Table of Contents
Management's Discussion and Analysis | 2 |
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Fund Performance and Supplementary Information | 5 |
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Schedule of Investments | 11 |
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Statement of Assets and Liabilities | 15 |
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Statement of Operations | 16 |
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Statements of Changes in Net Assets | 17 |
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Notes to Financial Statements | 18 |
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Financial Highlights | 26 |
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Report of Independent Registered Public Accounting Firm | 29 |
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Fund Information | 30 |
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Directors and Officers | 31 |
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DAVIS GLOBAL FUND
2949 East Elvira Road, Suite 101
Management’s Discussion and Analysis
Market Environment
During the year ended October 31, 2006, international equity markets, as measured by the Morgan Stanley Capital International World Index1, increased by 21.32%. The Organization for Economic Co-operation and Development (“OECD”) reported that global economic growth was generally positive over the last four calendar quarters ended September 30, 2006. For example, gross domestic product in the United Kingdom increased by approximately 0.7% each quarter while gross domestic product in Japan increased between 0.2% and 0.7% each quarter.
Performance Overview
Davis Global Fund’s Class A shares increased by 27.96%, on net asset value, for the year ended October 31, 20062, out-performing the Morgan Stanley Capital International World Index1, which increased by 21.32%. The Fund’s investment strategy is to use the Davis Investment Discipline to invest the majority of its assets in equity securities issued by both foreign and U.S. companies.
The Fund had approximately 71% of its assets invested in foreign companies, 27% in U.S. companies, and 2% in cash at October 31, 2006. Both the foreign and the U.S. companies made positive contributions3 to the Fund’s performance during the year ended October 31, 2006, with the foreign companies performing especially well.
The Fund’s largest industry group holdings were in consumer discretionary companies, and they were also the most important contributors to performance. Hunter Douglas4, News Corp., and Koninklijke Philips Electronics were among the top contributors to performance. Apollo Group and Mohawk Industries were among the top detractors from performance.
Industrial companies were important contributors to performance during the year ended October 31, 2006. China Merchants Holdings and Kuehne & Nagel were among the top contributors to performance. None of the Fund’s industrial companies detracted from performance.
The Fund had significant holdings in consumer staple and financial companies. Two consumer staple companies, Lindt & Spruengli and Heineken, and one financial company, Groupe Bruxelles, were among the most important contributors to the Fund’s performance. One consumer staples company, Nong Shim Holdings, and one financial company, AFLAC, were among the top detractors from performance.
Overall, energy companies made positive contributions to performance during the year ended October 31, 2006. Tenaris was the single most important contributor to performance and Ship Finance detracted from performance. The Fund no longer owns Ship Finance.
2
DAVIS GLOBAL FUND
2949 East Elvira Road, Suite 101
Management’s Discussion and Analysis – (Continued)
This Annual Report is authorized for use by existing shareholders. Prospective shareholders must receive a current Davis Global Fund prospectus, which contains more information about investment strategies, risks, charges, and expenses. Please read the prospectus carefully before investing or sending money.
Davis Global Fund’s investment objective is long-term growth of capital. There can be no assurance that the Fund will achieve its objective. The primary risks of an investment in Davis Global Fund are: (1) foreign country risk, (2) foreign currency risk, (3) market risk, (4) company risk, (5) medium capitalization 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 Global Fund have been registered with the Securities and Exchange Commission, and, as of January 1, 2007, in all 50 states. From its inception date in December 2004 until January 2007, shares of Davis Global Fund were not available for public sale. Only the directors, officers, and employees of the Fund, or its investment adviser and sub-adviser (and the investment adviser itself and affiliated companies), were eligible to purchase Fund shares.
1 The Morgan Stanley Capital International World Index is an unmanaged index considered to be representative of the broad global stock market. 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. The following table lists the average annual total returns for the periods ended October 31, 2006:
| | Fund Inception |
| One-Year | (12/22/04) |
Davis Global Fund A | | |
without sales charge | 27.96% | 19.28% |
Davis Global Fund A | | |
with 4.75% sales charge | 21.89% | 16.19% |
Morgan Stanley Capital | | |
International World Index | 21.32% | 13.87% |
Fund performance changes over time and current performance may be higher or lower than stated. Returns for other classes of shares will vary from the above returns. For more current information please call Davis Funds Shareholder Services at 1-800-279-0279.
3
DAVIS GLOBAL FUND
2949 East Elvira Road, Suite 101
Management’s Discussion and Analysis – (Continued)
3 A company’s or sector’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 Global 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 GLOBAL FUND
CLASS A FUND PERFORMANCE
Average Annual Return for the | Expense Example | | | |
periods ended October 31, 2006 | | Beginning | Ending | Expenses Paid |
(This calculation includes an | | | Account Value | Account Value | During Period* |
initial sales charge of 4.75%.) | | | (05/01/06) | (10/31/06) | (05/01/06-10/31/06) |
One-year | 21.89% | Actual | $1,000.00 | $1,010.32 | $6.13 |
Life of the Class (December 22, | | Hypothetical (5% return | | | |
2004 through October 31, 2006) | 16.19% | before expenses) | $1,000.00 | $1,019.11 | $6.16 |
*Expenses are equal to the Class’s annualized expense ratio (1.21%), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). See Notes to Performance on page 8 for a description of the “Expense Example”.
$10,000 invested at inception. Let’s say you invested $10,000 in Davis Global Fund, Class A Shares on December 22, 2004 (commencement of operations) and paid a 4.75% sales charge. As the chart shows, by October 31, 2006, the value of your investment would have grown to $13,219 - a 32.19% increase on your initial investment. For comparison, look at how the Morgan Stanley Capital International World Index did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $12,729 - a 27.29% increase.
The Morgan Stanley Capital International World Index is an unmanaged index considered to be representative of the broad global stock market. Investments cannot be made directly in the Index.
