Commentary

Holdings

Fact Sheet

Investment Professionals

Contacts

Davis Large Cap Value SMA Portfolio Summer Update 2020

The Equity Specialists

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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.

Portfolio Commentary Market PerspectiveIn the first half of 2020, the S&P 500 Index returned −3.08%. Stocks have been volatile, which is understand­able, given the near­term disruption and uncertainties introduced by COVID­19. It remains to be seen how the pandemic might ultimately impact individual businesses, different industries and whole economies. Our view is that opportunities are available at very attractive prices, but it is essential to be selective and, ideally, to apply the margin­of­safety principle in terms of valuation discipline.

We are neither optimists nor are we pessimists. Rather, it is a time to be realistic, both about the near­term uncertainty and challenges economically that we face, but also taking into account how the future may improve from here in iterative fashion.

In the immediate term, we know headline figures such as unemployment claims, a decline in gross domestic product and other such metrics will look unfavorable, and they could persist for some time. We believe, therefore, that investors should be prepared for that potentiality both in terms of their mindset and their allocations and positioning in general. As for how long this period could last, the answer will depend in large part on industry and government efforts to address the virus situation with treatments and/or vaccines. But there are also important components of the U.S. response to the virus already underway, and they must figure into one’s assessment about the probability of successfully weathering these recessionary conditions.

Where businesses and consumers have fallen on very challenging times, the U.S. government has by all measures been willing to step in and provide fiscal and monetary support. It is worth noting that many of the tools and measures being utilized today proved their

efficacy in the real­world test of the last crisis of 2008–2009. The key difference in the country’s response this time is that both the scope and the magnitude of stimulus dwarf the last crisis measures. In addition, emergency measures were deployed immediately in the present case, whereas they were rolled out with significant delay in the previous crisis. At the same time, the major U.S. banks that provide the basic economy with the lifeblood of liquidity and credit have, in some cases, more than twice the capital that they did entering 2008, with much more stable, deposit­based funding this time. The Federal Reserve has opened the discount window at virtually no cost, providing near frictionless liquidity to the banks, precluding the possibility of a “run on the banks” scenario. Last but not least, while some companies have levered up, given the low interest rates and borrowing costs that prevailed over the last decade, many have used the favorable economic and financial conditions in recent years to strengthen their balance sheets. Taken together, we believe these multiple levels of “shock absorbers” put the economy in a position to weather a near­term recession without losing its ability to expand thereafter in resilient fashion.

There are a number of guideposts and parameters that can prove useful in navigating crisis periods while one is in them, precepts we have learned over our more than 50 years navigating the stock market through all manners of conditions and crises:

The first lesson is to focus intensely on each and every investment one holds and to be positioned in highly durable, defensible businesses. Surviving through the period of near­term stress is the paramount goal at the outset. Invaluable attributes in environments like the present include balance sheet strength (with net cash preferably) and stable sources of funds and cash flow to support operations and necessary capital expenditures.

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Second, it is important to revisit the long­term and perennial relevance of different businesses—and whole industries—looking out some number of years. Some may fit squarely in the paradigm of how consumers and businesses interface (e.g., e­commerce, semiconductors embedded in smart mobile devices worldwide, financial services, etc.). In other cases, businesses may prove more ephemeral and non­essential in leaner economic times where consumers have to make more choices. Casinos, certain areas of travel, brick­and­mortar retail (already under secular pressure from online competi­tion) and luxury goods, for example, could in theory take longer to recover, and some of those businesses may not recover fully for a long time as they engage in “nice­to­have” products and services versus non­discretionary, “must­have” categories.

Finally, diversifying one’s portfolio with a varied set of businesses can be beneficial in our experience to prevent putting all of one’s eggs in a single basket. It is prudent in our view to hold investments with differentiated drivers of success and to diversify risk factors to reduce the likelihood of a permanent and substantial loss of capital as an additional, portfolio­level risk mitigator. •

Portfolio PositioningThe Portfolio is invested in both the proverbial tortoises and hares of the market—individual businesses that are cash­generative, have attractive returns on capital and strong competitive moats and are trading at value prices.

