N-CSR

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANANGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-09293

DAVIS VARIABLE ACCOUNT FUND, INC.

(Exact name of registrant as specified in charter)

2949 East Elvira Road, Suite 101

Tucson, AZ  85756

(Address of principal executive offices)

Thomas D. Tays

Davis Selected Advisers, L.P.

2949 East Elvira Road, Suite 101

Tucson, AZ  85756

(Name and address of agent for service)

Registrant’s telephone number, including area code: 520-806-7600

Date of fiscal year end: December 31, 2009

Date of reporting period: December 31, 2009

____________________

ITEM 1.  REPORT TO STOCKHOLDERS

DAVIS VARIABLE ACCOUNT FUND, INC. Table of Contents

Management's Discussion of Fund Performance:
Davis Value Portfolio	2
Davis Financial Portfolio	4
Davis Real Estate Portfolio	6
Fund Overview:
Davis Value Portfolio	8
Davis Financial Portfolio	10
Davis Real Estate Portfolio	11
Expense Example	13
Schedule of Investments:
Davis Value Portfolio	15
Davis Financial Portfolio	20
Davis Real Estate Portfolio	22
Statements of Assets and Liabilities	25
Statements of Operations	26
Statements of Changes in Net Assets	27
Notes to Financial Statements	29
Financial Highlights:
Davis Value Portfolio	36
Davis Financial Portfolio	37
Davis Real Estate Portfolio	38
Report of Independent Registered Public Accounting Firm	39
Fund Information	40
Directors and Officers	41

This Annual Report is authorized for use by existing shareholders.  Prospective shareholders must receive a current Davis Variable Account Fund, Inc. prospectus, which contains more information about investment strategies, risks, charges, and expenses.  Please read the prospectus carefully before investing or sending money.

Shares of the Davis Variable Account Funds 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.

DAVIS VARIABLE ACCOUNT FUND, INC.	Management’s Discussion of Fund Performance
DAVIS VALUE PORTFOLIO

Performance Overview

Davis Value Portfolio delivered a total return on net asset value of 31.16% for the year ended December 31, 2009.  Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 26.46%.  The sectors1 within the Index that turned in the strongest performance over the year were information technology, materials, and consumer discretionary.  The sectorswithin the Index that turned in the weakest (but still positive) performance over the year were telecommunication services, utilities, and energy.

Factors Impacting the Portfolio’s Performance

The Portfolio’s energy companies out-performed the corresponding sector within the Index (up 39% versus up 14% for the Index) and were the largest contributors2 to performance on a relative basis compared to the Index.  Occidental Petroleum3, EOG Resources, and Canadian Natural Resources were among the most important contributors to performance.  ConocoPhillips was among the most important detractors from performance.

The Portfolio’s information technology companies were the largest detractor from performance relative to the Index.  The Portfolio’s information technology companies out-performed the corresponding sector within the Index (up 63% versus up 62% for the Index), however this sector still detracted from performance relative to the Index due to the lower relative average weighting (8% versus 18% for the Index).  Google, Microsoft, and Texas Instruments were among the most important contributors to performance.  Tyco Electronics was among the most important detractors from performance.  The Portfolio no longer owns Tyco Electronics.

The Portfolio’s financial companies were among the most important contributors to relative performance as the Portfolio had a higher average weighting (28% versus 13% for the Index) and the Portfolio’s financial companies out-performed the corresponding sector within the Index (up 26% versus up 17% for the Index).  American Express and GAM Holding were among the most important contributors to performance.  Bank of America, Citigroup, NIPPONKOA Insurance, and Julius Baer Group were among the most important detractors from performance.  The Portfolio no longer owns Bank of America, Citigroup, or NIPPONKOA Insurance.

The Portfolio’s relative performance was helped due to stock selection of health care companies.  The Portfolio had a lower relative average weighting in health care companies (8% versus 14% for the Index), but the Portfolio’s health care companies out-performed the corresponding sector within the Index (up 40% versus up 20% for the Index).  Schering-Plough was among the most important contributors to performance.  Schering-Plough merged with Merck in November 2009.

The Portfolio ended the year with approximately 15% of its net assets invested in foreign companies.  As a whole these companies out-performed the domestic companies held by the Portfolio.

Davis Value Portfolio’s investment objective is long-term growth of capital.  There can be no assurance that the Portfolio will achieve its objective.  The primary risks of an investment in Davis Value Portfolio are: (1) market risk, (2) company risk, (3) financial services risk, (4) foreign country risk, (5) headline risk, and (6) selection risk. See the prospectus for a full description of each risk.

1     The companies included in the Standard & Poor’s 500® Index are divided into ten sectors.  One or more industry groups make up a sector.

2     A company’s or sector’s contribution to or detraction from the Portfolio’s performance is a product both of 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%.

3     This Management Discussion of Fund Performance 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 Portfolio’s holdings of each company discussed.

2

DAVIS VARIABLE ACCOUNT FUND, INC.	Management’s Discussion of Fund Performance
DAVIS VALUE PORTFOLIO - (CONTINUED)

Comparison of a $10,000 investment in Davis Value Portfolio versus the Standard & Poor’s 500® Indexover 10 years for an investment made on December 31, 1999

Average Annual Total Return for periods ended December 31, 2009

F  Fund & Benchmark Index	1-Year	5-Year	10-Year	Since Fund’s Inception	Inception Date	Gross Expense Ratio	Net Expense Ratio
Davis Value Portfolio	31.16%	0.61%	2.11%	2.26%	07/01/99	0.71%	0.71%
Standard & Poor’s 500® Index	26.46%	0.42%	(0.95)%	(0.26)%

The Standard & Poor’s 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange.  The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.  Investments cannot be made directly in the Index.

The performance data for Davis Value Portfolio 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 Portfolio today.  The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed.  Portfolio performance changes over time and current performance may be higher or lower than stated.  The operating expense ratio may vary in future years.  For more current information please call Davis Funds Investor Services at 1-800-279-0279.

Portfolio performance numbers are net of all Portfolio operating expenses, but do not include any insurance charges imposed by your insurance company’s separate account.  If performance included the effect of these additional charges, the return would be lower.

3

DAVIS VARIABLE ACCOUNT FUND, INC.	Management’s Discussion of Fund Performance
DAVIS FINANCIAL PORTFOLIO

Performance Overview

Davis Financial Portfolio delivered a total return on net asset value of 41.18% for the year ended December 31, 2009.  Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 26.46%.  The Index’s diversified financials and insurance industry groups1 turned in positive performances, while the banking industry group turned in a negative performance.

Factors Impacting the Portfolio’s Performance

The Portfolio’s financial sector holdings out-performed those of the Index (up 44% versus up 17% for the Index).  The Portfolio had a portion of its assets invested in other sectors and these non-financial holdings overall contributed2 to performance.

The Portfolio’s diversified financial companies were the largest contributors to performance.  The Portfolio’s diversified financial companies out-performed the corresponding industry group within the Index (up 56% versus up 30% for the Index).  American Express3, Oaktree, Goldman Sachs, and GAM Holding were among the most important contributors to performance.  JPMorgan Chase, Bank of New York Mellon, Julius Baer Group, and Bank of America were among the most important detractors from performance.

The Portfolio’s insurance companies were the second largest contributor to performance (up 24% versus up 14% for the corresponding industry group within the Index).  Transatlantic Holdings, China Life Insurance, and Loews were among the most important contributors to performance.  FPIC Insurance and American International Group were among the most important detractors from performance.  The Fund no longer owns American International Group.

The Portfolio’s banking companies contributed positively to performance (up 63% versus down 7% for the Index).  Wells Fargo and State Bank of India were among the most important contributors to performance.

The Portfolio received a favorable class action settlement from a former holding, Tyco International.  This settlement had an approximate impact of 0.4% on the investment performance of the Portfolio in 2009.

The Portfolio ended the year with approximately 25% of its net assets invested in foreign companies.  As a whole these companies out-performed the domestic companies held by the Portfolio.

Davis Financial Portfolio’s investment objective is long-term growth of capital.  There can be no assurance that the Portfolio will achieve its objective.  The primary risks of an investment in Davis Financial Portfolio are: (1) market risk, (2) company risk, (3) concentrated financial services portfolio risk, (4) foreign country risk, (5) headline risk, and (6) selection risk.  See the prospectus for a full description of each risk.

Davis Financial Portfolio concentrates its investments in the financial sector, and it may be subject to greater risks than a portfolio that does not concentrate its investments in a particular sector.  The Portfolio’s investment performance, both good and bad, is expected to reflect the economic performance of the financial sector more than a portfolio that does not concentrate its portfolio.

1     The companies included in the Standard & Poor’s 500® Index are divided into ten sectors.  One or more industry groups make up a sector.

2     A company’s or sector’s contribution to or detraction from the Portfolio’s performance is a product both of 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%.

3     This Management Discussion of Fund Performance 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 Portfolio’s holdings of each company discussed.

4

DAVIS VARIABLE ACCOUNT FUND, INC.	Management’s Discussion of Fund Performance
DAVIS FINANCIAL PORTFOLIO - (CONTINUED)

Comparison of a $10,000 investment in Davis Financial Portfolio versus the Standard & Poor’s 500® Indexover 10 years for an investment made on December 31, 1999

Average Annual Total Return for periods ended December 31, 2009

F Fund & Benchmark Index	1-Year	5-Year	10-Year	Since Fund’s Inception	Inception Date	Gross Expense Ratio	Net Expense Ratio
Davis Financial Portfolio	41.18%	(1.79)%	2.66%	1.81%	07/01/99	0.78%	0.78%
Standard & Poor’s 500® Index	26.46%	0.42%	(0.95)%	(0.26)%

The Standard & Poor’s 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange.  The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.  Investments cannot be made directly in the Index.

The performance data for Davis Financial Portfolio 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 Portfolio today.  The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed.  Portfolio performance changes over time and current performance may be higher or lower than stated.  The operating expense ratio may vary in future years.  For more current information please call Davis Funds Investor Services at 1-800-279-0279.

Portfolio performance numbers are net of all Portfolio operating expenses, but do not include any insurance charges imposed by your insurance company’s separate account.  If performance included the effect of these additional charges, the return would be lower.

Davis Financial Portfolio received a favorable class action settlement from a company that it no longer owns.  This settlement had a material impact on the investment performance of the Portfolio in 2009.  This was a one-time event that is unlikely to be repeated.

5

DAVIS VARIABLE ACCOUNT FUND, INC.	Management’s Discussion of Fund Performance
DAVIS REAL ESTATE PORTFOLIO

Performance Overview

Davis Real Estate Portfolio delivered a total return on net asset value of 31.73% for the year ended December 31, 2009.  Over the same time period, the Wilshire U.S. Real Estate Securities Index(“Index”) returned 29.20%.  Every sub-industry1 within the Index delivered positive returns, with real estate operating companies, office REITs, and residential REITs turning in the strongest performance.

Factors Impacting the Portfolio’s Performance

The Portfolio’s office REITs were important contributors2 to performance.  A higher relative average weighting in this sub-industry (27% versus 17% for the Index) was a strong contributor to the Portfolio’s performance.  Alexandria Real Estate3, Digital Realty Trust, and SL Green Realty were among the most important contributors to performance.  Derwent London was among the most important detractors from performance.  The Portfolio no longer owns Derwent London.

The Portfolio’s retail REITs were the most important contributor to performance relative to the Index.  The Portfolio’s retail REITs out-performed the corresponding sub-industry within the Index (up 51% versus up 28% for the Index).  Simon Property Group and Taubman Centers were among the most important contributors to performance.

Diversified REITs were the largest detractor from the Portfolio’s performance relative to the Index.  The Portfolio’s diversified REITs under-performed the corresponding sub-industry within the Index (down 17% versus up 24% for the Index).  Cousins Properties was among the most important detractors from performance.

Forest City Enterprises and ProLogis were among the most important contributors to the Portfolio’s performance.  Brixton, First Potomac Realty, and Cogdell Spencer were among the most important detractors from performance.  The Portfolio no longer owns Brixton or First Potomac Realty.

Davis Real Estate Portfolio’s investment objective is total return through a combination of growth and income.  There can be no assurance that the Portfolio will achieve its objective.  The primary risks of an investment in Davis Real Estate Portfolio are: (1) market risk, (2) company risk, (3) concentrated real estate portfolio risk, (4) focused portfolio risk, (5) small- and medium-capitalization risk, (6) foreign country risk, (7) headline risk, and (8) selection risk.  See the prospectus for a full description of each risk.

Davis Real Estate Portfolio concentrates its investments in the real estate sector, and it may be subject to greater risks than a portfolio that does not concentrate its investments in a particular sector.  The Portfolio’s investment performance, both good and bad, is expected to reflect the economic performance of the real estate sector much more than a portfolio that does not concentrate its portfolio.

Davis Real Estate Portfolio is allowed to focus its investments in fewer companies, and it may be subject to greater risks than a more diversified portfolio that is not allowed to focus its investments in a few companies.  Should the portfolio manager determine that it is prudent to focus the Portfolio’s portfolio in a few companies, the Portfolio’s investment performance, both good and bad, is expected to reflect the economic performance of its more focused portfolio.

1The companies included in the Wilshire U.S. Real Estate Securities Index are divided into eight sub-industries.

2     A company’s or sector’s contribution to or detraction from the Portfolio’s performance is a product both of 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%.

3     This Management Discussion of Fund Performance 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 Portfolio’s holdings of each company discussed.