The performance data for Davis Global Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
5
DAVIS GLOBAL FUND
CLASS B FUND PERFORMANCE
Average Annual Return for the | Expense Example | | | |
periods ended October 31, 2006 | | Beginning | Ending | Expenses Paid |
(This calculation includes any applicable | | Account Value | Account Value | During Period* |
contingent deferred sales charge.) | | (5/01/06) | (10/31/06) | (05/01/06-10/31/06) |
One-year | 22.41% | Actual | $1,000.00 | $1,003.69 | $11.62 |
Life of the Class (December 22, | | Hypothetical (5% return | | | |
2004 through October 31, 2006) | 16.58% | before expenses) | $1,000.00 | $1,013.61 | $11.67 |
*Expenses are equal to the Class’s annualized expense ratio (2.30%), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). See Notes to Performance on page 8 for a description of the “Expense Example”.
$10,000 invested at inception. Let’s say you invested $10,000 in Davis Global Fund, Class B Shares on December 22, 2004 (commencement of operations). As the chart shows, by October 31, 2006, the value of your investment (less a contingent deferred sales charge) would have grown to $13,302 - a 33.02% increase on your initial investment. For comparison, look at how the Morgan Stanley Capital International World Index did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $12,729 - a 27.29% increase.
The Morgan Stanley Capital International World Index is an unmanaged index considered to be representative of the broad global stock market. Investments cannot be made directly in the Index.
The performance data for Davis Global Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
6
DAVIS GLOBAL FUND
CLASS C FUND PERFORMANCE
Average Annual Return for the | Expense Example | | | |
periods ended October 31, 2006 | | Beginning | Ending | Expenses Paid |
(This calculation includes any applicable | | Account Value | Account Value | During Period* |
contingent deferred sales charge.) | | (05/01/06) | (10/31/06) | (05/01/06-10/31/06) |
One-year | 25.62% | Actual | $1,000.00 | $1,004.43 | $11.62 |
Life of the Class (December 22, | | Hypothetical (5% return | | | |
2004 through October 31, 2006) | 18.03% | before expenses) | $1,000.00 | $1,013.61 | $11.67 |
*Expenses are equal to the Class’s annualized expense ratio (2.30%), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). See Notes to Performance on page 8 for a description of the “Expense Example”.
$10,000 invested at inception. Let’s say you invested $10,000 in Davis Global Fund, Class C Shares on December 22, 2004 (commencement of operations). As the chart shows, by October 31, 2006, the value of your investment would have grown to $13,612 - a 36.12% increase on your initial investment. For comparison, look at the Morgan Stanley Capital International World Index did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $12,729 - a 27.29% increase.
The Morgan Stanley Capital International World Index is an unmanaged index considered to be representative of the broad stock market. Investments cannot be made directly in the Index.
The performance data for Davis Global Fund, contained in this report, represents past performance and assumes that all distributions were reinvested, and should not be considered as an indication of future performance from an investment in the Fund today. The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
7
DAVIS GLOBAL FUND
NOTES TO PERFORMANCE
The following disclosure provides important information regarding the Fund’s Expense Example which appears in each Class’s Fund Performance section of this Annual Report. Please refer to this information when reviewing the Expense Example for each Class.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (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 05/01/06 to 10/31/06. 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.
8
DAVIS GLOBAL FUND
FUND OVERVIEW
At October 31, 2006
Portfolio Composition | | Sector Weightings |
(% of Fund’s Net Assets) | | (% of Stock Holdings) |
| | | | | | |
Common Stock | 98.22 | % | | Media | 21.20 | % |
Short Term Investments | 1.87 | % | | Food, Beverage & Tobacco | 12.34 | % |
Other Assets & Liabilities | (0.09) | % | | Consumer Durables & Apparel | 9.20 | % |
| 100.00 | % | | Transportation | 8.53 | % |
| | | | Insurance | 8.22 | % |
| | | | Telecommunication Services | 7.31 | % |
| | | | Diversified Financials | 5.78 | % |
| | | | Energy | 5.17 | % |
| | | | Banks | 5.07 | % |
| | | | Health Care | 4.80 | % |
| | | | Technology | 3.35 | % |
| | | | Materials | 3.29 | % |
| | | | Other | 3.01 | % |
| | | | Automobiles & Components | 2.73 | % |
| | | | | 100.00 | % |
Country Diversification | | Top 10 Holdings |
(% of Stock Holdings) | | (% of Fund’s Net Assets) |
| | | | | | |
United States | 27.35 | % | | News Corp., Class A | 5.76 | % |
Netherlands | 11.43 | % | | NTL Inc. | 5.42 | % |
Switzerland | 8.96 | % | | Tenaris S.A., ADR | 5.08 | % |
United Kingdom | 7.25 | % | | America Movil S.A. de C.V., ADR | 4.08 | % |
France | 6.32 | % | | Hunter Douglas NV | 4.04 | % |
Luxembourg | 5.17 | % | | American International Group, Inc. | 3.94 | % |
Hong Kong | 4.91 | % | | Lagardere S.C.A. | 3.64 | % |
South Korea | 4.91 | % | | Kuehne & Nagel International AG, | | |
Mexico | 4.15 | % | | Registered | 3.56 | % |
Belgium | 3.50 | % | | Groupe Bruxelles Lambert S.A. | 3.44 | % |
China | 3.04 | % | | Koninklijke (Royal) Philips | | |
Germany | 2.73 | % | | Electronics NV, NY Shares | 3.21 | % |
Canada | 2.71 | % | | | | |