On the one hand, we own positions in staid, fairly mundane cash­generative industries, such as financial services and certain types of healthcare and industrials, many of which have a long history of returning capital to shareholders through dividends and share repurchases, while also reinvesting at attractive, if not exceptional, returns on equity. They tend to be slower growth in nature, but extremely proven, durable, established and cash­generative, and they can deliver value to share­holders through a combination of dividends, accretive share repurchases and capital appreciation driven by reinvestment rates over the long term in our estimation, even if short­term results may reflect the impact of COVID­19.

At the other end of the spectrum are exceptional companies that possess superior growth characteristics, in our estimation. For example, we hold a number of technology­related businesses serving a wide range of industries, from e­commerce and cloud computing to software services and semiconductors, among others. Beyond choosing the right businesses, it is imperative with these types of businesses to adhere to a valuation discipline and to establish why one should feel confident those companies are likely to sustain their leading edge in the face of formidable competitive forces. Overall, we are trying essentially to capture total returns in a variety of ways involving considerations around both defense and offense in our selections.

The Portfolio is diversified consciously across 22 differentiable businesses, each with its own attrac­tive features, according to our analysis. What unifies the entire Portfolio thematically is the concept of durability. First, we seek to own businesses that are built to last, and second, we look to them as vehicles for compound­ing shareholders’ capital over the long term—and in that order, starting first with defense and then proceeding on to offense. We “look down,” assessing downside risk, in other words, before “looking up” at the total return potential long­range for each investment.

Short­term market volatility has allowed us to make a number of adjustments to the Portfolio at the margin. Certain sectors, especially high­grade financials, have declined more than the overall market, and they present investors with, in select instances, single­digit valuations and possess financial strength well beyond the 2008–2009 crisis. This means, importantly, that we have a constructive view of our financial positions over the next three to five years and beyond—even if the current year proves somewhat challenging. The major banks in the U.S. have more than twice as much capital coming into this year as they did entering the 2008–2009 crisis. From a cash flow perspective, they continue to take in cash as their business models center around the activity of “making money on money,” which is really a digital product at this point, not a foot­traffic­dependent, physical product that must be sold in a store, for example. We are avoiding consciously businesses and industries that, in a new normal environment looking

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ahead, fail to meet the definition of “evergreen”—i.e., perennial and enduring—favoring instead contrarian areas whose financial soundness is underappreciated, in our view.

It is really time to avoid extreme optimism or pessimism. It is a time to be realists, as noted earlier. One reality is that the near­term news headlines, headline economic statistics and possibly share price performance may prove trying psychologically for investors. We are prepared for that potentiality and are focused instead on ensuring that the businesses we own do not fluctuate in their true long-term earnings power—and therefore intrinsic values—anywhere near the extent to which their share prices might vacillate. We believe that a realistic view also should leave open the possibility that from this point of extreme depression and stress, conditions can and should improve markedly for at least the right businesses in the right sectors in the coming years and possibly quarters. Starting at low multiples of normalized earnings, we feel we have an appropriate and favorable balance of risk and reward in terms of business characteristics in our Portfolios, as well as a consciously built­in margin of safety, valuation­wise. Lastly, we own a wide array of different businesses for the purpose of diversification. •

Portfolio ReviewIn the first six months of 2020, Davis Large Cap SMA Portfolio delivered negative results.1 By comparison, the S&P 500 Index returned −3.08%. To address the relative underperformance of the Portfolio this year, we recognize that our near­term results have been disap­pointing. On balance, the performance of financial and energy stocks, in particular, have caused us to lag this year. We expect many businesses to recover, if not fully at first, then gradually, and feel that long­term funda­mentals are in many instances overly discounted today, especially in the lagging financials sector. With some exceptions, particularly in energy, we believe many of

the positions that have hurt performance most this year could well stage a recovery on a fundamental, earnings­defined basis and feel they are trading at unjustifiably low valuations.