6

DAVIS VARIABLE ACCOUNT FUND, INC.	Management’s Discussion of Fund Performance
DAVIS REAL ESTATE PORTFOLIO - (CONTINUED)

Comparison of a $10,000 investment in Davis Real Estate Portfolio versus the Standard & Poor’s 500® Index and the Wilshire U.S. Real Estate Securities Indexover 10 years for an investment made on December 31, 1999

Average Annual Total Return for periods ended December 31, 2009

F Fund & Benchmark Indices	1-Year	5-Year	10-Year	Since Fund’s Inception	Inception Date	Gross Expense Ratio	Net Expense Ratio
Davis Real Estate Portfolio	31.73%	(2.12)%	8.49%	6.89%	07/01/99	0.98%	0.98%
Standard & Poor’s 500® Index	26.46%	0.42%	(0.95)%	(0.26)%
Wilshire U.S. Real Estate Securities Index	29.20%	(0.23)%	10.47%	8.93%

The Standard & Poor’s 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange.  The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.  Investments cannot be made directly in the Index.

The Wilshire U.S. Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities. It reflects no deduction for fees or expenses.  The Index was formerly named the “Dow Jones Wilshire Real Estate Securities Index.” Investments cannot be made directly in the Index.

The performance data for Davis Real Estate Portfolio 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 Portfolio today.  The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed.  Portfolio performance changes over time and current performance may be higher or lower than stated.  The operating expense ratio may vary in future years.  For more current information please call Davis Funds Investor Services at 1-800-279-0279.

Portfolio performance numbers are net of all Portfolio operating expenses, but do not include any insurance charges imposed by your insurance company’s separate account.  If performance included the effect of these additional charges, the return would be lower.

7

DAVIS VARIABLE ACCOUNT FUND, INC.	Fund Overview
DAVIS VALUE PORTFOLIO	December 31, 2009

Portfolio Composition		Industry Weightings
(% of Fund’s Net Assets)		(% of Long Term Portfolio)
			Fund	S&P 500®
Common Stock (U.S.)	79.88%	Energy	16.60%	11.48%
Common Stock (Foreign)	14.99%	Diversified Financials	13.81%	7.87%
Convertible Bonds (U.S.)	0.41%	Insurance	11.61%	2.41%
Convertible Bonds (Foreign)	0.17%	Health Care	9.26%	12.63%
Corporate Bonds	0.47%	Information Technology	8.53%	19.85%
Short Term Investments	2.95%	Food & Staples Retailing	6.52%	2.69%
Other Assets & Liabilities	1.13%	Materials	6.40%	3.60%
	100.00%	Banks	4.31%	2.86%
		Food, Beverage & Tobacco	4.18%	5.84%
		Media	4.03%	2.90%
		Retailing	2.77%	3.46%
		Transportation	2.65%	2.09%
		Commercial & Professional Services	2.43%	0.66%
		Other	1.97%	10.73%
		Household & Personal Products	1.96%	2.83%
		Automobiles & Components	1.58%	0.61%
		Capital Goods	1.39%	7.49%
			100.00%	100.00%

Top 10 Holdings

(% of Fund’s Net Assets)

Berkshire Hathaway Inc., Class A	Property & Casualty Insurance	4.39%
Occidental Petroleum Corp.	Energy	4.22%
Wells Fargo & Co.	Commercial Banks	4.13%
American Express Co.	Consumer Finance	3.96%
Costco Wholesale Corp.	Food & Staples Retailing	3.87%
EOG Resources, Inc.	Energy	3.50%
Devon Energy Corp.	Energy	3.17%
Loews Corp.	Multi-line Insurance	2.56%
JPMorgan Chase & Co.	Diversified Financial Services	2.41%
Merck & Co., Inc.	Pharmaceuticals, Biotechnology & Life Sciences	2.41%

8

DAVIS VARIABLE ACCOUNT FUND, INC.	Fund Overview
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2009

New Positions Added (01/01/09-12/31/09)

(Highlighted positions are those greater than 0.80% of 12/31/09 total net assets)

Security	Industry	Date of 1st Purchase	% of 12/31/09 Fund Net Assets
Activision Blizzard, Inc.	Software & Services	01/07/09	0.45%
Becton, Dickinson and Co.	Health Care Equipment & Services	03/02/09	0.91%
Coca-Cola Co.	Food, Beverage & Tobacco	06/26/09	0.54%
Fairfax Financial Holdings Ltd.	Multi-line Insurance	09/08/09	0.39%
GAM Holding Ltd.	Capital Markets	02/23/09	0.52%
Harley-Davidson, Inc., Sr. Notes,
15.00%, 02/01/14	Automobiles & Components	02/03/09	0.47%
Laboratory Corp. of America Holdings	Health Care Equipment & Services	03/02/09	0.39%
LLX Logistica S.A.	Transportation	09/22/09	0.07%
Mead Johnson Nutrition Co.	Household & Personal Products	12/14/09	0.32%
Medtronic, Inc.	Health Care Equipment & Services	01/07/09	–
Merck & Co., Inc.	Pharmaceuticals, Biotechnology &
	Life Sciences	03/11/09	2.41%
Natura Cosmeticos S.A.	Household & Personal Products	07/31/09	0.13%
Pfizer Inc.	Pharmaceuticals, Biotechnology &
	Life Sciences	02/25/09	0.88%
Potash Corp. of Saskatchewan Inc.	Materials	05/14/09	0.24%
Walt Disney Co.	Media	02/05/09	0.85%

Positions Closed (01/01/09-12/31/09)

(Gains and losses greater than $1,000,000 are highlighted)

		Date of		Realized
Security	Industry	Final Sale		Gain (Loss)
Altria Group, Inc.	Food, Beverage & Tobacco	01/05/09	$	122,420
American International Group, Inc.	Multi-line Insurance	12/18/09		(19,978,679)
Avon Products, Inc.	Household & Personal Products	03/23/09		(561,130)
Bank of America Corp.	Diversified Financial Services	03/16/09		(2,187,724)
Cisco Systems, Inc.	Technology Hardware & Equipment	08/20/09		(139,893)
Citigroup Inc.	Diversified Financial Services	03/10/09		(3,383,562)
Dell Inc.	Technology Hardware & Equipment	02/27/09		(1,662,540)
Discover Financial Services	Consumer Finance	02/04/09		(156,778)
eBay Inc.	Software & Services	06/03/09		(388,469)
E*TRADE Financial Corp.	Capital Markets	03/13/09		(760,169)
Lowe's Cos, Inc.	Retailing	02/04/09		(636,067)
MBIA Inc.	Property & Casualty Insurance	03/06/09		(664,262)
Medtronic, Inc.	Health Care Equipment & Services	04/28/09		(43,478)
Morgan Stanley	Capital Markets	03/16/09		(142,779)
NIPPONKOA Insurance Co., Ltd.	Property & Casualty Insurance	10/23/09		(1,151,848)
Schering-Plough Corp.	Pharmaceuticals, Biotechnology &
	Life Sciences	11/04/09		799,891
Sears Holdings Corp.	Retailing	02/27/09		(716,036)
Siemens AG, Registered	Capital Goods	03/20/09		(1,446,925)
Sprint Nextel Corp.	Telecommunication Services	03/12/09		(5,851,079)
State Street Corp.	Capital Markets	03/16/09		(107,364)
Sun Life Financial Inc.	Life & Health Insurance	12/14/09		165,773
Tyco Electronics Ltd.	Technology Hardware & Equipment	03/18/09		(629,440)
Whole Foods Market, Inc.	Food & Staples Retailing	01/09/09		(791,997)
WPP PLC, ADR	Media	01/09/09		(12,020)

9

DAVIS VARIABLE ACCOUNT FUND, INC.   ; Fund Overview

DAVIS FINANCIAL PORTFOLIO   December 31, 2009

Portfolio Composition		Industry Weightings
(% of Fund’s Net Assets)		(% of Stock Holdings)
			Fund	S&P 500®
Common Stock (U.S.)	73.93%	Diversified Financials	44.67%	7.87%
Common Stock (Foreign)	25.14%	Insurance	33.19%	2.41%
Short Term Investments	0.95%	Banks	12.52%	2.86%
Other Assets & Liabilities	(0.02)%	Energy	5.17%	11.48%
	100.00%	Commercial & Professional Services	2.90%	0.66%
		Materials	1.55%	3.60%
		Information Technology	–	19.85%
		Health Care	–	12.63%
		Capital Goods	–	7.49%
		Food, Beverage & Tobacco	–	5.84%
		Other	–	25.31%
			100.00%	100.00%

Top 10 Holdings

(% of Fund’s Net Assets)

American Express Co.	Consumer Finance	9.07%
Transatlantic Holdings, Inc.	Reinsurance	8.35%
Loews Corp.	Multi-line Insurance	6.15%
State Bank of India Ltd., GDR	Commercial Banks	5.71%
Wells Fargo & Co.	Commercial Banks	5.45%
Canadian Natural Resources Ltd.	Energy	5.12%
Oaktree Capital Group LLC, Class A	Diversified Financial Services	4.83%
Goldman Sachs Group, Inc.	Capital Markets	4.71%
Bank of New York Mellon Corp.	Capital Markets	4.66%
Markel Corp.	Property & Casualty Insurance	4.34%

New Positions Added (01/01/09-12/31/09)

(Highlighted positions are those greater than 0.30% of 12/31/09 total net assets)

Security	Industry	Date of 1st Purchase	% of 12/31/09 Fund Net Assets
Banco Santander Brasil S.A., ADS	Commercial Banks	10/07/09	0.32%
Cielo S.A.	Diversified Financial Services	06/26/09	0.26%

Positions Closed (01/01/09-12/31/09)

(Gains and losses greater than $1,000,000 are highlighted)

		Date of		Realized
Security	Industry	Final Sale		Gain (Loss)
Ambac Financial Group, Inc.	Property & Casualty Insurance	02/20/09	$	(615,674)
American International Group, Inc.	Multi-line Insurance	03/12/09		(6,106,028)
H&R Block, Inc.	Consumer Services	11/24/09		(96,600)
MBIA Inc.	Property & Casualty Insurance	03/06/09		(1,153,345)

10

DAVIS VARIABLE ACCOUNT FUND, INC.   ; Fund Overview

DAVIS REAL ESTATE PORTFOLIO   December 31, 2009

Portfolio Composition		Industry Weightings
(% of Fund’s Net Assets)		(% of Long Term Portfolio)
				Wilshire U.S. Real Estate Securities Index
Common Stock (U.S.)	74.80%
Common Stock (Foreign)	1.90%		Fund
Preferred Stock	8.34%	Office REITs	32.57%	17.23%
Convertible Bonds	4.27%	Retail REITs	19.59%	22.72%
Short Term Investments	9.13%	Specialized REITs	11.69%	26.07%
Other Assets & Liabilities	1.56%	Residential REITs	10.11%	15.91%
	100.00%	Industrial REITs	9.55%	6.21%
		Diversified REITs	6.48%	9.18%
		Other	5.66%	0.59%
		Real Estate Operating Companies	4.35%	2.09%
			100.00%	100.00%

Top 10 Holdings

(% of Fund’s Net Assets)

Corporate Office Properties Trust	Office REITs	5.10%
Ventas, Inc.	Specialized REITs	5.02%
American Campus Communities, Inc.	Residential REITs	4.97%
Alexandria Real Estate Equities, Inc.	Office REITs	4.61%
Simon Property Group, Inc.	Retail REITs	4.36%
Federal Realty Investment Trust	Retail REITs	3.92%
Vornado Realty Trust	Diversified REITs	3.88%
Essex Property Trust, Inc.	Residential REITs	3.73%
Douglas Emmett, Inc.	Office REITs	3.70%
Taubman Centers, Inc.	Retail REITs	3.59%

11

DAVIS VARIABLE ACCOUNT FUND, INC.Fund Overview

DAVIS REAL ESTATE PORTFOLIO - (CONTINUED) December 31, 2009

New Positions Added (01/01/09-12/31/09)

(Highlighted positions are those greater than 2.00% of 12/31/09 total net assets)

Security	Industry	Date of 1st Purchase	% of 12/31/09 Fund Net Assets
Alexandria Real Estate Equities, Inc., 7.00%,
Series D, Conv. Pfd.	Office REITs	04/21/09	3.04%
AMB Property Corp.	Industrial REITs	02/12/09	–
AvalonBay Communities, Inc.	Residential REITs	02/27/09	–
CBL & Associates Properties, Inc.	Retail REITs	01/14/09	1.27%
CBL & Associates Properties, Inc., 7.375%,
Series D	Retail REITs	01/14/09	0.68%
Digital Realty Trust, Inc., 5.50%,
Series D, Cum. Conv. Pfd.	Office REITs	01/21/09	0.74%
Digital Realty Trust, Inc., 144A Conv.
Sr. Notes, 5.50%, 04/15/29	Office REITs	04/14/09	1.90%
Forest City Enterprises, Inc., 144A Conv.
Sr. Notes, 5.00%, 10/15/16	Real Estate Operating Companies	10/20/09	0.37%
Highwoods Properties, Inc.	Office REITs	05/27/09	–
Host Hotels & Resorts Inc.	Specialized REITs	01/08/09	1.92%
Kilroy Realty Corp.	Office REITs	01/29/09	–
LaSalle Hotel Properties	Specialized REITs	01/14/09	2.04%
Liberty Property Trust	Diversified REITs	02/12/09	–
Macerich Co.	Retail REITs	10/22/09	0.47%
ProLogis	Industrial REITs	08/11/09	2.30%
Regency Centers Corp.	Retail REITs	07/17/09	3.20%
Simon Property Group, Inc.	Retail REITs	01/20/09	4.36%
U-Store-It Trust	Specialized REITs	08/13/09	–
Vornado Realty Trust	Diversified REITs	05/29/09	3.88%