Japan | 2.05 | % | | | | |
Austria | 2.03 | % | | | | |
Finland | 1.50 | % | | | | |
Taiwan | 1.14 | % | | | | |
Brazil | 0.85 | % | | | | |
| 100.00 | % | | | | |
9
DAVIS GLOBAL FUND
PORTFOLIO ACTIVITY – November 1, 2005 through October 31, 2006
New Positions Added (11/01/05 - 10/31/06) | | | |
(Highlighted positions are those greater than 1.99% of 10/31/06 total net assets) | | | |
| | | % of 10/31/06 |
| | Date of 1st | Fund |
Security | Sector | Purchase | Net Assets |
America Movil S.A. de C.V., ADR | Telecommunication Services | 11/22/05 | 4.08% |
Apollo Group, Inc., Class A | Consumer Services | 02/02/06 | 0.53% |
BHP Billiton PLC | Materials | 12/12/05 | 1.18% |
China Merchants Bank Co., Ltd. | Commercial Banks | 09/22/06 | 2.99% |
Companhia Vale do Rio Doce, ADR | Materials | 12/12/05 | 0.83% |
DIRECTV Group, Inc. | Broadcasting & Cable TV | 05/09/06 | 2.36% |
Erste Bank der oesterreichischen | | | |
Sparkassen AG | Commercial Banks | 05/09/06 | 2.00% |
Japan Tobacco Inc. | Food, Beverage & Tobacco | 05/08/06 | 2.01% |
Liberty Global, Inc., Series C | Broadcasting & Cable TV | 12/02/05 | 1.64% |
Rio Tinto PLC | Materials | 12/12/05 | 1.22% |
WPP Group PLC | Advertising | 10/17/06 | 2.01% |
Positions Closed (11/01/05 - 10/31/06) | | | |
(Gains and losses greater than $50,000 are highlighted) | | | |
| | Date of | Realized |
Security | Sector | Final Sale | Gain/(Loss) |
Groupe Bruxelles Lambert S.A., VVPR | Diversified Financial Services | 07/10/06 | $ | 8 | |
Lanxess | Materials | 02/23/06 | 68,687 | |
Lexmark International, Inc., Class A | Technology Hardware & Equipment | 02/16/06 | (78,657 | ) |
ServiceMaster Co. | Consumer Services | 02/16/06 | (16,976 | ) |
Ship Finance International Ltd. | Energy | 02/06/06 | (6,415 | ) |
Telewest Global, Inc. | Telecommunication Services | 03/06/06 | 27,495 | |
Wolters Kluwer NV, CVA | Publishing | 10/17/06 | 84,543 | |
| | | | | |
10
DAVIS GLOBAL FUND
SCHEDULE OF INVESTMENTS
October 31, 2006
| | Value | |
Shares | | Security | (Note 1 | ) |
COMMON STOCK – (98.22%) | |
| | | | | |
ADVERTISING – (2.01%) | | | |
| 26,200 | | WPP Group PLC (United Kingdom) | $ | 335,601 | |
AUTOMOBILES & COMPONENTS – (2.68%) | | | |
| 2,700 | | Continental AG (Germany) | | 301,939 | |
| 125 | | Porsche AG (Germany) | | 145,737 | |
| | | | | 447,676 | |
BROADCASTING & CABLE TV – (9.42%) | | | |
| 17,700 | | DIRECTV Group, Inc.* | | 394,356 | |
| 10,800 | | Liberty Global, Inc., Series C* | | 274,536 | |
| 33,475 | | NTL Inc. | | 906,168 | |
| | | | | 1,575,060 | |
CAPITAL GOODS – (0.60%) | | | |
| 1,700 | | Tae Young Corp. (South Korea) | | 101,035 | |
COMMERCIAL BANKS – (4.98%) | | | |
| 320,000 | | China Merchants Bank Co., Ltd.* (China) | | 499,511 | |
| 4,900 | | Erste Bank der oesterreichischen Sparkassen AG (Austria) | | 333,644 | |
| | | | | 833,155 | |
COMMERCIAL SERVICES & SUPPLIES – (1.21%) | | | |
| 70,000 | | Rentokil Initial PLC (United Kingdom) | | 202,296 | |
CONSUMER DURABLES & APPAREL – (9.03%) | | | |
| 8,783 | | Hunter Douglas NV (Netherlands) | | 675,947 | |
| 15,400 | | Koninklijke (Royal) Philips Electronics NV, NY Shares (Netherlands) | | 536,382 | |
| 4,100 | | Mohawk Industries, Inc.* | | 298,070 | |
| | | | | 1,510,399 | |
CONSUMER SERVICES – (0.53%) | | | |
| 2,400 | | Apollo Group, Inc., Class A* | | 88,632 | |
DIVERSIFIED FINANCIAL SERVICES – (5.68%) | | | |
| 5,226 | | Groupe Bruxelles Lambert S.A. (Belgium) | | 575,283 | |
| 3,900 | | Pargesa Holding S.A., Bearer Shares (Switzerland) | | 373,996 | |
| | | | | 949,279 | |
ENERGY – (5.08%) | | | |
| 22,000 | | Tenaris S.A., ADR (Luxembourg) | | 848,980 | |
FOOD, BEVERAGE & TOBACCO – (12.12%) | | | |
| 13,623 | | Diageo PLC (United Kingdom) | | 252,069 | |
| 11,400 | | Heineken Holding NV (Netherlands) | | 445,952 | |
| 77 | | Japan Tobacco Inc. (Japan) | | 335,770 | |
| 230 | | Lindt & Spruengli AG (Switzerland) | | 502,319 | |
11
DAVIS GLOBAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
October 31, 2006
| | Value | |
Shares | | Security | (Note 1 | ) |
COMMON STOCK – (Continued) | |
| | | | | |
FOOD, BEVERAGE & TOBACCO – (Continued) | | | |
| 70 | | Lotte Chilsung Beverage Co., Ltd. (South Korea) | $ | 88,257 | |
| 80 | | Lotte Confectionery Co., Ltd. (South Korea) | | 97,129 | |
| 1,080 | | Nong Shim Holdings Co., Ltd. (South Korea) | | 87,111 | |
| 9,000 | | Unilever NV, NY Shares (Netherlands) | | 217,800 | |
| | | | | 2,026,407 | |
HEALTH CARE EQUIPMENT & SERVICES – (4.71%) | | | |
| 4,100 | | Essilor International S.A. (France) | | 430,139 | |
| 4,300 | | IDEXX Laboratories, Inc.* | | 357,609 | |
| | | | | 787,748 | |
HOUSEHOLD & PERSONAL PRODUCTS – (0.60%) | | | |
| 167 | | Amorepacific Corp.* (South Korea) | | 86,491 | |
| 102 | | Pacific Corp. (South Korea) | | 14,181 | |
| | | | | 100,672 | |
LIFE & HEALTH INSURANCE – (4.14%) | | | |
| 5,500 | | AFLAC Inc. | | 247,060 | |
| 14,700 | | Power Corp. of Canada (Canada) | | 445,209 | |
| | | | | 692,269 | |
MATERIALS – (3.23%) | | | |
| 10,200 | | BHP Billiton PLC (United Kingdom) | | 196,710 | |
| 6,400 | | Companhia Vale do Rio Doce, ADR (Brazil) | | 139,008 | |
| 3,700 | | Rio Tinto PLC (United Kingdom) | | 204,115 | |
| | | | | 539,833 | |
MOVIES & ENTERTAINMENT – (5.76%) | | | |
| 46,200 | | News Corp., Class A | | 963,270 | |
MULTI-LINE INSURANCE – (3.94%) | | | |
| 9,800 | | American International Group, Inc. | | 658,266 | |
PUBLISHING – (3.64%) | | | |
| 8,450 | | Lagardere S.C.A. (France) | | 607,720 | |
SOFTWARE & SERVICES – (1.82%) | | | |
