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 13.80 | | $ | 10.86 | | $ | 9.79 | | $ | 8.17 | | $ | 10.00 | |
| | | | | | | | | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | | | | | | | | | | |
Net Investment Loss | | (0.09 | ) | | (0.17 | ) | | (0.09 | ) | | (0.06 | ) | | (0.02 | ) |
Net Realized and Unrealized Gains (Losses) | | 0.45 | | | 3.11 | | | 1.16 | | | 1.68 | | | (1.81 | ) |
Total from Investment Operations | | 0.36 | | | 2.94 | | | 1.07 | | | 1.62 | | | (1.83 | ) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Dividends and Distributions: | | | | | | | | | | | | | | | |
Dividends from Net Investment Income | | (0.01 | ) | | – | | | – | | | – | | | – | |
Distributions from Realized Gains | | (1.02 | ) | | – | | | – | | | – | | | – | |
Total Dividends and Distributions | | (1.03 | ) | | – | | | – | | | – | | | – | |
| | | | | | | | | | | | | | | |
Net Asset Value, End of Period | $ | 13.13 | | $ | 13.80 | | $ | 10.86 | | $ | 9.79 | | $ | 8.17 | |
| | | | | | | | | | | | | | | |
Total Return1 | | 2.85% | | | 27.07% | | | 10.93% | | | 19.83% | | | (18.30)% | |
| | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | |
Net Assets, End of Period (000 omitted) | $ | 1 | | $ | 1 | | $ | 1 | | $ | 1 | | $ | 1 | |
Ratio of Expenses to Average Net Assets | | 2.50%*3 | | | 2.02% | | | 2.05% | | | 2.06% | | | 2.04%* | |
Ratio of Net Investment Loss to Average Net Assets | | (1.66)% * | | | (0.66)% | | | (0.46)% | | | (0.16)% | | | (0.18)% * | |
Portfolio Turnover Rate2 | | 21% | | | 54% | | | 44% | | | 119% | | | 45% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Had the Adviser not reimbursed certain expenses, the ratio of expenses to average net assets for the six months ended January 31, 2006, would have been 4.28%. |
See Notes to Financial Statements
22
DAVIS RESEARCH FUND
FINANCIAL HIGHLIGHTS
CLASS C
Financial Highlights for a share of capital stock outstanding throughout each period:
| Six months
ended
January 31, 2006 | | Year ended July 31, | October 31, 2001 (Commencement of operations) through July 31, |
| (Unaudited) | | 2005 | | 2004 | | 2003 | | 2002 | |
| | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 13.80 | | $ | 10.86 | | $ | 9.79 | | $ | 8.17 | | $ | 10.00 | |
| | | | | | | | | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | | | | | | | | | | |
Net Investment Loss | | (0.08 | ) | | (0.16 | ) | | (0.09 | ) | | (0.06 | ) | | (0.02 | ) |
Net Realized and Unrealized Gains (Losses) | | 0.46 | | | 3.10 | | | 1.16 | | | 1.68 | | | (1.81 | ) |
Total from Investment Operations | | 0.38 | | | 2.94 | | | 1.07 | | | 1.62 | | | (1.83 | ) |
| | | | | | | | | | | | | | | |
Dividends and Distributions: | | | | | | | | | | | | | | | |
Dividends from Net Investment Income | | (0.01 | ) | | – | | | – | | | – | | | – | |
Distributions from Realized Gains | | (1.02 | ) | | – | | | – | | | – | | | – | |
Total Dividends and Distributions | | (1.03 | ) | | – | | | – | | | – | | | – | |
| | | | | | | | | | | | | | | |
Net Asset Value, End of Period | $ | 13.15 | | $ | 13.80 | | $ | 10.86 | | $ | 9.79 | | $ | 8.17 | |
| | | | | | | | | | | | | | | |
Total Return1 | | 2.99% | | | 27.07% | | | 10.93% | | | 19.83% | | | (18.30)% | |
| | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | |
Net Assets, End of Period (000 omitted) | $ | 1 | | $ | 1 | | $ | 1 | | $ | 1 | | $ | 1 | |
Ratio of Expenses to Average Net Assets | | 2.50%*3 | | | 2.02% | | | 2.05% | | | 2.06% | | | 2.04%* | |
Ratio of Net Investment Loss to Average Net Assets | | (1.66)%* | | | (0.66)% | | | (0.46)% | | | (0.16)% | | | (0.18)%* | |
Portfolio Turnover Rate2 | | 21% | | | 54% | | | 44% | | | 119% | | | 45% | |
1 | Assumes hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one year. |
2 | The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. |
3 | Had the Adviser not reimbursed certain expenses, the ratio of expenses to average net assets for the six months ended January 31, 2006, would have been 4.28%. |
See Notes to Financial Statements
23
DAVIS RESEARCH FUND
FUND INFORMATION
Portfolio Proxy Voting Policies and Procedures
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279 and (ii) on the SEC’s website at www.sec.gov.