Financial shares have been a notable laggard this year relative to the broad market. We expect that to prove temporary in the case of the businesses we have chosen in that sector. In fact, the steep declines in the share prices for financial services companies, especially in late first quarter and early second quarter, resulted in nearly depression­level multiples, despite the reality that today they are truly built to last, in our view. The Federal Reserve has conducted stress tests on the major banks in the U.S. year after year, using a range of very strict assumptions. This Fed stress test is a useful indicator of how durable and resilient our bank holdings should be. In addition, we model out a range of adverse scenarios internally. In both cases, our analysis and findings have led us to become net buyers of financials in the first half of the year, both in the U.S. and in certain foreign markets. We believe our current investments in this sector represent good value in both absolute and relative terms.

As the largest sector exposure in the Portfolio, it is worth elaborating on our financials as they are more individu­ally nuanced than their recently correlated share prices would suggest. For instance, at one end of the spectrum is Berkshire Hathaway, which commands a strong market position in insurance and reinsurance, utilities, railroads and a host of other industries, in addition to holding approximately $130 billion in cash and Treasuries on its balance sheet and more than $180 billion of marketable securities in its portfolio of liquid investments.2 It is a juggernaut with a fortress balance sheet, in other words. Looking beyond the temporary near­term earnings headwind, we have extremely high conviction in the durability of its businesses and the potential for both the operating earnings and investment returns to increase our value over the long term.

1. Net of fees. Composite performance from 4/1/69, through 12/31/01, is Davis Advisors’ Large Cap Value Composite which includes institutional accounts, mutual funds, and wrap accounts. Performance from 1/1/20, through the date of this report is the Davis Advisors’ Large Cap Value SMA Composite which includes only wrap accounts. See endnotes for a description of the composites. The performance of mutual funds and other Davis managed accounts may be materially different. Past performance is not a guarantee of future results. 2. Holdings discussed in this commentary are selected according to objective, non­performance­based criteria. They are chosen each quarter according to a consistent methodology based on their weight in the Davis Advisors’ Large Cap Value model portfolio as well as recent purchases and recent sales and are intended only as illustrations of the Davis Investment Discipline. They are not recommendations to buy, sell or hold any security. Individual account holdings may vary.

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Among more traditional, pure play financials, the Portfolio holds several leading, dominant banking insti­tutions; a global insurance giant, which we regard as a best­in­class property casualty insurer and reinsurer; and consumer finance leaders, among others. We believe in all of these cases that the balance sheets, funding stability, liquidity, risk management, capital ratios and management experience combine to form a relatively favorable case, starting at these low valuations. It is a contrarian thesis for the time being, but one that we believe has the potential to be among the future drivers of results over the long term.

Energy, as a sector, is challenged due to collapsing oil prices in recent years. Our energy investments, which we recently exited, focused on low­cost shale producers with above­average production growth and above­average economics relative to the broader industry. We believe the economic slowdown across the globe could be prove extremely challenging to the supply and demand picture for energy commodity prices, with oil trading at uneconomical levels, even for low­cost producers. Therefore, as the facts changed on a secular basis, we revised our views and decided to exit at a loss. The loss realized on those positions, which had been a relatively small percentage of assets, had the ancillary benefit of effectively neutralizing realized gains for the period, but the fact is that our results in this area were disappointing. We feel confident that allocating to more attractive areas today is a better use of capital and are willing to admit and learn from our mistakes in energy.

Supporting results in a positive way were companies generally engaged in different areas of technology that, as a sector, have proven remarkably resilient. We own a number of leading semiconductor and semiconductor­related businesses, an example of which is Intel, whose future prospects are expanding in potential rather than shrinking, as areas such as cloud computing, artificial intelligence, autonomous driving vehicles, 5G, video gaming and e­commerce continue to proliferate. We also hold market leaders in other areas of technology, ranging from software to Internet marketing and advertising to e­commerce.

Within the healthcare sector, we hold a leading inde­pendent lab and diagnostics services provider that offers lab testing at a fraction of the cost of hospitals—an important long­term competitive advantage and moat. We believe this business is well­positioned as demand for healthcare services continues to increase with not only the pandemic, but also longer­term as the population ages, since it is clear that costs must be contained. The company, in other words, essentially has exposure to the healthcare industry’s growing demand, but is a rare business insofar as it makes more money by driving down costs for the system—an uncommon combination that figures prominently in our long­term assessment of its business model, its competitive position and longevity overall.