| 7,000 | | Iron Mountain Inc.* | | 303,590 | |
TECHNOLOGY HARDWARE & EQUIPMENT – (1.48%) | | | |
| 12,400 | | Nokia Oyj, ADR (Finland) | | 246,512 | |
TELECOMMUNICATION SERVICES – (7.18%) | | | |
| 15,900 | | America Movil S.A. de C.V., ADR (Mexico) | | 681,633 | |
| 10,200 | | Chunghwa Telecom Co., Ltd., ADR (Taiwan) | | 186,558 | |
| 13,800 | | SK Telecom Co., Ltd., ADR (South Korea) | | 332,304 | |
| | | | | 1,200,495 | |
12
DAVIS GLOBAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
October 31, 2006
| | Value | |
Shares/Principal | | Security | (Note 1 | ) |
COMMON STOCK – (Continued) | |
| | | | | |
TRANSPORTATION – (8.38%) | | | |
| 162,537 | | China Merchants Holdings International Co., Ltd. (Hong Kong) | $ | 475,456 | |
| 160,400 | | Cosco Pacific Ltd. (Hong Kong) | | 331,228 | |
| 8,650 | | Kuehne & Nagel International AG, Registered (Switzerland) | | 594,490 | |
| | | | | 1,401,174 | |
| | | Total Common Stock – (identified cost $12,817,910) | | 16,420,069 | |
SHORT TERM INVESTMENTS – (1.87%) | | | |
$ | 48,000 | | Banc of America Securities LLC Joint Repurchase Agreement, 5.29%, | | | |
| | | 11/01/06, dated 10/31/06, repurchase value of $48,007 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a | | | |
| | | pooled cash account, 4.858%-7.00%, 10/01/20-10/01/36, | | | |
| | | total market value $48,960) | | 48,000 | |
| 34,000 | | Citigroup Global Markets, Inc. Joint Repurchase Agreement, 5.28%, | | | |
| | | 11/01/06, dated 10/31/06, repurchase value of $34,005 | | | |
| | | (collateralized by: U.S. Government agency mortgages | | | |
| | | in a pooled cash account, 0.00%-6.279%, 04/25/16-10/25/36, | | | |
| | | total market value $34,680) | | 34,000 | |
| 48,000 | | Goldman, Sachs & Co. Joint Repurchase Agreement, 5.29%, | | | |
| | | 11/01/06, dated 10/31/06, repurchase value of $48,007 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a pooled | | | |
| | | cash account, 4.50%-7.00%, 11/01/19-09/01/36, total market | | | |
| | | value $48,960) | | 48,000 | |
| 61,000 | | Morgan Stanley & Co. Joint Repurchase Agreement, 5.29%, | | | |
| | | 11/01/06, dated 10/31/06, repurchase value of $61,009 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a pooled | | | |
| | | cash account, 6.00%-6.064%, 04/01/36-10/01/36, total market | | | |
| | | value $62,220) | | 61,000 | |
| 61,000 | | Nomura Securities International, Inc. Joint Repurchase Agreement, 5.31%, | | | |
| | | 11/01/06, dated 10/31/06, repurchase value of $61,009 | | | |
| | | (collateralized by: U.S. Government agency mortgages and | | | |
| | | obligations in a pooled cash account, 4.00%-5.50%, 08/17/07-06/01/36, | | | |
| | | total market value $62,220) | | 61,000 | |
| 61,000 | | UBS Securities LLC Joint Repurchase Agreement, 5.30%, | | | |
| | | 11/01/06, dated 10/31/06, repurchase value of $61,009 | | | |
| | | (collateralized by: U.S. Government agency mortgages in a pooled | | | |
| | | cash account, 5.00%-6.50%, 12/01/13-08/01/36, total market | | | |
| | | market value $62,220) | | 61,000 | |
| | | Total Short Term Investments – (identified cost $313,000) | | 313,000 | |
13
DAVIS GLOBAL FUND
SCHEDULE OF INVESTMENTS - (Continued)
October 31, 2006
| | | Total Investments – (100.09%) – (identified cost $13,130,910) – (a) | $ | 16,733,069 | |
| | | Liabilities Less Other Assets – (0.09%) | | (14,265 | ) |
| | | Net Assets – (100%) | $ | 16,718,804 | |
ADR: American Depository Receipt.
* Non- Income producing security.
(a) | Aggregate cost for Federal Income Tax purposes is $13,403,898. At October 31, 2006, unrealized appreciation (depreciation) of securities for Federal Income Tax purposes was as follows: |
| | | Unrealized appreciation | $ | 3,404,013 | |
| | | Unrealized depreciation | | (74,842 | ) |
| | | Net unrealized appreciation | $ | 3,329,171 | |
See Notes to Financial Statements
14
DAVIS GLOBAL FUND
STATEMENT OF ASSETS AND LIABILITIES
At October 31, 2006
ASSETS: | | | |
| Investments in securities, at value (see accompanying Schedule of Investments) | | | |
| (identified cost $13,130,910) | $ | 16,733,069 | |
| Cash | | 2,355 | |
| Receivables: | | | |
| Dividends and interest | | 13,082 | |
| Capital stock sold | | 208 | |
| Total assets | | 16,748,714 | |
LIABILITIES: | | | |
| Accrued expenses | | 18,805 | |
| Accrued management fees | | 11,105 | |
| Total liabilities | | 29,910 | |
NET ASSETS | $ | 16,718,804 | |
| | | | |
NET ASSETS CONSIST OF: | | | |
| Par value of shares of capital stock | $ | 61,035 | |
| Additional paid-in capital | | 12,981,969 | |
| Accumulated net investment loss | | (5,088 | ) |
| Accumulated net realized gains from investments and foreign currency transactions | | 78,719 | |
| Net unrealized appreciation on investments and translation of assets and liabilities | | | |
| denominated in foreign currency | | 3,602,169 | |
| Net Assets | $ | 16,718,804 | |
| CLASS A SHARES | | | |
| Net assets | $ | 16,716,089 | |
| Shares outstanding | | 1,220,502 | |
| Net asset value and redemption price per share | $ | 13.70 | |
| Maximum offering price per share (100/95.25 of $13.70)* | $ | 14.38 | |
| CLASS B SHARES | | | |
| Net assets | $ | 1,357 | |
| Shares outstanding | | 100 | |
| Net asset value, offering, and redemption price per share | $ | 13.57 | |
| CLASS C SHARES | | | |
| Net assets | $ | 1,358 | |
| Shares outstanding | | 100 | |
| Net asset value, offering, and redemption price per share | $ | 13.58 | |
| | | | |
*On purchases of $100,000 or more, the offering price is reduced.