Positions Closed (01/01/09-12/31/09)

(Gains and losses greater than $500,000 are highlighted)

		Date of		Realized
Security	Industry	Final Sale		Gain (Loss)
AMB Property Corp.	Industrial REITs	07/24/09	$	42,447
AvalonBay Communities, Inc.	Residential REITs	03/10/09		38,421
Brixton PLC	Industrial REITs	03/19/09		(926,705)
Burlington Northern Santa Fe Corp.	Transportation	12/08/09		181,386
Derwent London PLC	Office REITs	02/09/09		(1,713,282)
First Potomac Realty Trust	Industrial REITs	02/18/09		(755,195)
General Growth Properties, Inc.	Retail REITs	01/08/09		(2,644,945)
Highwoods Properties, Inc.	Office REITs	07/31/09		22,507
Kilroy Realty Corp.	Office REITs	08/05/09		7,020
Liberty Property Trust	Diversified REITs	06/12/09		27,446
Minerva PLC	Real Estate Operating Companies	04/02/09		(417,058)
Mitsui Fudosan Co., Ltd.	Diversified Real Estate Activities	02/19/09		(247,701)
SL Green Realty Corp.	Office REITs	08/27/09		(334,601)
St. Joe Co.	Diversified Real Estate Activities	08/05/09		72,140
U-Store-It Trust	Specialized REITs	12/21/09		46,652

12

DAVIS VARIABLE ACCOUNT FUND, INC. Expense Example

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During Period*
	(07/01/09)	(12/31/09)	(07/01/09-12/31/09)
Davis Value Portfolio
Actual	$1,000.00	$1,242.37	$3.50
Hypothetical	$1,000.00	$1,022.08	$3.16
Davis Financial Portfolio
Actual	$1,000.00	$1,251.81	$3.86
Hypothetical	$1,000.00	$1,021.78	$3.47
Davis Real Estate Portfolio
Actual	$1,000.00	$1,400.23	$5.87
Hypothetical	$1,000.00	$1,020.32	$4.94

Hypothetical assumes 5% annual return before expenses.

*Expenses are equal to each Fund’s annualized operating expense ratio, multiplied by the average account valueover the period, multiplied by 184/365 (to reflect the one-half year period). See page 14 for a description of the “Expense Example.”  The annualized operating expense ratios for the six-month period ended December 31, 2009 are as follows:

	Annualized Expense Ratio**
Davis Value Portfolio	0.62%
Davis Financial Portfolio	0.68%
Davis Real Estate Portfolio	0.97%

** The expense ratios reflect the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.

13

DAVIS VARIABLE ACCOUNT FUND, INC. Expense Example – (Continued)

The following disclosure provides important information regarding each Fund’s Expense Example.  Please refer to this information when reviewing the Expense Example for each Fund.

Example

As a shareholder of the Fund, you incur ongoing costs only, including advisory and administrative fees and other Fund expenses.  The Expense Example is intended to help you understand your ongoing costs (in dollars) of investing in each 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 Fund is for the six-month period ended December 31, 2009.  Please note that the Expense Example is general and does not reflect charges imposed by your insurance company’s separate account or account specific costs, which may increase your total costs of investing in the Funds.  If these charges 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 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 each 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.  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.

14

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO	December 31, 2009

Shares					Security		Value (Note 1)
COMMON STOCK – (94.87%)
	CONSUMER DISCRETIONARY – (8.34%)
		Automobiles & Components – (1.04%)
	214,000		Harley-Davidson, Inc.			$                      5,392,800
		Consumer Durables & Apparel – (0.19%)
	435		Garmin Ltd.			13,350
	20,299		Hunter Douglas NV  (Netherlands)			992,348
						1,005,698
		Consumer Services – (0.58%)
	132,863		H&R Block, Inc.			3,005,361
		Media – (3.87%)
	182,441		Comcast Corp., Special Class A			2,919,968
	85,074		DIRECTV, Class A  *			2,836,793
	110,770		Grupo Televisa S.A., ADR  (Mexico)			2,299,585
	8,506		Liberty Media - Starz, Series A  *			392,594
	529,525		News Corp., Class A			7,254,493
	136,200		Walt Disney Co.			4,392,450
						20,095,883
		Retailing – (2.66%)
	17,130		Amazon.com, Inc.  *			2,305,355
	163,615		Bed Bath & Beyond Inc.  *			6,317,993
	166,400		CarMax, Inc.  *			4,035,200
	105,950		Liberty Media Corp. - Interactive, Series A  *			1,149,028
						13,807,576
				Total Consumer Discretionary		43,307,318
	CONSUMER STAPLES – (12.14%)
		Food & Staples Retailing – (6.25%)
	340,300		Costco Wholesale Corp.			20,125,342
	382,798		CVS Caremark Corp.			12,329,924
						32,455,266
		Food, Beverage & Tobacco – (4.01%)
	49,500		Coca-Cola Co.			2,821,500
	93,333		Diageo PLC, ADR  (United Kingdom)			6,478,244
	141,621		Heineken Holding NV  (Netherlands)			5,923,032
	31,760		Hershey Co.			1,136,690
	92,290		Philip Morris International Inc.			4,447,455
						20,806,921
		Household & Personal Products – (1.88%)
	38,270		Mead Johnson Nutrition Co.			1,672,399
	31,800		Natura Cosmeticos S.A.  (Brazil)			663,215
	122,520		Procter & Gamble Co.			7,428,388
						9,764,002
				Total Consumer Staples		63,026,189
	ENERGY – (15.92%)
	172,200		Canadian Natural Resources Ltd.  (Canada)			12,389,790
	2,659,900		China Coal Energy Co. - H  (China)			4,813,023
	35,222		ConocoPhillips			1,798,788
	224,330		Devon Energy Corp.			16,488,255
	187,030		EOG Resources, Inc.			18,198,019

15

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2009

Shares						Security		Value (Note 1)
COMMON STOCK – (CONTINUED)
	ENERGY – (CONTINUED)
	269,260			Occidental Petroleum Corp.			$                    21,904,301
	290,000			OGX Petroleo e Gas Participacoes S.A.  (Brazil)			2,848,363
	51,504			Transocean Ltd.  *			4,264,531
					Total Energy		82,705,070
	FINANCIALS – (29.07%)
		Banks – (4.13%)
			Commercial Banks – (4.13%)
	795,824			Wells Fargo & Co.			21,479,290
		Diversified Financials – (13.25%)
			Capital Markets – (5.85%)
	103,020			Ameriprise Financial, Inc.			3,999,236
	373,600			Bank of New York Mellon Corp.			10,449,592
	108,900			Brookfield Asset Management Inc., Class A  (Canada)			2,415,402
	221,460			GAM Holding Ltd.  (Switzerland)			2,681,673
	17,940			Goldman Sachs Group, Inc.			3,028,990
	221,460			Julius Baer Group Ltd.  (Switzerland)			7,788,404
							30,363,297
			Consumer Finance – (3.96%)
	507,680			American Express Co.			20,571,194
			Diversified Financial Services – (3.44%)
	300,668			JPMorgan Chase & Co.			12,528,835
	140,930			Moody's Corp.			3,776,924
	17,900			Visa Inc., Class A			1,565,534
							17,871,293
							68,805,784
		Insurance – (11.13%)
			Life & Health Insurance – (0.19%)
	40,980			Principal Financial Group, Inc.			985,159
			Multi-line Insurance – (3.37%)
	5,130			Fairfax Financial Holdings Ltd.  (Canada)			2,000,546
	95,300			Hartford Financial Services Group, Inc.			2,216,678
	365,490			Loews Corp.			13,285,561
							17,502,785
			Property & Casualty Insurance – (6.68%)
	230			Berkshire Hathaway Inc., Class A  *			22,816,000
	99			Berkshire Hathaway Inc., Class B  *			325,314
	1,340			Markel Corp.  *			455,600
	616,020			Progressive Corp. (Ohio)  *			11,082,200
							34,679,114
			Reinsurance – (0.89%)
	89,207			Transatlantic Holdings, Inc.			4,648,577
							57,815,635
		Real Estate – (0.56%)
	588,000			Hang Lung Group Ltd.  (Hong Kong)			2,904,203
					Total Financials		151,004,912
	HEALTH CARE – (8.88%)
		Health Care Equipment & Services – (3.52%)
	59,800			Becton, Dickinson and Co.			4,715,828

16

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2009

Shares					Security		Value (Note 1)
COMMON STOCK – (CONTINUED)
	HEALTH CARE – (CONTINUED)
		Health Care Equipment & Services – (Continued)
	100,150		Cardinal Health, Inc.			$                      3,228,836
	49,450		CareFusion Corp.  *			1,236,744
	76,180		Express Scripts, Inc.  *			6,586,523
	27,400		Laboratory Corp. of America Holdings  *			2,050,616
	14,600		UnitedHealth Group Inc.			445,008
						18,263,555
		Pharmaceuticals, Biotechnology & Life Sciences – (5.36%)
	167,380		Johnson & Johnson			10,780,946
	342,555		Merck & Co., Inc.			12,516,960
	250,800		Pfizer Inc.			4,562,052
						27,859,958
				Total Health Care		46,123,513
	INDUSTRIALS – (6.20%)
		Capital Goods – (1.33%)
	111,180		ABB Ltd., ADR  (Switzerland)			2,123,538
	32,630		PACCAR Inc.			1,184,143
	101,334		Tyco International Ltd.			3,615,597
						6,923,278
		Commercial & Professional Services – (2.33%)
	53,500		D&B Corp.			4,513,795
	333,697		Iron Mountain Inc.  *			7,594,944
						12,108,739
		Transportation – (2.54%)
	1,482,352		China Merchants Holdings International Co., Ltd.  (China)			4,781,972
	1,097,000		China Shipping Development Co. Ltd. - H  (China)			1,637,083
	950,804		Cosco Pacific Ltd.  (China)			1,209,089
	26,355		Kuehne & Nagel International AG, Registered  (Switzerland)			2,562,474
	63,000		LLX Logistica S.A.  (Brazil)*			365,841
	45,810		United Parcel Service, Inc., Class B			2,628,120
						13,184,579
				Total Industrials		32,216,596
	INFORMATION TECHNOLOGY – (8.19%)
		Semiconductors & Semiconductor Equipment – (1.49%)
	296,800		Texas Instruments Inc.			7,734,608
		Software & Services – (3.96%)
	210,600		Activision Blizzard, Inc.  *			2,340,819
	12,840		Google Inc., Class A  *			7,960,736
	337,110		Microsoft Corp.			10,278,484
						20,580,039
		Technology Hardware & Equipment – (2.74%)
	198,050		Agilent Technologies, Inc.  *			6,153,413
	156,170		Hewlett-Packard Co.			8,044,317
						14,197,730
				Total Information Technology		42,512,377
	MATERIALS – (5.97%)
	81,830		BHP Billiton PLC  (United Kingdom)			2,608,742
	42,380		Martin Marietta Materials, Inc.			3,789,196

17

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2009

Shares/Principal									Security		Value (Note 1)
COMMON STOCK – (CONTINUED)
	MATERIALS – (CONTINUED)
	32,200				Monsanto Co.					$                      2,632,350
	11,354				Potash Corp. of Saskatchewan Inc.  (Canada)					1,231,909
	41,205				Rio Tinto PLC  (United Kingdom)					2,224,940
	485,995				Sealed Air Corp.					10,623,851
	256,750				Sino-Forest Corp.  (Canada)*					4,757,675
	8,900				Sino-Forest Corp., 144A  (Canada)*(a)(b)					164,920
	56,890				Vulcan Materials Co.					2,996,396
								Total Materials		31,029,979
	UTILITIES – (0.16%)
	60,800				AES Corp.  *					809,248
								Total Utilities		809,248
					TOTAL COMMON STOCK  – (Identified cost $354,033,569)					492,735,202
CONVERTIBLE BONDS – (0.58%)
	MATERIALS – (0.17%)
$	736,000				Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13   (Canada) (c)					869,860
								Total Materials		869,860
	TELECOMMUNICATION SERVICES – (0.41%)
	1,600,000				Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11					1,624,000
	400,000				Level 3 Communications, Inc., Conv. Sr. Notes, 15.00%, 01/15/13    (c)					500,000
								Total Telecommunication Services		2,124,000
					TOTAL CONVERTIBLE BONDS – (Identified cost $2,736,000)					2,993,860
CORPORATE BONDS – (0.47%)
	CONSUMER DISCRETIONARY – (0.47%)
		Automobiles & Components – (0.47%)
	2,000,000				Harley-Davidson, Inc., Sr. Notes, 15.00%, 02/01/14    (c)					2,449,958
					TOTAL CORPORATE BONDS – (Identified cost $2,000,000)					2,449,958
SHORT TERM INVESTMENTS – (2.95%)
	5,111,000				Banc of America Securities LLC Joint Repurchase Agreement,
						0.01%, 01/04/10, dated 12/31/09, repurchase value of $5,111,006
						(collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.131%-5.959%, 02/01/35-06/01/38, total market value $5,213,220)				5,111,000
	10,222,000				Mizuho Securities USA Inc. Joint Repurchase Agreement,
						0.03%, 01/04/10, dated 12/31/09, repurchase value of $10,222,034
						(collateralized by: U.S. Government agency obligations in a pooled cash account, 0.93%-2.625%, 03/30/10-12/31/14, total market value $10,426,440)				10,222,000
					TOTAL SHORT TERM INVESTMENTS – (Identified cost $15,333,000)					15,333,000
				Total Investments – (98.87%) – (Identified cost $374,102,569) – (d)						513,512,020
				Other Assets Less Liabilities – (1.13%)						5,891,944
							Net Assets – (100.00%)			$                  519,403,964
	ADR: American Depositary Receipt
	*		Non-Income producing security.