In the industrial space, we own Carrier Global, a relatively new position, among other large, strong businesses. Our major industrial holdings also include industry leaders in aerospace and certain high­technology areas of defense. Carrier Global is the leading Heating, Ventilation and Air Conditioning (HVAC) provider in the U.S. spun out of the conglomerate United Technologies, which divided into three companies earlier this year. These are historically extremely durable, high­recurring revenue businesses that enjoy wide competitive moats and serve vast end markets, yet they are trading today at very attractive valuations, in our opinion.

Overall, our conviction is that the businesses in the Portfolio should, in our estimation, demonstrate their considerable earnings power over the coming quarters and years, and they are trading at very attractive valuations on fortress balance sheets by and large. Even taking into account the likelihood that near­term economic realities may prove challenging for businesses of all types, what will matter ultimately is whether investors hold businesses that are sufficiently resilient and relevant to confront the near­term realities and whether these investments have the ability to resume an expansion of earnings power in the years ahead. We are willing to be contrarians by owning such companies in volatile markets, provided the short­term challenges do not markedly alter what we see as attractive long­term economics for those companies. •

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ConclusionTimes of crisis, especially those that are truly unprec­edented, are universally difficult and unsettling. Whether the crisis is war, natural disasters, terrorist attacks or in this case, a global pandemic, there is always an adjust­ment period afterwards that can change the fortunes of people and certainly of businesses and industries on a secular basis. With many unknowns in the near term, what an investor should seek to understand with a high degree of confidence, in our view, is how and why their businesses should be able to sustain recessionary condi tions for a time and then resume a pattern of growing earnings thereafter—and then whether that long­term earnings accumulation is appropriately priced in.

In terms of whether this is an advantageous time to invest or not, we remain fully invested and maintain a constructive multi­year view for our businesses, especially starting from a point of modest expectations. That stated, it is advisable in our opinion to invest today with a very selective eye and on a bottom­up, company­by­company basis. This also means applying an independent, fresh lens to the broader market and being willing to avoid certain industries or sectors whose futures have changed due to the coronavirus and/or other secular forces such as competition or commoditization.

Thank you for your confidence, and we wish all of our shareholders and their families well in this time. •

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Davis Large Cap Value SMA Portfolio Selective. Attractive Growth. Undervalued.

Davis Large Cap Value SMA Portfolio S&P 500 Index

Selective Holdings 22 505

Attractive Growth EPS Growth (5 Year)1 25.9% 19.7%

Undervalued P/E (Forward)2 18.2x 23.4x

Today, Davis Large Cap Value SMA Portfolio holdings can be characterized by three characteristics: selective, attractive growth potential and undervalued. Selectivity allows us to reject the vast majority of companies that make up the index and instead build

a portfolio of those few companies that have above–average growth and below–average valuations. This combination of higher growth at below average valuations should create wealth for our shareholders in the years and decades to come.

The Attractive Growth and Undervalued reference in this piece relates to underlying characteristics of the portfolio holdings. There is no guarantee that the Porfolio’s performance will be positive as equity markets are volatile and an investor may lose money. Past performance is not a guarantee of future returns. Performance may vary. 1. Five–Year EPS Growth Rate is the average annualized earning per share growth for a company over the past five years. The values for the portfolio and index are the weighted average of the five–year EPS Growth Rates of the stocks in the portfolio or index. 2. Forward Price/Earnings (Forward P/E) Ratio is a stock’s current price divided by the company’s forecasted earnings for the following 12 months. The values for the portfolio and index are the weighted average of the P/E ratios of the stocks in the portfolio or index.

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The above listed securities are representative of a model Davis Large Cap Value SMA Portfolio as of the indicated date. Portfolio holdings may change over time. Individual accounts may contain different securities. There is no assurance that any securities listed herein will remain in an individual account at the time you receive this report. The securities listed for the S&P 500 Index are not representative of the entire portfolio, which consists of 505 securities. The information provided should not be considered a recommendation to buy or sell any particular security. There can be no assurance that an investor will earn a profit and not lose money.