See Notes to Financial Statements
15
DAVIS GLOBAL FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2006
Investment Income: | | | |
| Income: | | | |
| Dividends (net of foreign withholding taxes of $24,004) | $ | 221,542 | |
| Interest | | 15,647 | |
| Total income | | 237,189 | |
| | | | | | |
| Expenses: | | | | | |
| Management fees (Note 3) | $ | 106,378 | | | |
| Custodian fees | | 34,114 | | | |
| Transfer agent fees: | | | | | |
| Class A | | 737 | | | |
| Class B | | 138 | | | |
| Class C | | 142 | | | |
| Audit fees | | 13,200 | | | |
| Accounting fees (Note 3) | | 6,000 | | | |
| Legal fees | | 39 | | | |
| Reports to shareholders | | 1,580 | | | |
| Directors’ fees and expenses | | 247 | | | |
| Registration and filing fees | | 7,086 | | | |
| Miscellaneous | | 6,921 | | | |
| Payments under distribution plan (Note 4): | | | | | |
| Class B | | 9 | | | |
| Class C | | 9 | | | |
| Total expenses | | 176,600 | |
| Expenses paid indirectly (Note 6) | | (280 | ) |
| Reimbursement of expenses by adviser (Note 3 and 8) | | (280 | ) |
| Net expenses | | 176,040 | |
| Net investment income | | 61,149 | |
| | | | |
Realized and Unrealized Gain on Investments and Foreign Currency: | | | |
| Net realized gain from: | | | |
| Investment transactions | | 78,727 | |
| Foreign currency transactions | | 942 | |
| Net increase in unrealized appreciation on investments and translation of assets and | | | |
| liabilities in foreign currencies | | 3,081,534 | |
| Net realized and unrealized gain on investments and foreign currency | | 3,161,203 | |
| Net increase in net assets resulting from operations | $ | 3,222,352 | |
| | | | |
| | | | |
| | | | |
See Notes to Financial Statements
16
DAVIS GLOBAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
| | | December 22, 2004 | |
| | | (Commencement | |
| | | of operations) | |
| Year ended | | through | |
| October 31, 2006 | | October 31, 2005 | |
Operations: | | | | | | |
Net investment income | $ | 61,149 | | $ | 84,896 | |
Net realized gain (loss) from investments and foreign | | | | | | |
currency transactions | | 79,669 | | | (4,728 | ) |
Net increase in unrealized appreciation on investments | | | | | | |
and translation of assets and liabilities denominated in | | | | | | |
foreign currency | | 3,081,534 | | | 520,635 | |
Net increase in net assets resulting from operations | | 3,222,352 | | | 600,803 | |
| | | | | | |
Dividends and Distributions to | | | | | | |
Shareholders From: | | | | | | |
Net investment income: | | | | | | |
Class A | | (142,231 | ) | | (5,118 | ) |
Class B | | (3 | ) | | – | |
Class C | | (3 | ) | | – | |
| | | | | | |
Capital Share Transactions: | | | | | | |
net increase in assets resulting from capital share | | | | | | |
transactions (Note 5): | | | | | | |
Class A | | 2,799,922 | | | 10,241,080 | |
Class B | | 3 | | | 998 | |
Class C | | 3 | | | 998 | |
| | | | | | |
Total increase in net assets | | 5,880,043 | | | 10,838,761 | |
| | | | | | |
Net Assets: | | | | | | |
Beginning of period | | 10,838,761 | | | – | |
End of period* | $ | 16,718,804 | | $ | 10,838,761 | |
| | | | | | |
*Including undistributed net investment income | | | | | | |
(accumulated net investment loss) of | $ | (5,088 | ) | $ | 75,050 | |
| | | | | | |
| | | | | | |
| | | | | | |
See Notes to Financial Statements
17
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a separate series of Davis New York Venture Fund, Inc. (a Maryland corporation). The Fund 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 long-term growth of capital. The Fund commenced operations on December 22, 2004. 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 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 – The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (“Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities listed on the Exchange (and other national exchanges) are valued at the last reported sales price on the day of valuation. Securities traded in the over-the-counter market (e.g. NASDAQ) and listed securities for which no sale was reported on that date are stated at the average of closing bid and asked prices. Securities traded on foreign exchanges are valued based upon the last sales price on the principal exchange on which the security is traded prior to the time when the Fund’s assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Adviser identifies as a significant event occurring before the Fund’s assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Directors. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. 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. A custodian bank holds securities pledged as collateral for repurchase agreements until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
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.
18
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
October 31, 2006
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
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.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. The 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.
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 Funds. 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.
19
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
October 31, 2006
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
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, and passive foreign investment company shares. The character of dividends and distributions made during the fiscal year from net investment income 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. Accordingly, during the year ended October 31, 2006, amounts have been reclassified to reflect a decrease in accumulated net investment loss of $950, and a corresponding decrease in accumulated net realized gain. Net assets have not been affected by this reclassification.