18

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2009

	(a)	This security is subject to Rule 144A.  The Board of Directors of the Fund has determined that there is sufficient liquidity in this security to realize current valuations.  This security amounted to $164,920, or 0.03% of the Fund's net assets, as of December 31, 2009.
	(b)	Restricted Security – See Note 7 of the Notes to Financial Statements.
	(c)	Illiquid Security – See Note 7 of the Notes to Financial Statements.
	(d)	Aggregate cost for federal income tax purposes is $375,885,823.  At December 31, 2009 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
			Unrealized appreciation		$                 146,574,379
			Unrealized depreciation		(8,948,182)
				Net unrealized appreciation	$                 137,626,197
See Notes to Financial Statements

19

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS FINANCIAL PORTFOLIO	December 31, 2009

Shares						Security		Value (Note 1)
COMMON STOCK – (99.07%)
	ENERGY – (5.12%)
	62,500			Canadian Natural Resources Ltd.  (Canada)			$                      4,496,875
					Total Energy		4,496,875
	FINANCIALS – (89.54%)
		Banks – (12.41%)
			Commercial Banks – (12.41%)
	20,000			Banco Santander Brasil S.A., ADS  (Brazil)			278,800
	21,600			ICICI Bank Ltd., ADR  (India)			814,536
	50,948			State Bank of India Ltd., GDR  (India)			5,012,519
	177,500			Wells Fargo & Co.			4,790,725
							10,896,580
		Diversified Financials – (44.25%)
			Capital Markets – (21.10%)
	60,460			Ameriprise Financial, Inc.			2,347,057
	146,200			Bank of New York Mellon Corp.			4,089,214
	124,300			Brookfield Asset Management Inc., Class A  (Canada)			2,756,974
	20,100			Charles Schwab Corp.			378,483
	93,910			GAM Holding Ltd.  (Switzerland)			1,137,162
	24,520			Goldman Sachs Group, Inc.			4,139,957
	93,910			Julius Baer Group Ltd.  (Switzerland)			3,302,669
	7,260			T. Rowe Price Group Inc.			386,704
							18,538,220
			Consumer Finance – (9.55%)
	196,700			American Express Co.			7,970,284
	194,994			First Marblehead Corp.  *			415,337
							8,385,621
			Diversified Financial Services – (13.60%)
	14,486			Bank of America Corp.			218,159
	25,700			Cielo S.A.  (Brazil)			226,444
	23,748			JPMorgan Chase & Co.			989,579
	122,000			Moody's Corp.			3,269,600
	126,700			Oaktree Capital Group LLC, Class A  (a)			4,244,450
	62,000			RHJ International  (Belgium)*			470,852
	28,900			Visa Inc., Class A			2,527,594
							11,946,678
							38,870,519
		Insurance – (32.88%)
			Life & Health Insurance – (4.08%)
	48,833			China Life Insurance Co., Ltd., ADR  (China)			3,581,901
			Multi-line Insurance – (6.15%)
	148,600			Loews Corp.			5,401,610
			Property & Casualty Insurance – (11.00%)
	24,600			ACE Ltd.			1,239,840
	24,800			FPIC Insurance Group, Inc.  *			958,024
	11,200			Markel Corp.  *			3,808,000
	203,300			Progressive Corp. (Ohio)  *			3,657,367
							9,663,231

20

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS FINANCIAL PORTFOLIO – (CONTINUED)	December 31, 2009

Shares/Principal

Security

Value (Note 1)

COMMON STOCK – (CONTINUED)

FINANCIALS – (CONTINUED)

Insurance – (Continued)

Reinsurance – (11.65%)

33,900

Everest Re Group, Ltd.

$                     2,904,552

140,737

Transatlantic Holdings, Inc.

7,333,805

10,238,357

28,885,099

Total Financials

78,652,198

INDUSTRIALS – (2.87%)

Commercial & Professional Services – (2.87%)

29,900

D&B Corp.

2,522,663

Total Industrials

2,522,663

MATERIALS – (1.54%)

61,700

Sealed Air Corp.

1,348,762

Total Materials

1,348,762

TOTAL COMMON STOCK  – (Identified cost $70,873,846)

87,020,498

SHORT TERM INVESTMENTS – (0.95%)

$

278,000

Banc of America Securities LLC Joint Repurchase Agreement,

0.01%, 01/04/10, dated 12/31/09, repurchase value of $278,000

(collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.131%-5.959%, 02/01/35-06/01/38, total market value $283,560)

278,000

557,000

Mizuho Securities USA Inc. Joint Repurchase Agreement,

0.03%, 01/04/10, dated 12/31/09, repurchase value of $557,002

(collateralized by: U.S. Government agency obligations in a pooled cash account, 0.93%-2.625%, 03/30/10-12/31/14, total market value $568,140)

557,000

TOTAL SHORT TERM INVESTMENTS – (Identified cost $835,000)

835,000

Total Investments – (100.02%) – (Identified cost $71,708,846) – (b)

87,855,498

Liabilities Less Other Assets – (0.02%)

(18,277)

Net Assets – (100.00%)

$                   87,837,221

ADR: American Depositary Receipt

ADS: American Depositary Share

GDR: Global Depositary Receipt

*

Non-Income producing security.

(a)

Illiquid Security – See Note 7 of the Notes to Financial Statements.

(b)

Aggregate cost for federal income tax purposes is $71,862,391.  At December 31, 2009 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:

Unrealized appreciation

$                   21,504,253

Unrealized depreciation

(5,511,146)

Net unrealized appreciation

$                   15,993,107

See Notes to Financial Statements

21

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS REAL ESTATE PORTFOLIO	December 31, 2009

Shares							Security		Value (Note 1)
COMMON STOCK – (76.70%)
	FINANCIALS – (73.54%)
		Diversified Financials – (1.90%)
			Capital Markets – (1.90%)
	20,240				Brookfield Asset Management Inc., Class A  (Canada)			$                         448,923
		Real Estate – (71.64%)
			Real Estate Investment Trusts (REITs) – (68.12%)
				Diversified REITs – (5.79%)
	59,032				Cousins Properties, Inc.			450,414
	13,070				Vornado Realty Trust			914,116
				1,364,530
				Industrial REITs – (5.88%)
	168,200				DCT Industrial Trust Inc.			844,364
	39,600				ProLogis			542,124
								1,386,488
				Office REITs – (20.50%)
	16,900				Alexandria Real Estate Equities, Inc.			1,086,501
	12,400				Boston Properties, Inc.			831,668
	32,790				Corporate Office Properties Trust			1,201,098
	16,700				Digital Realty Trust, Inc.			839,676
	61,200				Douglas Emmett, Inc.			872,100
								4,831,043
				Residential REITs – (8.70%)
	41,700				American Campus Communities, Inc.			1,171,770
	10,490				Essex Property Trust, Inc.			877,488
								2,049,258
				Retail REITs – (16.81%)
	30,960				CBL & Associates Properties, Inc.			299,383
	13,650				Federal Realty Investment Trust			924,378
	3,053				Macerich Co.			109,755
	21,500				Regency Centers Corp.			753,790
	12,892				Simon Property Group, Inc.			1,028,782
	23,560				Taubman Centers, Inc.			846,040
								3,962,128
				Specialized REITs – (10.44%)
	60,583				Cogdell Spencer, Inc.			342,900
	38,803				Host Hotels & Resorts Inc.  *			452,831
	22,700				LaSalle Hotel Properties			481,921
	27,020				Ventas, Inc.			1,181,855
								2,459,507
								16,052,954
			Real Estate Management & Development – (3.52%)
				Real Estate Operating Companies – (3.52%)
	70,380				Forest City Enterprises, Inc., Class A  *			829,076
								16,882,030
						Total Financials		17,330,953

22

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS REAL ESTATE PORTFOLIO – (CONTINUED)	December 31, 2009

Shares/Principal							Security		Value (Note 1)
COMMON STOCK – (CONTINUED)
	INDUSTRIALS – (3.16%)
		Transportation – (3.16%)
	21,700				Alexander & Baldwin, Inc.			$                         742,791
						Total Industrials		742,791
					TOTAL COMMON STOCK  – (Identified cost $18,128,897)			18,073,744
PREFERRED STOCK – (8.34%)
	FINANCIALS – (8.34%)
		Real Estate – (8.34%)
			Real Estate Investment Trusts (REITs) – (8.34%)
				Industrial REITs – (1.06%)
	11,900				AMB Property Corp., 6.75%, Series M			249,483
				Office REITs – (6.27%)
	33,272				Alexandria Real Estate Equities, Inc., 7.00%, Series D, Conv. Pfd.			717,428
	5,700				Digital Realty Trust, Inc., 5.50%, Series D, Cum. Conv. Pfd.			174,385
	5,014				Digital Realty Trust, Inc., 8.50%, Series A			127,230
	19,930				SL Green Realty Corp., 7.625%, Series C			458,639
								1,477,682
				Residential REITs – (0.33%)
	2,000				Equity Residential, 7.00%, Series E, Cum. Conv. Pfd.			77,688
				Retail REITs – (0.68%)
	8,280				CBL & Associates Properties, Inc., 7.375%, Series D			160,404
						Total Financials		1,965,257
					TOTAL PREFERRED STOCK – (Identified cost $1,072,511)			1,965,257
CONVERTIBLE BONDS – (4.27%)
	FINANCIALS – (4.27%)
		Real Estate – (4.27%)
			Real Estate Investment Trusts (REITs) – (3.90%)
				Industrial REITs – (1.59%)
$	401,000				ProLogis, Conv. Sr. Notes, 2.25%, 04/01/37			373,933
				Office REITs – (2.31%)
	344,000				Digital Realty Trust, Inc., 144A Conv. Sr. Notes, 5.50%, 04/15/29  (a)			449,350
	104,000				SL Green Realty Corp., 144A Conv. Sr. Notes, 3.00%, 03/30/27  (a)			96,070
								545,420
								919,353
			Real Estate Management & Development – (0.37%)
				Real Estate Operating Companies – (0.37%)
	80,000				Forest City Enterprises, Inc., 144A Conv. Sr. Notes, 5.00%, 10/15/16  (a)			87,400
						Total Financials		1,006,753
					TOTAL CONVERTIBLE BONDS – (Identified cost $686,033)			1,006,753

23

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS REAL ESTATE PORTFOLIO – (CONTINUED)	December 31, 2009

Principal							Security		Value (Note 1)
SHORT TERM INVESTMENTS – (9.13%)
$	717,000			Banc of America Securities LLC Joint Repurchase Agreement,
					0.01%, 01/04/10, dated 12/31/09, repurchase value of $717,001
					(collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.131%-5.959%, 02/01/35-06/01/38, total market value $731,340)			$                         717,000
	1,435,000			Mizuho Securities USA Inc. Joint Repurchase Agreement,
					0.03%, 01/04/10, dated 12/31/09, repurchase value of $1,435,005
					(collateralized by: U.S. Government agency obligations in a pooled cash account, 0.93%-2.625%, 03/30/10-12/31/14, total market value $1,463,700)			1,435,000
				TOTAL SHORT TERM INVESTMENTS – (Identified cost $2,152,000)				2,152,000
			Total Investments – (98.44%) – (Identified cost $22,039,441) – (b)					23,197,754
			Other Assets Less Liabilities – (1.56%)					368,599
						Net Assets – (100.00%)		$                    23,566,353
	*	Non-Income producing security.
	(a)	These securities are subject to Rule 144A.  The Board of Directors of the Fund has determined that there is sufficient liquidity in these securities to realize current valuations.  These securities amounted to $632,820, or 2.68% of the Fund's net assets, as of December 31, 2009.
	(b)	Aggregate cost for federal income tax purposes is $23,463,635.  At December 31, 2009 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
			Unrealized appreciation					$                      3,205,644
			Unrealized depreciation					(3,471,525)
						Net unrealized depreciation		$                      (265,881)
See Notes to Financial Statements

24

DAVIS VARIABLE ACCOUNT FUND, INC.	Statements of Assets and Liabilities
	At December 31, 2009

				Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
ASSETS:
Investments in securities at value* (see accompanying Schedules of Investments)			$	513,512,020	$	87,855,498	$	23,197,754
Cash				154,232		111,594		29,464
Receivables:
	Capital stock sold			6,042,463		141,202		5,618
	Dividends and interest			558,699		26,942		117,988
	Investment securities sold			265,900		–		292,307
Prepaid expenses				7,126		1,327		419
		Total assets		520,540,440		88,136,563		23,643,550
LIABILITIES:
Payables:
	Investment securities purchased			505,886		–		–
	Capital stock redeemed			342,486		233,756		40,470
Accrued audit fees				13,900		12,100		12,100
Accrued management fees				244,972		41,994		13,033
Other accrued expenses				29,232		11,492		9,244
Due to Adviser				–		–		2,350
		Total liabilities		1,136,476		299,342		77,197
NET ASSETS			$	519,403,964	$	87,837,221	$	23,566,353
SHARES OUTSTANDING				48,303,092		8,798,369		3,186,708
NET ASSET VALUE, offering, and redemption price per share (Net assets ÷ Shares outstanding)			$	10.75	$	9.98	$	7.40
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	48,303	$	8,798	$	3,187
Additional paid-in capital				421,167,728		84,602,067		38,068,873
Undistributed net investment income				126,666		478,082		7,288
Accumulated net realized losses from investments and foreign currency transactions				(41,354,580)		(13,399,316)		(15,671,007)
Net unrealized appreciation on investments and foreign currency transactions				139,415,847		16,147,590		1,158,012
		Net Assets	$	519,403,964	$	87,837,221	$	23,566,353
*Including:
Cost of investments			$	374,102,569	$	71,708,846	$	22,039,441
See Notes to Financial Statements