Davis Large Cap Value SMA Portfolio Holdings June 30, 2020High Conviction. Different from the Index.

Holding Portfolio (%) S&P 500 Index (%)

Alphabet 7.0% 3.3%Amazon.com 7.0 4.5Applied Materials 7.0 0.2Berkshire Hathaway 7.0 1.4Facebook 7.0 2.1Capital One Financial 6.8 0.1JPMorgan Chase 5.4 1.1Raytheon Technologies 4.9 0.4Wells Fargo 4.7 0.4Carrier Global 4.6 0.1Bank of New York Mellon 4.5 0.1American Express 4.4 0.3Intel 3.9 1.0Texas Instruments 3.9 0.5Quest Diagnostics 3.5 0.1Alibaba Group Holding 3.4 —New Oriental Education & Technology 3.4 —U.S. Bancorp 2.9 0.2Chubb 1.6 0.2Microsoft 1.5 6.0Loews 0.6 0.0CASH 5.0 —

100.0%

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Average Annual Total returns as of June 30, 2020 for Davis Large Cap Value SMA Composite with a 3% maximum wrap fee: 1 year, −1.51%; 5 years, 4.30%; 10 years, 7.66%. Total return assumes reinvestment of dividends. Investment return and principal value will vary so that an investor may lose money. Current perfor mance may be higher or lower. Total return updates are available quarterly. Please ask your financial advisor to contact Davis Advisors. See endnotes for a description of the Composite. Portfolio characteristics, holdings and industry groups are subject to change. Davis Advisors classifies its Large Cap Value strategy as such based on its overall investment strategy. At the time of this report, this classification may or may not agree with classifications by other third party information services. 1. As of 6/30/20. This includes Davis Advisors, the Davis family and Foundation, and our employees. 2. The Attractive Growth and Undervalued reference in this piece relates to underlying charac teristics of the portfolio holdings. There is no guarantee that the Portfolio’s performance will be positive as equity markets are volatile and an investor may lose money. 3. For information purposes only. Not a recom mendation to buy or sell any security. 4. As of 6/30/20. Includes Davis Advisors, Davis Family and Foundation, our employees and Fund Directors. 5. Sources: Davis Advisors and Wilshire Atlas. 6. Net of fees. As of 6/30/20.

Davis Large Cap Value SMA Portfolio June 30, 2020

Davis Large Cap Value is a portfolio of attractive businesses selected using the time-tested Davis Investment Discipline. The Portfolio has outper formed its benchmark since inception. As one of the largest investors in the strategy, we have a unique commit ment to client stewardship.1

•  Unique Attributes of Davis Large Cap Value SMA Portfolio

•  Equity-Focused Research Firm: Established in 1969, Davis is a lead­ing specialist in equity investing. Our primary focus on research and unique investment discipline has built wealth for our clients over the long term.

•  Portfolio of Best of Breed Businesses: Utilizing rigorous independent research, we invest in durable, well­managed businesses with sustainable competitive advantages and attractive long­term growth prospects selling at a discount to their true value.

•  Flexible, Opportunistic Approach: We believe a bottom­up stock selection process and not mirroring the benchmark index are keys to long­term outperformance. Active Share 82%.

•  We Are One of the Largest Investors: We have a unique commitment to stewardship, generating attractive long­term results and managing risks.

• Experienced ManagementChris Davis, 31 years with Davis Advisors Danton Goei, 22 years with Davis Advisors

• Top 10 Holdings3 Portfolio IndexAlphabet 7.0% 3.3%Amazon.com 7.0 4.5Applied Materials 7.0 0.2Berkshire Hathaway 7.0 1.4Facebook 7.0 2.1Capital One Financial 6.8 0.1JPMorgan Chase 5.4 1.1Raytheon Technologies 4.9 0.4Wells Fargo 4.7 0.4Carrier Global 4.6 0.1

•  Our Investment Alongside Our ClientsWe have more than $2 billion of our own money invested in Davis strategies and funds.4

$115,270 $124,560

$193,180

$17,470,990

Davis LCV SMA Portfolio Has Grown Client Wealth Over the Long Term6($100,000 Hypothetical Investment)