The tax character of distributions paid during the years ended October 31, 2006 and 2005 was as follows:
| 2006 | | 2005 |
Ordinary income | $ | 142,237 | | $ | 5,118 |
| | | | | |
As of October 31, 2006, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
Undistributed net investment income | $ | 267,900 | |
Undistributed long-term capital gain | | 78,719 | |
Net unrealized appreciation on investments and | | | |
foreign currency transactions | | 3,329,181 | |
Total | $ | 3,675,800 | |
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.
20
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
October 31, 2006
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)
New Accounting Pronouncement – In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” This standard defines the threshold for recognizing the benefits of tax-return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. FIN 48 is effective as of the beginning of the first fiscal year beginning after December 15, 2006 (January 1, 2007 for calendar year companies), with early application permitted if no interim financial statements have been issued. At adoption, companies must adjust their financial statements to reflect only those tax positions that are more-likely-than-not to be sustained as of the adoption date. The Funds are evaluating the impact that will result from adopting FIN 48. Currently, no reasonable estimate of the impact can be made.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal periods. As of October 31, 2006, the Manager does not believe the adoption of SFAS No. 157 will materially impact the financial statement amounts; however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain measurements on changes in net assets period.
NOTE 2 – PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term securities) for the year ended October 31, 2006 were $3,910,201 and $1,340,137, 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 was 0.75% of the average net assets for the first $250 million, 0.65% on the next $250 million and 0.55% of the average net assets in excess of $500 million. Advisory fees paid during the year ended October 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 year ended October 31, 2006, amounted to $62. State Street Bank and 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 for the year ended October 31, 2006 amounted to $6,000. The Adviser is contractually committed to waive fees and/or reimburse the Fund’s expenses to the extent necessary to cap total annual Fund operating expenses (Class A shares, 1.30%; Class B shares, 2.30%; Class C shares 2.30%), such reimbursements amounted to $130 and $134 for Class B and C shares, respectively. Certain directors and officers of the Fund are also directors and officers of the general partner of the Adviser.
21
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
October 31, 2006
NOTE 3 – INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
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
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 year ended October 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 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. There was no service fee for Class A shares of the Fund for the year ended October 31, 2006.
CLASS B SHARES
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 year ended October 31, 2006, Class B shares of the Fund made distribution payments of $9 and there were no payments made for service fees.
There were no commission advances by the Distributor during the year ended October 31, 2006 on the sale of Class B shares of the Fund.
22
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS – (Continued)
October 31, 2006
NOTE 4 – DISTRIBUTION AND UNDERWRITING FEES – (Continued)
CLASS B SHARES – (Continued)
The Distributor intends to seek payment from Class B shares of the Fund in the amount of $51, 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 payment 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 year ended October 31, 2006, the Distributor received no contingent deferred sales charges from Class B shares of the Fund.
CLASS C SHARES
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 year ended October 31, 2006, Class C shares of the Fund made distribution payments of $9 and there were no payments made for service fees.
There were no commission advances by the Distributor on the sale of Class C shares of the Fund and the Distributor received no contingent deferred sales charges from Class C shares of the Fund during the year ended October 31, 2006.
23
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS – (Continued)
October 31, 2006
NOTE 5 – CAPITAL STOCK
At October 31, 2006, there were 3,500,000,000 shares of capital stock ($0.05 par value per share) authorized, 175,000,000 of which are classified as Davis Global Fund. Transactions in capital stock were as follows:
Class A | Year ended October 31, 2006 | | December 22, 2004 (Commencement of operations) through October 31, 2005 | |
| Shares | | Amount | | Shares | | | Amount | |
Shares subscribed | 208,130 | | $ | 2,662,133 | | 999,913 | | $ | 10,236,040 | |
Shares issued in reinvestment | | | | | | | | | | |
of distributions | 12,315 | | | 142,232 | | 500 | | | 5,118 | |
| 220,445 | | | 2,804,365 | | 1,000,413 | | | 10,241,158 | |
Shares redeemed | (348 | ) | | (4,443 | ) | (8 | ) | | (78 | ) |
Net increase | 220,097 | | $ | 2,799,922 | | 1,000,405 | | $ | 10,241,080 | |
| | | | | | | | | | |
Class B | Year ended October 31, 2006 | | December 22, 2004 (Commencement of operations) through October 31, 2005 | | |
| Shares | | Amount | | Shares | | | Amount | | |
Shares subscribed | – | | $ | – | | 108 | | $ | 1,075 | | |
Shares issued in reinvestment | | | | | | | | | | | |
of distributions | – | * | | 3 | | – | | | – | | |
| – | | | 3 | | 108 | | | 1,075 | | |
Shares redeemed | – | | | – | | (8 | ) | | (77 | ) | |
Net increase | – | * | $ | 3 | | 100 | | $ | 998 | | |
| | | | | | | | | | | |
Class C | Year ended October 31, 2006 | | December 22, 2004 (Commencement of operations) through October 31, 2005 | |
| Shares | | Amount | | Shares | | | Amount | |
Shares subscribed | – | | $ | – | | 108 | | $ | 1,075 | |
Shares issued in reinvestment | | | | | | | | | | |
of distributions | – | * | | 3 | | – | | | – | |
| – | | | 3 | | 108 | | | 1,075 | |
Shares redeemed | – | | | – | | (8 | ) | | (77 | ) |
Net increase | – | * | $ | 3 | | 100 | | $ | 998 | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
* Less than 1 share.
24
DAVIS GLOBAL FUND
NOTES TO FINANCIAL STATEMENTS – (Continued)
October 31, 2006
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 $280 during the year ended October 31, 2006.
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 year ended October 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 December 22, 2004 to May 31, 2005. These credits were previously retained by BFDS and not directly transferred to the Fund. The amount paid to the Fund amounted to $16.