25

DAVIS VARIABLE ACCOUNT FUND, INC.	Statements of Operations
	For the year ended December 31, 2009

							Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
INVESTMENT INCOME:
Income:
		Dividends*				$	6,113,936	$	1,050,512	$	674,233
		Interest					563,805		8,223		32,159
			Total income				6,677,741		1,058,735		706,392
Expenses:
		Management fees (Note 3)					2,514,522		463,102		118,341
		Custodian fees					84,382		23,874		20,497
		Transfer agent fees					15,696		9,083		6,255
		Audit fees					20,400		18,000		18,000
		Legal fees					13,596		2,508		650
		Accounting fees (Note 3)					6,252		2,004		2,004
		Reports to shareholders					58,615		19,941		3,909
		Directors’ fees and expenses					110,360		23,027		7,676
		Registration and filing fees					290		54		13
		Miscellaneous					15,889		7,822		6,003
			Total expenses				2,840,002		569,415		183,348
			Expenses paid indirectly (Note 4)				(6)		–		–
				Net expenses			2,839,996		569,415		183,348
					Net investment income		3,837,745		489,320		523,044
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss from:
		Investment transactions					(40,964,511)		(8,123,481)		(12,770,370)
		Foreign currency transactions					(14,128)		(261)		(1,820)
Net change in unrealized appreciation (depreciation)							155,373,588		34,312,747		17,711,950
	Net realized and unrealized gain on investments and foreign currency transactions						114,394,949		26,189,005		4,939,760
		Net increase in net assets resulting from operations				$	118,232,694	$	26,678,325	$	5,462,804
*Net of foreign taxes withheld as follows						$	73,330	$	19,778	$	2,080
See Notes to Financial Statements

26

DAVIS VARIABLE ACCOUNT FUND, INC.	Statements of Changes in Net Assets
	For the year ended December 31, 2009

			Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
OPERATIONS:
	Net investment income	$	3,837,745	$	489,320	$	523,044
	Net realized loss from investments and foreign currency transactions		(40,978,639)		(8,123,742)		(12,772,190)
	Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions		155,373,588		34,312,747		17,711,950
	Net increase in net assets resulting from operations		118,232,694		26,678,325		5,462,804
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
	Net investment income		(3,982,003)		(629,608)		(513,936)
CAPITAL SHARE TRANSACTIONS:
	Net increase (decrease) in net assets resulting from capital share transactions (Note 5)		72,001,466		4,467,751		(713,924)
Total increase in net assets			186,252,157		30,516,468		4,234,944
NET ASSETS:
	Beginning of year		333,151,807		57,320,753		19,331,409
	End of year*	$	519,403,964	$	87,837,221	$	23,566,353
*Including undistributed net investment income of		$	126,666	$	478,082	$	7,288
See Notes to Financial Statements

27

DAVIS VARIABLE ACCOUNT FUND, INC.	Statements of Changes in Net Assets
	For the year ended December 31, 2008

			Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
OPERATIONS:
	Net investment income	$	4,955,792	$	630,375	$	654,938
	Net realized gain (loss) from investments and foreign currency transactions		605,679		(5,207,088)		(2,901,263)
	Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions		(246,836,174)		(46,773,677)		(16,471,893)
	Net decrease in net assets resulting from operations		(241,274,703)		(51,350,390)		(18,718,218)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
	Net investment income		(4,909,074)		–		(804,817)
	Realized gains from investment transactions		(8,550,201)		(3,340,762)		(368,670)
	Return of capital		–		–		(28,370)
CAPITAL SHARE TRANSACTIONS:
	Net decrease in net assets resulting from capital share transactions (Note 5)		(70,813,149)		(4,713,395)		(10,296,476)
Total decrease in net assets			(325,547,127)		(59,404,547)		(30,216,551)
NET ASSETS:
	Beginning of year		658,698,934		116,725,300		49,547,960
	End of year*	$	333,151,807	$	57,320,753	$	19,331,409
*Including undistributed net investment income of		$	285,052	$	610,730	$	–
See Notes to Financial Statements

28

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Davis Variable Account Fund, Inc. (a Maryland corporation), consists of three series of funds, Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio (collectively “Funds”).  Davis Value Portfolio and Davis Financial Portfolio are registered under the Investment Company Act of 1940 (“40 Act”), as amended, as diversified, open-end management investment companies.  Davis Real Estate Portfolio is registered under the 40 Act, as amended, as a non-diversified, open-end management investment company. Only insurance companies, for the purpose of funding variable annuity or variable life insurance contracts, may purchase shares of the Funds.  The Funds account separately for the assets, liabilities, and operations of each series.  The following is a summary of significant accounting policies followed by the Funds in the preparation of financial statements.

Security Valuation - The Funds calculate the net asset value of their 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 Funds’ assets are valued.  Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value.  Securities whose values have been materially affected by what Davis Selected Advisers, L.P. (“Davis Advisors” or “Adviser”), the Funds’ investment adviser, identifies as a significant event occurring before the Funds’ 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.

Value Measurements - Fair value is defined as the price that the Funds would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment.  Various inputs are used to determine the fair value of the Funds’ investments.  These inputs are summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

        Level 3 – significant unobservable inputs (including Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

29

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)

Value Measurements – (Continued)

The following is a summary of the inputs used as of December 31, 2009 in valuing each Fund’s investments carried at value:

	Investments in Securities at Value
	Davis		Davis		Davis
	Value		Financial		Real Estate
	Portfolio		Portfolio		Portfolio
Valuation inputs
Level 1 – Quoted prices:
Equity securities:
Consumer discretionary	$	42,314,970	$	–	$	–
Consumer staples		57,103,157		–		–
Energy		77,892,047		4,496,875		–
Financials		145,419,036		67,787,215		19,121,825
Health care		46,123,513		–		–
Industrials		22,025,978		2,522,663		742,791
Information technology		42,512,377		–		–
Materials		26,196,297		1,348,762		–
Utilities		809,248		–		–
Level 2 – Other Significant Observable Inputs:
Convertible debt securities		2,993,860		–		1,006,753
Corporate debt securities		2,449,958		–		–
Equity securities*:
Consumer discretionary		992,348		–		–
Consumer staples		5,923,032		–		–
Energy		4,813,023		–		–
Financials		5,585,876		10,864,983		174,385
Industrials		10,190,618		–		–
Materials		4,833,682		–		–
Short-term securities		15,333,000		835,000		2,152,000
Level 3 – Significant Unobservable Inputs		–		–		–
Total	$	513,512,020	$	87,855,498	$	23,197,754

* Includes certain securities trading primarily outside the U.S. whose value the Fund adjusted as a result of significant market movements following the close of local trading.

Master Repurchase Agreements - The Funds, 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.

30

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)

Foreign Currency- The Funds 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 Funds as an unrealized gain or loss.  When the forward currency contract is closed, the Funds record 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 Funds 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 the 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 Funds’ 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 Funds include foreign currency gains and losses realized on the sale of investments together with market gains and losses on such investments in the Statements of Operations.

Federal Income Taxes- It is each 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.  The Adviser has analyzed the Funds’ tax positions taken on federal and state income tax returns for all open tax years and has concluded that as of December 31, 2009, no provision for income tax would be required in the Funds’ financial statements.  The Funds’ federal and state (Arizona and Maryland) income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.  The earliest tax year that remains subject to examination by these jurisdictions is 2006.  At December 31, 2009, Davis Value Portfolio and Davis Financial Portfolio had post October 2009 losses available to offset future capital gains, if any, which expire in 2018. The Funds have available for federal income tax purposes unused capital loss carryforwards that expire in 2017.  Details of post October 2009 capital losses and capital loss carryforwards are as follows:

	Post October 2009 Capital Losses (expiring 12/31/2018)
Davis Value Portfolio	$	9,789,000
Davis Financial Portfolio		239,000

	Capital Loss Carryforwards
	Davis		Davis		Davis
	Value		Financial		Real Estate
	Portfolio		Portfolio		Portfolio
Expiring
12/31/2016	$	–	$	4,739,000	$	2,585,000
12/31/2017		30,445,000		8,267,000		11,662,000
	$	30,445,000	$	13,006,000	$	14,247,000

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.  Dividend income from REIT securities may include return of capital.  Upon notification from the issuer, the amount of the return of capital is reclassified to adjust dividend income, reduce the cost basis, and/or adjust realized gain/loss.  Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.

31

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2009

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) on investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, passive foreign investment company shares, and partnership income.  The character of dividends and distributions made during the fiscal year from net investment income and net realized securities gains may differ from their ultimate characterization for federal income tax purposes.  Also, due to the timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which income or realized gain was recorded by the Funds.  The Funds adjust the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax rules.  Accordingly, during the year ended December 31, 2009, for Davis Value Portfolio, amounts have been reclassified to reflect a decrease in undistributed net investment income of $14,128 and a corresponding decrease in accumulated net realized losses from investments and foreign currency transactions; for Davis Financial Portfolio, amounts have been reclassified to reflect an increase in undistributed net investment income of $7,640 and a corresponding increase in accumulated net realized losses from investments and foreign currency transactions; for Davis Real Estate Portfolio, amounts have been reclassified to reflect a decrease in undistributed net investment income of $1,820 and a corresponding decrease in accumulated net realized losses from investments and foreign currency transactions.  The Funds’ net assets have not been affected by these reclassifications.

The tax character of distributions paid during the years ended December 31, 2009 and 2008 was as follows:

	Ordinary Income		Long-Term Capital Gain		Return of Capital		Total
Davis Value Portfolio
2009	$	3,982,003	$	–	$	–	$	3,982,003
2008		4,912,728		8,546,547		–		13,459,275
Davis Financial Portfolio
2009		629,608		–		–		629,608
2008		18,252		3,322,510		–		3,340,762
Davis Real Estate Portfolio
2009		513,936		–		–		513,936
2008		805,314		368,173		28,370		1,201,857

As of December 31, 2009, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

	Davis Value Portfolio			Davis Financial Portfolio		Davis Real Estate Portfolio
Undistributed net investment income	$		790,168	$	478,082	$	7,288
Accumulated net realized losses from investments and foreign currency transactions		(40,234,828)			(13,245,770)		(14,246,813)
Net unrealized appreciation (depreciation) on investments			137,632,593		15,994,044		(266,182)
Total	$		98,187,933	$	3,226,356	$	(14,505,707)

Indemnification - - Under the Funds’ organizational documents, their officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Funds.  In addition, some of the Funds’ contracts with their service providers contain general indemnification clauses.  The Funds’ maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Funds cannot be determined and the Funds have no historical basis for predicting the likelihood of any such claims.

32

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)

Use of Estimates in Financial Statements- In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period.  Actual results may differ from these estimates.

NOTE 2 - PURCHASES AND SALES OF SECURITIES

Purchases and sales of investment securities (excluding short-term securities) during the year ended December 31, 2009 were as follows:

	Davis		Davis		Davis
	Value		Financial		Real Estate
	Portfolio		Portfolio		Portfolio
Cost of purchases	$	149,251,682	$	14,698,421	$	11,903,585
Proceeds of sales		74,542,809		6,805,846		13,426,525

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser.  Prior to July 1, 2009, the annual rate for the Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio was 0.75% of the respective Fund’s average net assets.  Effective July 1, 2009, the annual rate is 0.55% of the respective Fund’s average net assets. Advisory fees paid during the year ended December 31, 2009 approximated 0.63%, 0.63%, and 0.64% of the average net assets for the Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio, respectively.

Boston Financial Data Services, Inc. (“BFDS”) is the Funds’ primary transfer agent.  State Street Bank and Trust Company (“State Street Bank”) is the Funds’ primary accounting provider.  Fees for such services are included in the custodian fee as State Street Bank also serves as the Funds’ custodian.  The Adviser is also paid for certain accounting services.  The fee paid to the Adviser for these services for the year ended December 31, 2009 for Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio amounted to $6,252, $2,004, and $2,004, respectively.  Certain directors and officers of the Funds are also directors and officers of the general partner of the Adviser.

Davis Selected Advisers-NY, Inc. (“DSA-NY”), a wholly-owned subsidiary of the Adviser, acts as sub-adviser to the Funds.  DSA-NY performs research and portfolio management services for the Funds under a Sub-Advisory Agreement with the Adviser.  The Funds pay no fees directly to DSA-NY.

NOTE 4 - 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 Funds.  Such reductions amounted to $6 for Davis Value Portfolio during the year ended December 31, 2009.  There were no reductions for Davis Financial Portfolio and Davis Real Estate Portfolio.