In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s Form N-PX filing is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279 and (ii) on the SEC’s website at www.sec.gov.
Form N–Q
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available without charge, upon request by calling 1-800-279-0279 or on the SEC’s website at www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
24
DAVIS RESEARCH FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
DIRECTORS
For the purposes of their service as directors to the Davis Funds, the business address for each of the directors is 2949 E. Elvira Road, Suite 101, Tucson, AZ 85706. Each Director serves until their retirement, resignation, death or removal. Subject to exceptions and exemptions, which may be granted by the Independent Directors, effective January 1, 2006, Directors must retire at the close of business on the last day of the calendar year in which the Director attains age seventy-four (74).
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
| | | | | |
Independent Directors
| | | | | |
Marc P. Blum (born 9/9/42) | Director | Director since 1986 | Chief Executive Officer, World Total Return Fund, LLLP; Of Counsel to Gordon, Feinblatt, Rothman, Hoffberger and Hollander, LLC (law firm). | 12 | Director, Legg Mason Trust (asset management company) and Rodney Trust Company (Delaware). |
| | | | | |
Thomas S. Gayner (born 12/16/61) | Director | Director since 2004 | Executive Vice President and Chief Investment Officer, Markel Corporation (insurance company). | 12 | none |
| | | | | |
Jerry D. Geist (born 5/23/34) | Director | Director since 1986 | Chairman, Santa Fe Center Enterprises (energy project development); Retired Chairman and President, Public Service Company of New Mexico. | 12 | Director, CH2M-Hill, Inc. (engineering); Chairman, Santa Fe Center Enterprises; Investment Committee for Microgeneration Technology Fund, UTECH Funds. |
| | | | | |
25
DAVIS RESEARCH FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors - Continued
| | | | | |
D. James Guzy (born 3/7/36) | Director | Director since 1982 | Chairman, PLX Technology, Inc. (semi-conductor manufacturer). | 12 | Director, Intel Corp. (semi-conductor manufacturer), Cirrus Logic Corp. (semi-conductor manufacturer), Alliance Technology Fund (a mutual fund), Micro Component Technology, Inc. (micro-circuit handling and testing equipment manufacturer), LogicVision, Inc. (semi-conductor software company), and Tessera Technologies, Inc. (semi-conductor packaging company). |
| | | | | |
G. Bernard Hamilton (born 3/18/37) | Director | Director since 1978 | Managing General Partner, Avanti Partners, L.P. (investment partnership). | 12 | none |
| | | | | |
Samuel H. Iapalucci (born 07/19/52) | Director | Director since 2006 | Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc. (engineering). | 12 | none |
| | | | | |
| | | | | |
Robert P. Morgenthau (born 3/22/57) | Director | Director since 2002 | Chairman, Northroad Capital Management, LLC (an investment management firm) since June 2002; President of Private Advisory Services of Bank of America (an investment management firm) from 2001 until 2002; prior to that a managing director and global head of marketing and distribution for Lazard Asset Management (an investment management firm) for ten years. | 12 | none |
| | | | | |
26
DAVIS RESEARCH FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors - Continued
| | | | | |
Theodore B. Smith, Jr. (born 12/23/32) | Director | Director since 1994 | Chairman, John Hassall, Inc. (fastener manufacturing); Chairman, Cantrock Realty and Mayor, Incorporated Village of Mill Neck, NY. | 12 | none |
| | | | | |