25
DAVIS GLOBAL FUND
FINANCIAL HIGHLIGHTS
CLASS A
Financial Highlights for a share of capital stock outstanding throughout the period:
| Year ended October 31, 2006 | | December 22, 2004 (Commencement of operations) through October 31, 2005 | | | | |
| | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 10.83 | | $ | 10.00 | | | | |
| | | | | | | | | |
Income from Investment Operations: | | | | | | | | | |
Net Investment Income | | 0.05 | | | 0.10 | | | | |
Net Realized and Unrealized Gains | | 2.95 | | | 0.75 | | | | |
Total from Investment Operations | | 3.00 | | | 0.85 | | | | |
| | | | | | | | | |
Dividends and Distributions: | | | | | | | | | |
Dividends from Net Investment Income | | (0.13 | ) | | (0.02 | ) | | | |
| | | | | | | | | |
Net Asset Value, End of Period | $ | 13.70 | | $ | 10.83 | | | | |
| | | | | | | | | |
Total Return1 | | 27.96% | | | 8.47% | | | | |
| | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | |
Net Assets, End of Period (000 omitted) | $ | 16,716 | | $ | 10,837 | | | | |
Ratio of Expenses to Average Net Assets | | 1.24% | | | 1.30%*3 | | | | |
Ratio of Net Investment Income to Average Net Assets | | 0.43% | | | 1.26%* | | | | |
Portfolio Turnover Rate2 | | 10% | | | 0% | | | | |
| | | | | | | | | |
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 Advisor not absorbed certain expenses, the ratio of expenses to average net assets would have been 1.65% for the period ended October 31, 2005.
See Notes to Financial Statements
26
DAVIS GLOBAL FUND
FINANCIAL HIGHLIGHTS
CLASS B
Financial Highlights for a share of capital stock outstanding throughout the period:
| Year ended October 31, 2006 | | December 22, 2004 (Commencement of operations) through October 31, 2005 | | | | |
| | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 10.76 | | $ | 10.00 | | | | |
| | | | | | | | | |
Income (Loss) from Investment Operations: | | | | | | | | | |
Net Investment Income (Loss) | | (0.09 | ) | | 0.03 | | | | |
Net Realized and Unrealized Gains | | 2.93 | | | 0.73 | | | | |
Total from Investment Operations | | 2.84 | | | 0.76 | | | | |
| | | | | | | | | |
Dividends and Distributions: | | | | | | | | | |
Dividends from Net Investment Income | | (0.03 | ) | | - | | | | |
| | | | | | | | | |
Net Asset Value, End of Period | $ | 13.57 | | $ | 10.76 | | | | |
| | | | | | | | | |
Total Return1 | | 26.41% | | | 7.60% | | | | |
| | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | |
Net Assets, End of Period (000 omitted) | $ | 1 | | $ | 1 | | | | |
Ratio of Expenses to Average Net Assets | | 2.30%3 | | | 2.30%*3,4 | | | | |
Ratio of Net Investment Income (Loss) to Average | | | | | | | | | |
Net Assets | | (0.63)% | | | 0.26%* | | | | |
Portfolio Turnover Rate2 | | 10% | | | 0% | | | | |
| | | | | | | | | |
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 Advisor not absorbed certain expenses, the ratio of expenses to average net assets would have been 12.99% for the year ended October 31, 2006 and 2.65% for the period ended October 31, 2005.
4 Ratio of expenses to average net assets before the reduction of expenses paid indirectly was 2.31% for the period ended October 31, 2005.
See Notes to Financial Statements
27
DAVIS GLOBAL FUND
FINANCIAL HIGHLIGHTS
CLASS C
Financial Highlights for a share of capital stock outstanding throughout the period:
| Year ended October 31, 2006 | | December 22, 2004 (Commencement of operations) through October 31, 2005 | | | | |
| | | | | | | | | |
Net Asset Value, Beginning of Period | $ | 10.75 | | $ | 10.00 | | | | |
| | | | | | | | | |
Income (Loss) from Investment Operations: | | | | | | | | | |
Net Investment Income (Loss) | | (0.08 | ) | | 0.03 | | | | |
Net Realized and Unrealized Gains | | 2.94 | | | 0.72 | | | | |
Total from Investment Operations | | 2.86 | | | 0.75 | | | | |
| | | | | | | | | |
Dividends and Distributions: | | | | | | | | | |
Dividends from Net Investment Income | | (0.03 | ) | | - | | | | |
| | | | | | | | | |
Net Asset Value, End of Period | $ | 13.58 | | $ | 10.75 | | | | |
| | | | | | | | | |
Total Return1 | | 26.62% | | | 7.50% | | | | |
| | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | |
Net Assets, End of Period (000 omitted) | $ | 1 | | $ | 1 | | | | |
Ratio of Expenses to Average Net Assets | | 2.30%3 | | | 2.30%*3,4 | | | | |
Ratio of Net Investment Income (Loss) to Average | | | | | | | | | |
Net Assets | | (0.63)% | | | 0.26%* | | | | |
Portfolio Turnover Rate2 | | 10% | | | 0% | | | | |
| | | | | | | | | |
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 Advisor not absorbed certain expenses, the ratio of expenses to average net assets would have been 13.31% for the year ended October 31, 2006 and 2.65% for the period ended October 31, 2005.
4 Ratio of expenses to average net assets before the reduction of expenses paid indirectly was 2.31% for the period ended October 31, 2005.
See Notes to Financial Statements
28
DAVIS GLOBAL FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
of Davis New York Venture Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Davis Global Fund (a series of Davis New York Venture Fund, Inc.), including the schedule of investments, as of October 31, 2006, and the related statement of operations for the year ended, the statements of changes in net assets for the year then ended and the period from December 22, 2004 (commencement of operations) through October 31, 2005, and the financial highlights for the year then ended and the period from December 22, 2004 (commencement of operations) through October 31, 2005. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Davis Global Fund as of October 31, 2006, the results of its operations for the year then ended, the changes in its net assets for the year then ended and the period from December 22, 2004 (commencement of operations) through October 31, 2005, and the financial highlights for the year then ended and the period from December 22, 2004 (commencement of operations) to October 31, 2005, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 8, 2006
29
DAVIS GLOBAL FUND
FUND INFORMATION
Federal Income Tax Information (Unaudited)
In early 2007, shareholders will receive information regarding all dividends and distributions paid to them by the Fund during the calendar year 2006. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
During the fiscal year ended October 31, 2006, $142,237 of dividends paid by the Fund constituted income dividends for Federal Income Tax purposes.
Dividends paid by the Fund during the fiscal year ended October 31, 2006, which are not designated as capital gain dividends should be multiplied by 12% to arrive at the net amount eligible for the corporate dividends-received deduction.