33

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 5 - CAPITAL STOCK

At December 31, 2009, there were 5 billion shares of capital stock ($0.001 par value per share) authorized. Transactions in capital stock were as follows:

		Year ended December 31, 2009
			Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
Shares sold			16,029,614		3,303,661		708,612
Shares issued in reinvestment of distributions			368,022		63,087		102,105
			16,397,636		3,366,748		810,717
Shares redeemed			(8,410,774)		(2,616,379)		(956,040)
	Net increase (decrease)		7,986,862		750,369		(145,323)
Proceeds from shares sold		$	142,471,775	$	26,457,753	$	4,050,873
Proceeds from shares issued in reinvestment of distributions			3,982,003		629,608		513,936
			146,453,778		27,087,361		4,564,809
Cost of shares redeemed			(74,452,312)		(22,619,610)		(5,278,733)
	Net increase (decrease)	$	72,001,466	$	4,467,751	$	(713,924)

		Year ended December 31, 2008
			Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
Shares sold			5,699,870		2,481,240		276,678
Shares issued in reinvestment of distributions			1,734,051		531,968		161,544
			7,433,921		3,013,208		438,222
Shares redeemed			(12,622,781)		(3,147,595)		(1,432,521)
	Net decrease		(5,188,860)		(134,387)		(994,299)
Proceeds from shares sold		$	61,188,955	$	26,265,738	$	2,700,154
Proceeds from shares issued in reinvestment of distributions			13,459,275		3,340,762		1,201,857
			74,648,230		29,606,500		3,902,011
Cost of Shares redeemed			(145,461,379)		(34,319,895)		(14,198,487)
	Net decrease	$	(70,813,149)	$	(4,713,395)	$	(10,296,476)

NOTE 6 - BANK BORROWINGS

Each 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.  Each 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 higher of the Federal Funds Rate or the Overnight Libor Rate, plus 1.25%.  The Funds had no borrowings during the year ended December 31, 2009.

34

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 7 - ILLIQUID AND RESTRICTED SECURITIES

Securities may be considered illiquid if they lack a readily available market or if valuation has not changed for a certain period of time.  Restricted securities are not registered under the Securities Act of 1933 and may have contractual restrictions on resale.  They are valued under methods approved by the Board of Directors as reflecting fair value.  The aggregate value of illiquid securities in Davis Value Portfolio amounted to $3,819,818 or 0.74% of the Fund’s net assets as of December 31, 2009.  The aggregate value of restricted securities in Davis Value Portfolio amounted to $164,920 or 0.03% of the Fund’s net assets as of December 31, 2009.  The aggregate value of illiquid securities in Davis Financial Portfolio amounted to $4,244,450 or 4.83% of the Fund’s net assets as of December 31, 2009.

Information regarding illiquid and restricted securities is as follows:

Fund	Security	Acquisition Date	Principal	Units/ Shares	Cost per Unit/Share		Valuation per  Unit/Share as of December 31, 2009
Davis Value Portfolio	Harley-Davidson, Inc., Sr. Notes, 15.00%, 02/01/14	02/03/09	$    2,000,000	20,000	$	100.00	$	122.50
Davis Value Portfolio	Level 3 Communications, Inc., Conv. Sr. Notes, 15.00%, 01/15/13	12/23/08	$    400,000	4,000	$	100.00	$	125.00
Davis Value Portfolio	Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13	07/17/08	$    736,000	7,360	$	100.00	$	118.19
Davis Value Portfolio	Sino-Forest Corp., 144A	12/11/09	NA	8,900	$	15.85	$	18.53
Davis Financial Portfolio	Oaktree CapitalGroup LLC, Class A	05/21/07	NA	126,700	$	23.84	$	33.50

NOTE 8 - SUBSEQUENT EVENTS

Fund management has determined that no material events or transactions occurred subsequent to December 31, 2009 and through February 9, 2010, the date the Funds’ financial statements were issued, which require adjustments and/or additional disclosure in the Funds’ financial statements.

35

DAVIS VARIABLE ACCOUNT FUND, INC.	Financial Highlights
DAVIS VALUE PORTFOLIO

The following financial information represents selected data for each share of capital stock outstanding throughout each period:
			Year ended  December 31,
			2009			2008			2007			2006			2005
Net Asset Value, Beginning of Period			$	8.26		$	14.48		$	14.58		$	12.77		$	11.78
Income (Loss) from Investment Operations:
	Net Investment Income		0.08			0.13			0.17			0.11			0.12
	Net Realized and Unrealized Gains (Losses)		2.49			(6.00)			0.51			1.81			0.99
		Total from Investment Operations	2.57			(5.87)			0.68			1.92			1.11
Dividends and Distributions:
	Dividends from Net Investment Income		(0.08)			(0.12)			(0.17)			(0.11)			(0.11)
	Distributions from Realized Gains		–			(0.23)			(0.61)			–			–
	Distributions in Excess of Net Investment Income		–			–			–			–			(0.01)
		Total Dividends and Distributions	(0.08)			(0.35)			(0.78)			(0.11)			(0.12)
Net Asset Value, End of Period			$	10.75		$	8.26		$	14.48		$	14.58		$	12.77
Total Returna			31.16		%	(40.32)		%	4.64		%	15.00		%	9.44		%
Ratios/Supplemental Data:
	Net Assets, End of Period (in thousands)		$	519,404		$	333,152		$	658,699		$	771,828		$	620,369
	Ratio of Expenses to Average Net Assets:
		Gross	0.71		%	0.82		%	0.81		%	0.81		%	0.81		%
		Netb	0.71		%	0.82		%	0.81		%	0.81		%	0.81		%
Ratio of Net Investment Income to Average Net Assets			0.97		%	0.98		%	1.11		%	0.83		%	0.87		%
Portfolio Turnover Ratec			20		%	17		%	9		%	19		%	14		%

a	Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period.  Total returns do not reflect charges attributable to your insurance company’s separate account.  Inclusion of these charges would reduce the total returns shown.
b	The Net Ratio of Expenses to Average Net Assets reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.
c	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.
See Notes to Financial Statements

36

DAVIS VARIABLE ACCOUNT FUND, INC.	Financial Highlights – (Continued)
DAVIS FINANCIAL PORTFOLIO

The following financial information represents selected data for each share of capital stock outstanding throughout each period:
			Year ended  December 31,
			2009			2008			2007			2006			2005
Net Asset Value, Beginning of Period			$	7.12		$	14.27		$	16.29		$	13.83		$	12.82
Income (Loss) from Investment Operations:
	Net Investment Income		0.05			0.08			0.17			0.09			0.07
	Net Realized and Unrealized Gains (Losses)		2.88			(6.76)			(1.12)			2.47			1.00
		Total from Investment Operations	2.93			(6.68)			(0.95)			2.56			1.07
Dividends and Distributions:
	Dividends from Net Investment Income		(0.07)			–			(0.17)			(0.09)			(0.06)
	Distributions from Realized Gains		–			(0.47)			(0.90)			(0.01)			–
		Total Dividends and Distributions	(0.07)			(0.47)			(1.07)			(0.10)			(0.06)
Net Asset Value, End of Period			$	9.98		$	7.12		$	14.27		$	16.29		$	13.83
Total Returna			41.18		%b	(46.36)		%	(6.05)		%	18.50		%	8.38		%
Ratios/Supplemental Data:
	Net Assets, End of Period (in thousands)		$	87,837		$	57,321		$	116,725		$	155,807		$	124,060
	Ratio of Expenses to Average Net Assets:
		Gross	0.78		%	0.88		%	0.85		%	0.84		%	0.85		%
		Netc	0.78		%	0.88		%	0.85		%	0.84		%	0.85		%
Ratio of Net Investment Income to Average Net Assets			0.67		%	0.73		%	0.97		%	0.66		%	0.52		%
Portfolio Turnover Rated			10		%	16		%	17		%	9		%	21		%

a	Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period.  Total returns do not reflect charges attributable to your insurance company’s separate account.  Inclusion of these charges would reduce the total returns shown.
b	Davis Financial Portfolio received a favorable class action settlement from a company that it no longer owns.  This settlement had an approximate impact of 0.4% on the investment performance of the Fund in 2009.  This was a one-time event that is unlikely to be repeated.
c	The Net Ratio of Expenses to Average Net Assets reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.
d	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.
See Notes to Financial Statements

37

DAVIS VARIABLE ACCOUNT FUND, INC.	Financial Highlights – (Continued)
DAVIS REAL ESTATE PORTFOLIO

The following financial information represents selected data for each share of capital stock outstanding throughout each period:
			Year ended  December 31,
			2009			2008			2007			2006			2005
Net Asset Value, Beginning of Period			$	5.80		$	11.45		$	20.43		$	17.33		$	16.80
Income (Loss) from Investment Operations:
	Net Investment Income		0.16			0.19			0.42			0.34			0.30
	Net Realized and Unrealized Gains (Losses)		1.60			(5.50)			(3.40)			5.58			1.86
		Total from Investment Operations	1.76			(5.31)			(2.98)			5.92			2.16
Dividends and Distributions:
	Dividends from Net Investment Income		(0.16)			(0.22)			(0.64)			(0.60)			(0.54)
	Distributions from Realized Gains		–			(0.11)			(5.36)			(2.22)			(1.09)
	Return of Capital		–			(0.01)			–			–			–
		Total Dividends and Distributions	(0.16)			(0.34)			(6.00)			(2.82)			(1.63)
Net Asset Value, End of Period			$	7.40		$	5.80		$	11.45		$	20.43		$	17.33
Total Returna			31.73		%	(46.91)		%	(15.48)		%	34.37		%	13.14		%
Ratios/Supplemental Data:
	Net Assets, End of Period (in thousands)		$	23,566		$	19,331		$	49,548		$	89,738		$	64,556
	Ratio of Expenses to Average Net Assets:
		Gross	0.98		%	0.98		%	0.88		%	0.86		%	0.87		%
		Netb	0.98		%	0.98		%	0.87		%	0.86		%	0.87		%
Ratio of Net Investment Income to Average Net Assets			2.81		%	1.84		%	1.92		%	1.63		%	1.71		%
Portfolio Turnover Ratec			70		%	41		%	49		%	38		%	28		%

a	Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period.  Total returns do not reflect charges attributable to your insurance company’s separate account.  Inclusion of these charges would reduce the total returns shown.
b	The Net Ratio of Expenses to Average Net Assets reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.
c	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.
See Notes to Financial Statements

38

DAVIS VARIABLE ACCOUNT FUND, INC. Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

of Davis Variable Account Fund, Inc.:

We have audited the accompanying statements of assets and liabilities of Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio (comprising the Davis Variable Account Fund, Inc.), including the schedules of investments, as of December 31, 2009, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended.  These financial statements and financial highlights are the responsibility of the Funds’ 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 December 31, 2009, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received.  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 Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio as of December 31, 2009, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

KPMG LLP

Denver, Colorado

February 9, 2010

39

DAVIS VARIABLE ACCOUNT FUND, INC. Fund Information

Federal Income Tax Information (Unaudited)

Davis Value Portfolio

During the calendar year ended 2009, $3,982,003 or 100% of dividends paid by the Fund constituted income qualifying for the corporate dividends-received deduction.

Davis Financial Portfolio

During the calendar year ended 2009, $629,608 or 100% of dividends paid by the Fund constituted income qualifying for the corporate dividends-received deduction.

Davis Real Estate Portfolio

During the calendar year ended 2009, $37,710 or 7% of dividends paid by the Fund constituted income qualifying for the corporate dividends-received deduction.

Portfolio Proxy Voting Policies and Procedures

The Funds have adopted Portfolio Proxy Voting Policies and Procedures under which the Funds vote proxies relating to securities held by the Funds.  A description of the Funds’ Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Funds toll-free at 1-800-279-0279, (ii) on the Funds’ website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

In addition, the Funds are required to file Form N-PX, with their complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year.  The Funds’ Form N-PX filing is available (i) without charge, upon request, by calling the Funds toll-free at 1-800-279-0279, (ii) on the Funds’ website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

Form N-Q

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Funds’ Form N-Q is available without charge, upon request, by calling 1-800-279-0279 or on the Funds’ website at www.davisfunds.com or on the SEC’s website at www.sec.gov.  The Funds’ 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.

40

DAVIS VARIABLE ACCOUNT FUND, INC. Directors and Officers

For the purposes of their service as directors to the Davis Funds, the business address for each of the directors is 2949 E. Elvira Road, Suite 101, Tucson, AZ 85756.  Each Director serves until their retirement, resignation, death or removal.  Subject to exceptions and exemptions, which may be granted by the Independent Directors, Directors must retire at the close of business on the last day of the calendar year in which the Director attains age seventy-four (74).

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 (09/09/42)	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 Investment Counsel & Trust Company N.A. (asset management company) and Rodney Trust Company (Delaware).
John S. Gates, Jr. (08/02/53)	Director	Director since 2007	Chairman and Chief Executive Officer of PortaeCo LLC, a private investment company (beginning in 2006); Co-founder of Centerpoint Properties Trust (a REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (a REIT).
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; Director, Washington Post Co. (newspaper publisher); Director, Colfax Corp. (engineering and manufacturer of pumps and fluid handling equipment).
G. Bernard Hamilton (03/18/37)	Director	Director since 1978	Managing General Partner, Avanti Partners, L.P. (investment partnership), retired 2005.	13	none
Samuel H. Iapalucci (07/19/52)	Director	Director since 2006	Former Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc. (engineering).	13	none
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (an investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director	Director since 1990	General Partner, Tuxedo Park Associates (land holding and development firm).	13	none
Marsha Williams (03/28/51)	Director	Director since 1999	Senior Vice President and Chief Financial Officer, Orbitz Worldwide, Inc. (travel-services provider) since 2007; former Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a REIT).	13	Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering); Director, Fifth Third Bancorp (diversified financial services).

41

DAVIS VARIABLE ACCOUNT FUND, INC. Directors and Officers – (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 (08/16/35)	Director / Chairman (retired 12/31/09)	Director since 1994	Vice Chairman, Member of the Audit Committee and Member of the International Investment Committee, former Chief Investment Officer (1980 through 2005), all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P.	13	none
Christopher C. Davis (07/13/65)	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).	10	Director, Davis New York Venture Fund, Inc. (consisting of four portfolios); Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (newspaper publisher).

