Chris Davis‘ Davis New York Venture Fund annual review for periods ending December 31, 2014.

Summary

  • For the most recent 1, 5, 10, and 20 year periods, Davis New York Venture Fund built shareholder wealth. Over these periods, a $10,000 investment grew to $10,655, $17,253, $18,277, and $70,333, respectively.
  • Since inception in 1969, a $10,000 investment in the Fund has increased to more than twice the value of the S&P 500® Index: $1.7 million vs. $821,000.
  • Portfolio holdings driving shareholder returns in the coming years include: companies with outstanding competitive advantages; companies involved in significant capacity expansion projects or transformative mergers; businesses undervalued due to distortions caused by GAAP; and beneficiaries of continued health care expansion.
  • We have avoided areas of the market that we believe are overvalued and riskier than they appear and that do not offer investors sustainable, long-term wealth-building opportunities.
  • The Davis family, employees and directors are the largest shareholders in the Fund.

The average annual total returns for Davis New York Venture Fund’s Class A shares for periods ending December 31, 2014, including a maximum 4.75% sales charge, are: 1 year, 1.49%; 5 years, 10.44%; and 10 years, 5.70%. The performance presented represents past performance and is not a guarantee of future results. Total return assumes reinvestment of dividends and capital gain distributions. Investment return and principal value will vary so that, when redeemed, an investor’s shares may be worth more or less than their original cost. The total annual operating expense ratio for Class A shares as of the most recent prospectus was 0.86%. The total annual operating expense ratio may vary in future years. Returns and expenses for other classes of shares will vary. Current performance may be higher or lower than the performance quoted. For most recent month-end performance, click here or call 800-279-0279.

We launched Davis New York Venture Fund more than four decades ago based on the principle that investing in well-researched, durable businesses is the best way to build wealth over the long term. Since then, we have grown the value of an initial $10,000 investment to more than $1.7 million today, a 170-fold increase.2 While at times this rate of growth has been faster or slower, our steadfast focus on equities combined with an investment discipline centered on research, careful stock selection and a long-term perspective have helped us increase the value of our clients’ savings. In fact, as the chart below shows, the longer clients remained with us, the more we increased their savings.

This consistent, long-term record of satisfactory absolute returns reflects the wealth-creating potential of owning a portfolio of carefully selected businesses through all types of economic and market environments.

In addition to generating satisfactory absolute returns, our investment approach has delivered relative returns in excess of the S&P 500® Index over the long term. For example, the same $10,000 investment we grew to $1.7 million in Davis New York Venture Fund since its inception would have grown to only about $821,000 invested in the S&P 500® Index over the same period of time.2 The fact a shareholder who invested with us at our inception would now have more than twice the savings of an individual who chose to invest in a passive index reflects the value we have added through careful research and active management over the long term.2

Importantly, these strong long-term results include a handful of periods along the way when our investment approach of seeking durable, well-managed businesses at attractive prices was not rewarded by the market.

Chris Davis' Davis New York Venture Fund

This report includes candid statements and observations regarding investment strategies, individual securities, and economic and market conditions; however, there is no guarantee that these statements, opinions or forecasts will prove to be correct. Equity markets are volatile and an investor may lose money. Past performance is not a guarantee of future results. 1Class A shares without a sales charge. Past performance is not a guarantee of future results. 2Class A shares without a sales charge. Past performance is not a guarantee of future results. Inception date is February 17, 1969. 3Performance is of a hypothetical $10,000 investment in Davis New York Venture Fund Class A shares without a sales charge. Returns for other classes of shares will vary. All returns include the reinvestment of dividends and capital gain distributions. Investments cannot be made in an index.

Chris Davis’ Davis New York Venture Fund: Results of Our Investment Discipline

Our investment discipline has built wealth for shareholders for more than 45 years.

As active managers, we know we will go through periods when our results trail the market, particularly when indexing and other momentum-based strategies are galloping ahead. We have been through such times before and have always emerged in a strong position. For example, in the late 1990s the S&P 500® Index surged ahead and disciplined value investors like us were considered dinosaurs. But when the bubble burst in 2000, many of these dinosaurs posted the best relative results of their careers. Davis New York Venture Fund, for example, outperformed the Index by 19% in 2000 and also outperformed over the next 1, 3, 5, and 10 year stretches.4 While we do not know when the current cycle will end, we are confident the investment discipline that has helped our shareholders build wealth for more than 45 years will continue to do so. Our conviction in our discipline is strengthened when results are viewed on a rolling basis rather than a trailing basis. The chart below divides our results into rolling periods ranging from one to 45 years with the bars indicating the percentage of those periods our returns exceeded the benchmark. As with our absolute returns, the longer clients remained with us the better the relative outcome.

Chris Davis' Davis New York Venture Fund

Chris Davis’ Davis New York Venture Fund: Near-Term Results

We have avoided areas of the market that we believe are overvalued and riskier than they appear and that do not offer investors sustainable, long-term wealth-building opportunities.

The rolling data above combined with our long record of satisfactory absolute returns is a testament to the ability of our research-driven, stock-specific approach to add value over time.

However, delving into what has worked and not worked in the recent periods when our absolute returns have been good but our relative results have trailed is worthwhile.

In the plus column, the strong performance of a number of our core holdings such as American Express, Wells Fargo, Berkshire Hathaway, Costco, and Google have made them significant contributors to our returns over the last several years.5 Moreover, during this period, we believe the competitive advantages of these first-class businesses have only increased, further improving their future prospects.

In the negative column, our relative results have been affected most by our decision to avoid a number of companies and sectors that have done especially well, but that we believe do not offer investors sustainable long-term opportunities. In other words, we have been hurt more by what we chose not to own than by what we owned. For example, while companies with high current dividend yields are currently in fashion, we have avoided or sold

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