1 yr 5 yr Inception(4/1/69)

10 yr

• Sectors5 Portfolio IndexFinancials 39.9% 11.4%Information Technology 17.2 26.2Communication Services 14.7 10.8Consumer Discretionary 14.5 10.8Industrials 10.0 8.0Health Care 3.7 14.6Consumer Staples — 7.0Utilities — 3.1Energy — 2.8Real Estate — 2.8Materials — 2.5

• Undervalued. Attractive Growth. Selective.2 Portfolio IndexUndervalued P/E (Forward) 18.2x 23.4xAttractive Growth EPS Growth (5 Year) 25.9% 19.7%Selective Holdings 22 505

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Investment ProfessionalsChristopher C. Davis joined Davis Advisors in 1989. He has more than 30 years experience in investment management and securities research. Mr. Davis received his M.A. from the University of St. Andrews in Scotland.

Danton G. Goei joined Davis Advisors in 1998. Mr. Goei received his B.A. from Georgetown University and his M.B.A. from The Wharton School. He was previously employed at Bain & Company, Morgan Stanley Asia Ltd. and Citicorp. Mr. Goei speaks multiple languages and has lived in Europe, Asia and currently resides in New York City.

Dwight C. Blazin joined Davis Advisors in 1995. He was previously a consultant for IT Consulting and Systems Design. Mr. Blazin received his B.A. from Brigham Young University and his M.A. and Ph.D. from New York University.

Kent Y. Whitaker first joined Davis Advisors in 2000. Previously, he worked at Amoco Corporation, British Petroleum, Hunt Energy Corporation, and Asarco. Mr. Whitaker holds a B.A. from Dartmouth College, a M.S. from Miami University and a M.B.A. from the Amos Tuck Business School.

Darin Prozes joined Davis Advisors in 2004. He previously worked for the Parthenon Group, a strategy con sulting firm. Mr. Prozes received his B.A. from Princeton University and his M.B.A. from Stanford University.

Pierce B.T. Crosbie, CFA joined Davis Advisors in 2008. Previously, he worked as a research analyst at Davidson Kempner Capital Management and in mergers and acquisitions at RBC Capital Markets. Mr. Crosbie received his B.A. from McGill University, his M.B.A. from the Harvard Business School and is a CFA charter holder.

Edward Yen joined Davis Advisors in 2013. Previously, he worked at Dodge & Cox and Lehman Brothers. Mr. Yen received his B.S. from the University of California, Berkeley and his M.B.A. from Stanford University.

Benjamin Betcher, CFA joined Davis Advisors in 2017. Previously, he worked as a research analyst at Sanford Bernstein and as head of finance at Ampush Media. Mr. Betcher received his B.S. from Tufts University and is a CFA charter holder.

Sobby Arora, CFA joined Davis Advisors in 2017. Previously, he worked as a research analyst at Federated Global Investment Management and ING Investment Management. Mr. Arora received his B.A. from Colgate University, his M.B.A. from The Stern School of Business and is a CFA charter holder.

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4 South Central Arkansas, Kansas, Louisiana, Missouri, Oklahoma, Tennessee, Texas Mark Giles Regional Director 800­717­3477 Ext. 6908 mgiles@dsaco.com Marty Smith Regional Representative 800­717­3477 Ext. 2674 martysmith@dsaco.com

ContactsFinancial Advisor Support and Literature Requests: 800-717-3477 davisfunds.com

Dodd Kittsley, National Director 212­891­5578, dkittsley@dsaco.com

Ed Snowden, Manager, Regional Representatives 800­717­3477 Ext. 2267, esnowden@dsaco.com

Contact Regional Directors or Regional Representatives to arrange meetings or for information on our investment process, philosophy and performance.