Christian R. Sonne (born 5/6/36) | Director | Director since 1990 | General Partner, Tuxedo Park Associates (land holding and development firm); President and Chief Executive Officer, Mulford Securities Corporation (private investment fund) until 1990; formerly Vice President of Goldman Sachs & Co. (investment banking); Chairman, Board of Trustees, American Scandinavian Foundation. | 12 | none |
| | | | | |
Marsha Williams (born 3/28/51) | Director | Director since 1999 | Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a real estate investment trust); Former Chief Administrative Officer, Crate & Barrel (home furnishings retailer); former Vice President and Treasurer, Amoco Corporation (oil & gas company). | 15 | Director, the Selected Funds (consisting of three portfolios) since 1996; Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering). |
27
DAVIS RESEARCH FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name and Age | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Inside Directors*
| | | | | |
Jeremy H. Biggs (born 8/16/35) | Director/ Chairman | Director since 1994 | Vice Chairman, Member of the Investment Policy Committee and Member of the International Investment Committee, all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P. | 12 | none |
| | | | | |
Andrew A. Davis (born 6/25/63) | Director | Director since 1997 | President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser. | 15 | Director, the Selected Funds (consisting of three portfolios) since 1998. |
| | | | | |
Christopher C. Davis (born 7/13/65) | Director | Director since 1997 | Chief Executive Officer, President or Vice President of each Davis Fund, Selected Fund and the Clipper Fund; Chairman and Chief Executive Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser, including sole member of the Adviser’s general partner, Davis Investments, LLC; Employee of Shelby Cullom Davis & Co. (registered broker/dealer). | 15 | Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (newspaper publisher). |
* Jeremy H. Biggs, Andrew A. Davis, and Christopher C. Davis own partnership units (directly, indirectly or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.
28
DAVIS RESEARCH FUND
2949 East Elvira Road, Tucson, Arizona 85706
| Directors | Officers |
| Jeremy H. Biggs | Jeremy H. Biggs |
| Marc P. Blum | Chairman |
| Andrew A. Davis | Christopher C. Davis |
| Christopher C. Davis | President |
| Thomas S. Gayner | Andrew A. Davis |
| Jerry D. Geist | Vice President |
| D. James Guzy | Kenneth C. Eich |
| G. Bernard Hamilton | Executive Vice President & Principal |
| Samuel H. Iapalucci | Executive Officer |
| Robert P. Morgenthau | Sharra L. Reed |
| Theodore B. Smith, Jr. | Vice President & Chief Compliance Officer |
| Christian R. Sonne | Douglas A. Haines |
| Marsha Williams | Vice President & Principal Accounting Officer |
| | Thomas D. Tays |
| | Vice President & Secretary |
| | |
Investment Adviser | |
Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”) |
2949 East Elvira Road, Suite 101 | |
Tucson, Arizona 85706 | |
(800) 279-0279 | |
| |
Distributor | |
Davis Distributors, LLC | |
2949 East Elvira Road, Suite 101 | |
Tucson, Arizona 85706 | |
| |
Transfer Agent | |
Boston Financial Data Services, Inc. | |
c/o The Davis Funds | |
P.O. Box 8406 | |
Boston, Massachusetts 02266-8406 | |
| |
Custodian | |
State Street Bank and Trust Co. | |
One Lincoln Street | |
Boston, Massachusetts 02111 | |
| |
Counsel | |
Seyfarth Shaw LLP | |
55 East Monroe Street, Suite 4200 | |
Chicago, Illinois 60603-5803 | |
| |
Independent Registered Public Accounting Firm | |
KPMG LLP | |
707 Seventeenth Street, Suite 2700 | |
Denver, Colorado 80202 | |
For more information about the Davis Research Fund, including management fee, charges, and expenses, see the current prospectus, which must precede or accompany this report. The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request by calling 1-800-279-0279.
29