*      Jeremy H. Biggs 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.

42

DAVIS VARIABLE ACCOUNT FUND, INC. Directors and Officers – (Continued)

Officers

Christopher C. Davis (born 07/13/65, Davis Funds officer since 1997). See description in the section on Inside Directors.

Andrew A. Davis (born 06/25/63, Davis Funds officer since 1997). President or Vice President of each of the Davis Funds (consisting of 13 portfolios) and Selected Funds (consisting of three portfolios); President, Davis Selected Advisers, L.P., serves as an executive officer in certain companies affiliated with the Adviser; Director of Davis Series, Inc. (consisting of six portfolios) and the Selected Funds (consisting of three portfolios).

Kenneth C. Eich (born 08/14/53, Davis Funds officer since 1997). Executive Vice President and Principal Executive Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Chief Operating Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Douglas A. Haines (born 03/04/71, Davis Funds officer since 2004). Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Director of Fund Accounting, Davis Selected Advisers, L.P.

Sharra L. Haynes (born 09/25/66, Davis Funds officer since 1997). Vice President, Chief Compliance Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Chief Compliance Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Thomas D. Tays (born 03/07/57, Davis Funds officer since 1997). Vice President and Secretary of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President, Chief Legal Officer and Secretary, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Arthur Don (born 09/24/53, Davis Funds officer since 1991). Assistant Secretary (for clerical purposes only) of each of the Davis Funds and Selected Funds; Shareholder, Greenberg Traurig, LLP (a law firm); counsel to the Independent Directors and the Davis Funds.

43

DAVIS VARIABLE ACCOUNT FUND, INC.

Investment Adviser

Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”)

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

(800) 279-0279

Distributor

Davis Distributors, LLC

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

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

Greenberg Traurig, LLP

77 West Wacker Drive, Suite 3100

Chicago, Illinois 60601

Independent Registered Public Accounting Firm

KPMG LLP

707 Seventeenth Street, Suite 2700

Denver, Colorado 80202

For more information about Davis Variable Account Fund, Inc., including management fee, charges, and expenses, see the current prospectus, which must precede or accompany this report.  The Funds’ Statement of Additional Information contains additional information about the Funds’ Directors and is available without charge upon request by calling 1-800-279-0279 and on the Funds’ website at www.davisfunds.com.  Quarterly Fact sheets are available on the Funds’ website at www.davisfunds.com.

44

DAVIS VALUE PORTFOLIO Table of Contents

Management's Discussion of Fund Performance	2
Fund Overview	4
Expense Example	6
Schedule of Investments	7
Statement of Assets and Liabilities	12
Statement of Operations	13
Statements of Changes in Net Assets	14
Notes to Financial Statements	15
Financial Highlights	21
Report of Independent Registered Public Accounting Firm	22
Fund Information	23
Directors and Officers	24

This Annual Report is authorized for use by existing shareholders.  Prospective shareholders must receive a current Davis Value Portfolio prospectus, which contains more information about investment strategies, risks, charges, and expenses.  Please read the prospectus carefully before investing or sending money.

Shares of the Davis Value Portfolio 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.

DAVIS VALUE PORTFOLIO Management’s Discussion of Fund Performance

Performance Overview

Davis Value Portfolio delivered a total return on net asset value of 31.16% for the year ended December 31, 2009.  Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 26.46%.  The sectors1 within the Index that turned in the strongest performance over the year were information technology, materials, and consumer discretionary.  The sectorswithin the Index that turned in the weakest (but still positive) performance over the year were telecommunication services, utilities, and energy.

Factors Impacting the Portfolio’s Performance

The Portfolio’s energy companies out-performed the corresponding sector within the Index (up 39% versus up 14% for the Index) and were the largest contributors2 to performance on a relative basis compared to the Index.  Occidental Petroleum3, EOG Resources, and Canadian Natural Resources were among the most important contributors to performance.  ConocoPhillips was among the most important detractors from performance.

The Portfolio’s information technology companies were the largest detractor from performance relative to the Index.  The Portfolio’s information technology companies out-performed the corresponding sector within the Index (up 63% versus up 62% for the Index), however this sector still detracted from performance relative to the Index due to the lower relative average weighting (8% versus 18% for the Index).  Google, Microsoft, and Texas Instruments were among the most important contributors to performance.  Tyco Electronics was among the most important detractors from performance.  The Portfolio no longer owns Tyco Electronics.

The Portfolio’s financial companies were among the most important contributors to relative performance as the Portfolio had a higher average weighting (28% versus 13% for the Index) and the Portfolio’s financial companies out-performed the corresponding sector within the Index (up 26% versus up 17% for the Index).  American Express and GAM Holding were among the most important contributors to performance.  Bank of America, Citigroup, NIPPONKOA Insurance, and Julius Baer Group were among the most important detractors from performance.  The Portfolio no longer owns Bank of America, Citigroup, or NIPPONKOA Insurance.

The Portfolio’s relative performance was helped due to stock selection of health care companies.  The Portfolio had a lower relative average weighting in health care companies (8% versus 14% for the Index), but the Portfolio’s health care companies out-performed the corresponding sector within the Index (up 40% versus up 20% for the Index).  Schering-Plough was among the most important contributors to performance.  Schering-Plough merged with Merck in November 2009.

The Portfolio ended the year with approximately 15% of its net assets invested in foreign companies.  As a whole these companies out-performed the domestic companies held by the Portfolio.

Davis Value Portfolio’s investment objective is long-term growth of capital.  There can be no assurance that the Portfolio will achieve its objective.  The primary risks of an investment in Davis Value Portfolio are: (1) market risk, (2) company risk, (3) financial services risk, (4) foreign country risk, (5) headline risk, and (6) selection risk. See the prospectus for a full description of each risk.

1     The companies included in the Standard & Poor’s 500® Index are divided into ten sectors.  One or more industry groups make up a sector.

2     A company’s or sector’s contribution to or detraction from the Portfolio’s performance is a product both of 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%.

3     This Management Discussion of Fund Performance 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 Portfolio’s holdings of each company discussed.

2

DAVIS VALUE PORTFOLIO Management’s Discussion of Fund Performance – (Continued)

Comparison of a $10,000 investment in Davis Value Portfolio versus the Standard & Poor’s 500® Indexover 10 years for an investment made on December 31, 1999

Average Annual Total Return for periods ended December 31, 2009

F Fund & Benchmark Index	1-Year	5-Year	10-Year	Since Fund’s Inception	Inception Date	Gross Expense Ratio	Net Expense Ratio
Davis Value Portfolio	31.16%	0.61%	2.11%	2.26%	07/01/99	0.71%	0.71%
Standard & Poor’s 500® Index	26.46%	0.42%	(0.95)%	(0.26)%

The Standard & Poor’s 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange.  The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.  Investments cannot be made directly in the Index.

The performance data for Davis Value Portfolio 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 Portfolio today.  The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed.  Portfolio performance changes over time and current performance may be higher or lower than stated.  The operating expense ratio may vary in future years.  For more current information please call Davis Funds Investor Services at 1-800-279-0279.

Portfolio performance numbers are net of all Portfolio operating expenses, but do not include any insurance charges imposed by your insurance company’s separate account.  If performance included the effect of these additional charges, the return would be lower.

3

DAVIS VALUE PORTFOLIO Fund Overview

 December 31, 2009

Portfolio Composition		Industry Weightings
(% of Fund’s Net Assets)		(% of Long Term Portfolio)
			Fund	S&P 500®
Common Stock (U.S.)	79.88%	Energy	16.60%	11.48%
Common Stock (Foreign)	14.99%	Diversified Financials	13.81%	7.87%
Convertible Bonds (U.S.)	0.41%	Insurance	11.61%	2.41%
Convertible Bonds (Foreign)	0.17%	Health Care	9.26%	12.63%
Corporate Bonds	0.47%	Information Technology	8.53%	19.85%
Short Term Investments	2.95%	Food & Staples Retailing	6.52%	2.69%
Other Assets & Liabilities	1.13%	Materials	6.40%	3.60%
	100.00%	Banks	4.31%	2.86%
		Food, Beverage & Tobacco	4.18%	5.84%
		Media	4.03%	2.90%
		Retailing	2.77%	3.46%
		Transportation	2.65%	2.09%
		Commercial & Professional Services	2.43%	0.66%
		Other	1.97%	10.73%
		Household & Personal Products	1.96%	2.83%
		Automobiles & Components	1.58%	0.61%
		Capital Goods	1.39%	7.49%
			100.00%	100.00%

Top 10 Holdings

(% of Fund’s Net Assets)

Berkshire Hathaway Inc., Class A	Property & Casualty Insurance	4.39%
Occidental Petroleum Corp.	Energy	4.22%
Wells Fargo & Co.	Commercial Banks	4.13%
American Express Co.	Consumer Finance	3.96%
Costco Wholesale Corp.	Food & Staples Retailing	3.87%
EOG Resources, Inc.	Energy	3.50%
Devon Energy Corp.	Energy	3.17%
Loews Corp.	Multi-line Insurance	2.56%
JPMorgan Chase & Co.	Diversified Financial Services	2.41%
Merck & Co., Inc.	Pharmaceuticals, Biotechnology & Life Sciences	2.41%

4

DAVIS VALUE PORTFOLIO	Fund Overview – (Continued)
	December 31, 2009

New Positions Added (01/01/09-12/31/09)

(Highlighted positions are those greater than 0.80% of 12/31/09 total net assets)

Security	Industry	Date of 1st Purchase	% of 12/31/09 Fund Net Assets
Activision Blizzard, Inc.	Software & Services	01/07/09	0.45%
Becton, Dickinson and Co.	Health Care Equipment & Services	03/02/09	0.91%
Coca-Cola Co.	Food, Beverage & Tobacco	06/26/09	0.54%
Fairfax Financial Holdings Ltd.	Multi-line Insurance	09/08/09	0.39%
GAM Holding Ltd.	Capital Markets	02/23/09	0.52%
Harley-Davidson, Inc., Sr. Notes,
15.00%, 02/01/14	Automobiles & Components	02/03/09	0.47%
Laboratory Corp. of America Holdings	Health Care Equipment & Services	03/02/09	0.39%
LLX Logistica S.A.	Transportation	09/22/09	0.07%
Mead Johnson Nutrition Co.	Household & Personal Products	12/14/09	0.32%
Medtronic, Inc.	Health Care Equipment & Services	01/07/09	–
Merck & Co., Inc.	Pharmaceuticals, Biotechnology &
	Life Sciences	03/11/09	2.41%
Natura Cosmeticos S.A.	Household & Personal Products	07/31/09	0.13%
Pfizer Inc.	Pharmaceuticals, Biotechnology &
	Life Sciences	02/25/09	0.88%
Potash Corp. of Saskatchewan Inc.	Materials	05/14/09	0.24%
Walt Disney Co.	Media	02/05/09	0.85%

Positions Closed (01/01/09-12/31/09)

(Gains and losses greater than $1,000,000 are highlighted)

		Date of		Realized
Security	Industry	Final Sale		Gain (Loss)
Altria Group, Inc.	Food, Beverage & Tobacco	01/05/09	$	122,420
American International Group, Inc.	Multi-line Insurance	12/18/09		(19,978,679)
Avon Products, Inc.	Household & Personal Products	03/23/09		(561,130)
Bank of America Corp.	Diversified Financial Services	03/16/09		(2,187,724)
Cisco Systems, Inc.	Technology Hardware & Equipment	08/20/09		(139,893)
Citigroup Inc.	Diversified Financial Services	03/10/09		(3,383,562)
Dell Inc.	Technology Hardware & Equipment	02/27/09		(1,662,540)
Discover Financial Services	Consumer Finance	02/04/09		(156,778)
eBay Inc.	Software & Services	06/03/09		(388,469)
E*TRADE Financial Corp.	Capital Markets	03/13/09		(760,169)
Lowe's Cos, Inc.	Retailing	02/04/09		(636,067)
MBIA Inc.	Property & Casualty Insurance	03/06/09		(664,262)
Medtronic, Inc.	Health Care Equipment & Services	04/28/09		(43,478)
Morgan Stanley	Capital Markets	03/16/09		(142,779)
NIPPONKOA Insurance Co., Ltd.	Property & Casualty Insurance	10/23/09		(1,151,848)
Schering-Plough Corp.	Pharmaceuticals, Biotechnology &
	Life Sciences	11/04/09		799,891
Sears Holdings Corp.	Retailing	02/27/09		(716,036)
Siemens AG, Registered	Capital Goods	03/20/09		(1,446,925)
Sprint Nextel Corp.	Telecommunication Services	03/12/09		(5,851,079)
State Street Corp.	Capital Markets	03/16/09		(107,364)
Sun Life Financial Inc.	Life & Health Insurance	12/14/09		165,773
Tyco Electronics Ltd.	Technology Hardware & Equipment	03/18/09		(629,440)
Whole Foods Market, Inc.	Food & Staples Retailing	01/09/09		(791,997)
WPP PLC, ADR	Media	01/09/09		(12,020)

5

DAVIS VALUE PORTFOLIO Expense Example

Example

As a shareholder of the Fund, you incur ongoing costs only, including advisory and administrative 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 the Fund is for the six-month period ended December 31, 2009. Please note that the Expense Example is general and does not reflect charges imposed by your insurance company’s separate account or account specific costs, which may increase your total costs of investing in the Fund. If these charges 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 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. 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.