2 Central Arizona, Colorado, Idaho, Iowa, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, Wyoming Dan Steichen Regional Director 800­717­3477 Ext. 2262 dsteichen@dsaco.com Sean Lynch Senior Regional Representative 800­717­3477 Ext. 2675 slynch@dsaco.com

3 Great Lakes Illinois, Indiana, Kentucky, Minnesota, Southern Ohio, Wisconsin Bill Coughlin Regional Director 800­717­3477 Ext. 3783 bcoughlin@dsaco.com Nancy Brennan Senior Regional Representative 800­717­3477 Ext. 2679 nbrennan@dsaco.com

9 New York City Connecticut, Southern New York Jim Ambrosio Regional Director 800­717­3477 Ext. 3787 jambrosio@dsaco.com Laurel Hardy Senior Regional Representative 800­717­3477 Ext. 2683 lhardy@dsaco.com

6 Mid-Atlantic Maryland, North Carolina, South Carolina, Virginia, Washington DC, West Virginia J.P. Raflo Regional Director 800­717­3477 Ext. 6905 jraflo@dsaco.com Mari Downey Senior Regional Representative 800­717­3477 Ext. 2665 mdowney@dsaco.com

7 North Atlantic Delaware, New Jersey, Northern Ohio, Pennsylvania Reed Finley Regional Director 800­717­3477 Ext. 6906 rfinley@dsaco.com Danny Hardy Regional Representative 800­717­3477 Ext. 2677 dhardy@dsaco.com

8 Northeast Maine, Massachusetts, Michigan, New Hampshire, Northern New York, Rhode Island, Vermont Steve Coyle Regional Director 800­717­3477 Ext. 3790 coyle@dsaco.com Danielle Irwin Senior Regional Representative 800­717­3477 Ext. 2682 dirwin@dsaco.com

5 Southeast Alabama, Florida, Georgia, Mississippi, Puerto Rico Peter Yensel Regional Director 800­717­3477 Ext. 3785 pyensel@dsaco.com Mike Longoni Senior Regional Representative 800­717­3477 Ext. 2261 mlongoni@dsaco.com

1 West Coast Alaska, California, Hawaii, Oregon, Washington Joe Emhof Regional Director 800­717­3477 Ext. 3786 jemhof@dsaco.com Jon Franke Senior Regional Representative 800­717­3477 Ext. 2663 jfranke@dsaco.com

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This material may be shared with existing and potential clients to provide information concerning market conditions and the investment strategies and techniques used by Davis Advisors to manage its client accounts. Please refer to Davis Advisors’ Form ADV Part 2 for more information regarding investment strategies, risks, fees, and expenses. Clients should also review other relevant material, including a schedule of investments listing securities held in their account.

The performance of mutual funds is included in the Composite. The performance of the mutual funds and other Davis managed accounts may be materially different. For example, the Davis New York Venture Fund may be significantly larger than another Davis managed account and may be managed with a view toward different client needs and considerations. The differences that may affect investment performance include, but are not limited to: the timing of cash deposits and withdrawals, the possibility that Davis Advisors may not buy or sell a given security on behalf of all clients pursuing similar strategies, the price and timing differences when buying or selling securities, the size of the account, the differences in expenses and other fees, and the clients pursuing similar investment strategies but imposing different investment restrictions. This is not a solicitation to invest in the Davis New York Venture Fund or any other fund.

Davis Advisors is committed to communicating with our investment partners as candidly as possible because we believe our clients benefit from under­standing our investment philosophy and approach. Our views and opinions include “forward­looking statements” which may or may not be accurate over the long term. Forward­looking statements can be identified by words like “believe,” “expect,” “anticipate,” “feel,” or similar expressions. You should not place undue reliance on forward­looking statements, which are current as of the date of this report. We disclaim any obligation to update or alter any forward­looking statements, whether as a result of new information, future events, or otherwise. While we believe we have a reasonable basis for our appraisals and we have confidence in our opinions, actual results may differ materially from those we anticipate.

Returns from inception (4/1/69) through 12/31/01, were calculated from the Davis Large Cap Value Composite (see description below). Returns from 1/1/02, through the date of this report were calcu­lated from the Large Cap Value (SMA) Composite.

Davis Advisors’ Large Cap Value Composite includes all actual, fee­paying, discretionary Large Cap Value investing style institutional accounts, mutual funds, and wrap accounts under management including those accounts no longer managed. Effective 1/1/98, a minimum account size of $3,500,000 was established. Accounts below this minimum are

deemed not to be representative of the Composite’s intended strategy and as such are not included in the Composite. A time­weighted internal rate of return formula is used to calculate performance for the accounts included in the Composite.