For the fiscal year ended October 31, 2006, certain dividends paid by the Fund constitute qualified dividend income for Federal Income Tax purposes. The Fund designates $125,567 as qualified dividend income.
The Fund has elected to give the benefit of foreign tax credits to its shareholders. Accordingly, shareholders who must report their gross income dividends and distributions in a Federal Tax return will be entitled to a foreign tax credit, or an itemized deduction, in computing their U.S. income tax liability. It is generally more advantageous to claim a credit rather than to take a deduction. For the fiscal year ended October 31, 2006, the Fund intends on passing through $24,004 as a foreign tax credit based on foreign source income of $227,454.
For purposes of preparing your Federal Income Tax return, however, you should report the amounts as reflected on the appropriate Form 1099-DIV or substitute Form 1099-DIV which you should receive in early 2007.
The foregoing information is presented to assist shareholders in reporting dividends received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations, which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax adviser for specific guidance.
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.
30
DAVIS GLOBAL 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 (birthdate) | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
| | | | | |
Independent Directors
| | | | | |
Marc P. Blum (9/9/42) | Director | Director since 1986 | Chief Executive Officer, World Total Return Fund, LLLP; Of Counsel to Gordon, Feinblatt, Rothman, Hoffberger and Hollander, LLC (law firm). | 13 | Director, Legg Mason Trust (asset management company) and Rodney Trust Company (Delaware). |
| | | | | |
Thomas S. Gayner (12/16/61) | Director | Director since 2004 | Executive Vice President and Chief Investment Officer, Markel Corporation (insurance company). | 13 | Director, First Market Bank. |
| | | | | |
Jerry D. Geist (5/23/34) | Director | Director since 1986 | Chairman, Santa Fe Center Enterprises (energy project development); retired Chairman and President, Public Service Company of New Mexico. | 13 | Director, CH2M-Hill, Inc. (engineering); Chairman, Santa Fe Center Enterprises, Member, Investment Committee for Microgeneration Technology Fund, UTECH Funds. |
| | | | | |
31
DAVIS GLOBAL FUND
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
DIRECTORS – (Continued)
Name (birthdate) | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors – (Continued)
| | | | | |
D. James Guzy (3/7/36) | Director | Director since 1982 | Chairman, PLX Technology, Inc. (semi-conductor manufacturer). | 13 | Director, Intel Corp. (semi-conductor manufacturer), Cirrus Logic Corp. (semi-conductor manufacturer), Alliance Technology Fund (a mutual fund), Micro Component Technology, Inc. (micro-circuit handling and testing equipment manufacturer), LogicVision, Inc. (semi-conductor software company), and Tessera Technologies, Inc. (semi-conductor packaging company). |
| | | | | |
G. Bernard Hamilton (3/18/37) | Director | Director since 1978 | Retired, Managing General Partner, Avanti Partners, L.P. from 1990-2005 (investment partnership). | 13 | none |
| | | | | |
Samuel H. Iapalucci (7/19/52) | Director | Director since 2006 | Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc., (engineering). | 13 | none |
| | | | | |
32
DAVIS GLOBAL FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name (birthdate) | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors – (Continued)
Robert P. Morgenthau (3/22/57) | Director | Director since 2002 | Chairman, NorthRoad Capital Management, LLC (an investment management firm) since June 2002; President of Private Advisory Services of Bank of America (an investment management firm) from 2001 until 2002; prior to that a Managing Director and Global Head of Marketing and Distribution for Lazard Asset Management (an investment management firm) for ten years. | 13 | none |
| | | | | |
Theodore B. Smith, Jr. (12/23/32) | Director | Director since 1994 | Chairman of John Hassall, Inc. (fastener manufacturing); Chairman, Cantrock Realty; Mayor, Incorporated Village of Mill Neck, NY. | 13 | none |
| | | | | |
Christian R. Sonne (5/6/36) | Director | Director since 1990 | General Partner, Tuxedo Park Associates (land holding and development firm); President and Chief Executive Officer of Mulford Securities Corporation (private investment fund) until 1990; formerly Vice President of Goldman Sachs & Co. (investment banking); Chairman, Board of Trustees, American Scandinavian Foundation. | 13 | none |
| | | | | |
33
DAVIS GLOBAL FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name (birthdate) | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Independent Directors – (Continued)
| | | | | |
Marsha Williams (3/28/51) | Director | Director since 1999 | Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a real estate investment trust); former Chief Administrative Officer, Crate & Barrel (home furnishings retailer); former Vice President and Treasurer, Amoco Corporation (oil & gas company). | 16 | Director, the Selected Funds (consisting of three portfolios) since 1996; Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering). |
34
DAVIS GLOBAL FUND
2949 East Elvira Road, Suite 101
DIRECTORS – (Continued)
Name (birthdate) | Position(s) Held With Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director |
Inside Directors*
| | | | | |
Jeremy H. Biggs (8/16/35) | Director/ Chairman | Director since 1994 | Vice Chairman, Member of the Audit Committee and Member of the International Investment Committee, all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P. | 13 | none |
| | | | | |
Andrew A. Davis (6/25/63) | Director | Director since 1997 | President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser. | 16 | Director, the Selected Funds (consisting of three portfolios) since 1998. |
| | | | | |
Christopher C. Davis (7/13/65) | Director | Director since 1997 | President or Vice President of each Davis Fund, Selected Fund, and Clipper Fund; Chairman, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser, including sole member of the Adviser’s general partner, Davis Investments, LLC; Employee of Shelby Cullom Davis & Co. (registered broker/dealer). | 16 | Director, the Selected Funds (consisting of three portfolios) since 1998. Director, Washington Post Co. (newspaper publisher). |
* Jeremy H. Biggs, Andrew A. Davis, and Christopher C. Davis own partnership units (directly, indirectly or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.
35
DAVIS GLOBAL 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 | |
131 South Dearborn Street, Suite 2400 | |
Chicago, Illinois 60603-5577 | |
| |
Independent Registered Public Accounting Firm | |
KPMG LLP | |
707 Seventeenth Street, Suite 2700 | |
Denver, Colorado 80202 | |
For more information about the Davis Global 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.
36