Davis Advisors’ Large Cap Value (SMA) Composite excludes institutional accounts and mutual funds. Performance shown from 1/1/02, through 12/31/10, includes all eligible wrap accounts with a minimum account size of $3,500,000 from inception date for the first full month of account management and includes closed accounts through the last day of the month prior to the account’s closing. For the perfor­mance shown from 1/1/11, through the date of this report, the Davis Advisors’ Large Cap Value SMA Composite includes all eligible wrap accounts with no account minimum from inception date for the first full month of account management and includes closed accounts through the last day of the month prior to the account’s closing. The net of fees rate of return formula used by the wrap­fee style accounts is calculated based on a hypothetical 3% maximum wrap fee charged by the wrap account sponsor for all account service, including advisory fees for the period 1/1/06, and thereafter. For the gross perfor­mance results, custodian fees and advisory fees are treated as cash withdrawals. A list of Davis Advisors’ Composites is available upon request.

This report discusses companies in conformance with Rule 206(4)­1 of the Investment Advisers Act of 1940 and guidance published thereunder. The companies we discuss are chosen in the following manner: starting at the beginning of the year, the holdings from a Large Cap Value model portfolio are listed in descending order based on percentage owned. Companies that reflect different weights are then selected. (For the first quarter, holdings num­bered 1, 11, 21, and 31 are selected and discussed. For the second quarter, holdings numbered 2, 12, 22, and 32 are selected and discussed. This pattern then repeats itself for the following quarters. No more than two of these holdings can come from the same sector per piece.); one recent purchase and one recent sale are also discussed. A sale is defined as a position that is completely eliminated from the portfolio before the end of the quarter in question. If there were no purchases or sales, the purchases and sales are omitted from the report. If there were multiple purchases and/or sales, the purchase and sale discussed shall be the earliest to occur. If there are multiple purchases and/or sales on the same day, the one that is the largest percentage of assets will be discussed. No holding can be discussed if it was discussed in the previous three quarters. As this is primarily a domestic equity strategy, no more than one foreign holding will be discussed in any report. If more than one foreign holding would be discussed based on the criteria above, the holding with the largest percent of assets in the model portfolio would be chosen. However, if the model portfolio

has an aggregate foreign holding percentage that is greater than 15% the commentary would include a discussion of the largest foreign holding in the model portfolio that has not been discussed in the previous three quarters.

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 buy or sell any particular security. There is no assurance that any of the securities discussed herein will remain in an account at the time this report is received or that securities sold have not been repurchased. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of any account’s portfolio holdings. It should not be assumed that any of the securities discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. It is possible that a security was profitable over the previous five­year period of time but was not profitable over the last year. In order to determine if a certain security added value to a specific portfolio, it is important to take into consideration at what time that security was added to that specific portfolio. A complete listing of all securities purchased or sold in an account, including the date and execution prices, is available upon request.

The investment objective of a Davis Large Cap Value account is long­term growth of capital. There can be no assurance that Davis will achieve its objective. Davis Advisors uses the Davis Investment Discipline to invest a client’s assets principally in common stocks (including indirect holdings of common stock through depositary receipts) issued by large compa­nies with market capitalizations of at least $10 billion. Historically, the Large­Cap Value strategy has invested a significant portion of its assets in financial services companies and in foreign companies, and may also invest in mid­ and small­capitalization companies. The principal risks are: common stock risk, depositary receipts risk, emerging markets risk, fees and expenses risk, financial services risk, foreign country risk, foreign currency risk, headline risk, large­capitalization companies risk, manager risk, mid­ and small­capitalization companies risk, and stock market risk. See the ADV Part 2 for a description of these principal risks.

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 two­thirds of the total market value of all domestic common stocks. Investments cannot be made directly in an index.

Davis Advisors 2949 East Elvira Road, Suite 101, Tucson, AZ 85756 800–717–3477, davisadvisors.com

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