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During Period*
	(07/01/09)	(12/31/09)	(07/01/09-12/31/09)
Actual	$1,000.00	$1,242.37	$3.50
Hypothetical	$1,000.00	$1,022.08	$3.16

Hypothetical assumes 5% annual return before expenses.

* Expenses are equal to the Fund’s annualized operating expense ratio (0.62%)**, multiplied by the average account valueover the period, multiplied by 184/365 (to reflect the one-half year period).

** The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.  

6

DAVIS VALUE PORTFOLIO	Schedule of Investments
	December 31, 2009

Shares					Security			Value (Note 1)
COMMON STOCK – (94.87%)
	CONSUMER DISCRETIONARY – (8.34%)
		Automobiles & Components – (1.04%)
	214,000		Harley-Davidson, Inc.			$	5,392,800
		Consumer Durables & Apparel – (0.19%)
	435		Garmin Ltd.				13,350
	20,299		Hunter Douglas NV  (Netherlands)				992,348
							1,005,698
		Consumer Services – (0.58%)
	132,863		H&R Block, Inc.				3,005,361
		Media – (3.87%)
	182,441		Comcast Corp., Special Class A				2,919,968
	85,074		DIRECTV, Class A  *				2,836,793
	110,770		Grupo Televisa S.A., ADR  (Mexico)				2,299,585
	8,506		Liberty Media - Starz, Series A  *				392,594
	529,525		News Corp., Class A				7,254,493
	136,200		Walt Disney Co.				4,392,450
							20,095,883
		Retailing – (2.66%)
	17,130		Amazon.com, Inc.  *				2,305,355
	163,615		Bed Bath & Beyond Inc.  *				6,317,993
	166,400		CarMax, Inc.  *				4,035,200
	105,950		Liberty Media Corp. - Interactive, Series A  *				1,149,028
							13,807,576
				Total Consumer Discretionary			43,307,318
	CONSUMER STAPLES – (12.14%)
		Food & Staples Retailing – (6.25%)
	340,300		Costco Wholesale Corp.				20,125,342
	382,798		CVS Caremark Corp.				12,329,924
							32,455,266
		Food, Beverage & Tobacco – (4.01%)
	49,500		Coca-Cola Co.				2,821,500
	93,333		Diageo PLC, ADR  (United Kingdom)				6,478,244
	141,621		Heineken Holding NV  (Netherlands)				5,923,032
	31,760		Hershey Co.				1,136,690
	92,290		Philip Morris International Inc.				4,447,455
							20,806,921
		Household & Personal Products – (1.88%)
	38,270		Mead Johnson Nutrition Co.				1,672,399
	31,800		Natura Cosmeticos S.A.  (Brazil)				663,215
	122,520		Procter & Gamble Co.				7,428,388
							9,764,002
				Total Consumer Staples			63,026,189
	ENERGY – (15.92%)
	172,200		Canadian Natural Resources Ltd.  (Canada)				12,389,790
	2,659,900		China Coal Energy Co. - H  (China)				4,813,023
	35,222		ConocoPhillips				1,798,788
	224,330		Devon Energy Corp.				16,488,255
	187,030		EOG Resources, Inc.				18,198,019

7

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2009

Shares						Security			Value (Note 1)
COMMON STOCK – (CONTINUED)
	ENERGY – (CONTINUED)
	269,260			Occidental Petroleum Corp.			$	21,904,301
	290,000			OGX Petroleo e Gas Participacoes S.A.  (Brazil)				2,848,363
	51,504			Transocean Ltd.  *				4,264,531
					Total Energy			82,705,070
	FINANCIALS – (29.07%)
		Banks – (4.13%)
			Commercial Banks – (4.13%)
	795,824			Wells Fargo & Co.				21,479,290
		Diversified Financials – (13.25%)
			Capital Markets – (5.85%)
	103,020			Ameriprise Financial, Inc.				3,999,236
	373,600			Bank of New York Mellon Corp.				10,449,592
	108,900			Brookfield Asset Management Inc., Class A  (Canada)				2,415,402
	221,460			GAM Holding Ltd.  (Switzerland)				2,681,673
	17,940			Goldman Sachs Group, Inc.				3,028,990
	221,460			Julius Baer Group Ltd.  (Switzerland)				7,788,404
								30,363,297
			Consumer Finance – (3.96%)
	507,680			American Express Co.				20,571,194
			Diversified Financial Services – (3.44%)
	300,668			JPMorgan Chase & Co.				12,528,835
	140,930			Moody's Corp.				3,776,924
	17,900			Visa Inc., Class A				1,565,534
								17,871,293
								68,805,784
		Insurance – (11.13%)
			Life & Health Insurance – (0.19%)
	40,980			Principal Financial Group, Inc.				985,159
			Multi-line Insurance – (3.37%)
	5,130			Fairfax Financial Holdings Ltd.  (Canada)				2,000,546
	95,300			Hartford Financial Services Group, Inc.				2,216,678
	365,490			Loews Corp.				13,285,561
								17,502,785
			Property & Casualty Insurance – (6.68%)
	230			Berkshire Hathaway Inc., Class A  *				22,816,000
	99			Berkshire Hathaway Inc., Class B  *				325,314
	1,340			Markel Corp.  *				455,600
	616,020			Progressive Corp. (Ohio)  *				11,082,200
								34,679,114
			Reinsurance – (0.89%)
	89,207			Transatlantic Holdings, Inc.				4,648,577
								57,815,635
		Real Estate – (0.56%)
	588,000			Hang Lung Group Ltd.  (Hong Kong)				2,904,203
					Total Financials			151,004,912
	HEALTH CARE – (8.88%)
		Health Care Equipment & Services – (3.52%)
	59,800			Becton, Dickinson and Co.				4,715,828

8

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2009

Shares					Security			Value (Note 1)
COMMON STOCK – (CONTINUED)
	HEALTH CARE – (CONTINUED)
		Health Care Equipment & Services – (Continued)
	100,150		Cardinal Health, Inc.			$	3,228,836
	49,450		CareFusion Corp.  *				1,236,744
	76,180		Express Scripts, Inc.  *				6,586,523
	27,400		Laboratory Corp. of America Holdings  *				2,050,616
	14,600		UnitedHealth Group Inc.				445,008
							18,263,555
		Pharmaceuticals, Biotechnology & Life Sciences – (5.36%)
	167,380		Johnson & Johnson				10,780,946
	342,555		Merck & Co., Inc.				12,516,960
	250,800		Pfizer Inc.				4,562,052
							27,859,958
				Total Health Care			46,123,513
	INDUSTRIALS – (6.20%)
		Capital Goods – (1.33%)
	111,180		ABB Ltd., ADR  (Switzerland)				2,123,538
	32,630		PACCAR Inc.				1,184,143
	101,334		Tyco International Ltd.				3,615,597
							6,923,278
		Commercial & Professional Services – (2.33%)
	53,500		D&B Corp.				4,513,795
	333,697		Iron Mountain Inc.  *				7,594,944
							12,108,739
		Transportation – (2.54%)
	1,482,352		China Merchants Holdings International Co., Ltd.  (China)				4,781,972
	1,097,000		China Shipping Development Co. Ltd. - H  (China)				1,637,083
	950,804		Cosco Pacific Ltd.  (China)				1,209,089
	26,355		Kuehne & Nagel International AG, Registered  (Switzerland)				2,562,474
	63,000		LLX Logistica S.A.  (Brazil)*				365,841
	45,810		United Parcel Service, Inc., Class B				2,628,120
							13,184,579
				Total Industrials			32,216,596
	INFORMATION TECHNOLOGY – (8.19%)
		Semiconductors & Semiconductor Equipment – (1.49%)
	296,800		Texas Instruments Inc.				7,734,608
		Software & Services – (3.96%)
	210,600		Activision Blizzard, Inc.  *				2,340,819
	12,840		Google Inc., Class A  *				7,960,736
	337,110		Microsoft Corp.				10,278,484
							20,580,039
		Technology Hardware & Equipment – (2.74%)
	198,050		Agilent Technologies, Inc.  *				6,153,413
	156,170		Hewlett-Packard Co.				8,044,317
							14,197,730
				Total Information Technology			42,512,377
	MATERIALS – (5.97%)
	81,830		BHP Billiton PLC  (United Kingdom)				2,608,742
	42,380		Martin Marietta Materials, Inc.				3,789,196

9

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2009

Shares/Principal									Security			Value (Note 1)
COMMON STOCK – (CONTINUED)
	MATERIALS – (CONTINUED)
	32,200				Monsanto Co.					$	2,632,350
	11,354				Potash Corp. of Saskatchewan Inc.  (Canada)						1,231,909
	41,205				Rio Tinto PLC  (United Kingdom)						2,224,940
	485,995				Sealed Air Corp.						10,623,851
	256,750				Sino-Forest Corp.  (Canada)*						4,757,675
	8,900				Sino-Forest Corp., 144A  (Canada)*(a)(b)						164,920
	56,890				Vulcan Materials Co.						2,996,396
								Total Materials			31,029,979
	UTILITIES – (0.16%)
	60,800				AES Corp.  *						809,248
								Total Utilities			809,248
					TOTAL COMMON STOCK  – (Identified cost $354,033,569)						492,735,202
CONVERTIBLE BONDS – (0.58%)
	MATERIALS – (0.17%)
$	736,000				Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13   (Canada) (c)						869,860
								Total Materials			869,860
	TELECOMMUNICATION SERVICES – (0.41%)
	1,600,000				Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11						1,624,000
	400,000				Level 3 Communications, Inc., Conv. Sr. Notes, 15.00%, 01/15/13    (c)						500,000
								Total Telecommunication Services			2,124,000
					TOTAL CONVERTIBLE BONDS – (Identified cost $2,736,000)						2,993,860
CORPORATE BONDS – (0.47%)
	CONSUMER DISCRETIONARY – (0.47%)
		Automobiles & Components – (0.47%)
	2,000,000				Harley-Davidson, Inc., Sr. Notes, 15.00%, 02/01/14    (c)						2,449,958
					TOTAL CORPORATE BONDS – (Identified cost $2,000,000)						2,449,958
SHORT TERM INVESTMENTS – (2.95%)
	5,111,000				Banc of America Securities LLC Joint Repurchase Agreement,
						0.01%, 01/04/10, dated 12/31/09, repurchase value of $5,111,006
						(collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.131%-5.959%, 02/01/35-06/01/38, total market value $5,213,220)					5,111,000
	10,222,000				Mizuho Securities USA Inc. Joint Repurchase Agreement,
						0.03%, 01/04/10, dated 12/31/09, repurchase value of $10,222,034
						(collateralized by: U.S. Government agency obligations in a pooled cash account, 0.93%-2.625%, 03/30/10-12/31/14, total market value $10,426,440)					10,222,000
					TOTAL SHORT TERM INVESTMENTS – (Identified cost $15,333,000)						15,333,000
				Total Investments – (98.87%) – (Identified cost $374,102,569) – (d)							513,512,020
				Other Assets Less Liabilities – (1.13%)							5,891,944
							Net Assets – (100.00%)			$	519,403,964
	ADR: American Depositary Receipt
	*		Non-Income producing security.

10

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2009

	(a)	This security is subject to Rule 144A.  The Board of Directors of the Fund has determined that there is sufficient liquidity in this security to realize current valuations.  This security amounted to $164,920, or 0.03% of the Fund's net assets, as of December 31, 2009.
	(b)	Restricted Security – See Note 7 of the Notes to Financial Statements.
	(c)	Illiquid Security – See Note 7 of the Notes to Financial Statements.
	(d)	Aggregate cost for federal income tax purposes is $375,885,823.  At December 31, 2009 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
			Unrealized appreciation		$	146,574,379
			Unrealized depreciation			(8,948,182)
				Net unrealized appreciation	$	137,626,197
See Notes to Financial Statements

11

DAVIS VALUE PORTFOLIO	Statement of Assets and Liabilities
	At December 31, 2009

ASSETS:
Investments in securities at value* (see accompanying Schedule of Investments)			$	513,512,020
Cash				154,232
Receivables:
	Capital stock sold			6,042,463
	Dividends and interest			558,699
	Investment securities sold			265,900
Prepaid expenses				7,126
		Total assets		520,540,440
LIABILITIES:
Payables:
	Investment securities purchased			505,886
	Capital stock redeemed			342,486
Accrued management fee				244,972
Other accrued expenses				43,132
		Total liabilities		1,136,476
NET ASSETS			$	519,403,964
SHARES OUTSTANDING				48,303,092
NET ASSET VALUE, offering, and redemption price per share                                                     (Net assets ÷ Shares outstanding)			$	10.75
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	48,303
Additional paid-in capital				421,167,728
Undistributed net investment income				126,666
Accumulated net realized losses from investments and foreign currency transactions				(41,354,580)
Net unrealized appreciation on investments and foreign currency transactions				139,415,847
		Net Assets	$	519,403,964
*Including:
Cost of Investments			$	374,102,569
See Notes to Financial Statements

12

DAVIS VALUE PORTFOLIO	Statement of Operations
	For the year ended December 31, 2009

INVESTMENT INCOME:
Income:
		Dividends*						$	6,113,936
		Interest							563,805
			Total income						6,677,741
Expenses:
		Management fees (Note 3)				$	2,514,522
		Custodian fees					84,382
		Transfer agent fees					15,696
		Audit fees					20,400
		Legal fees					13,596
		Accounting fees (Note 3)					6,252
		Reports to shareholders					58,615
		Directors’ fees and expenses					110,360
		Registration and filing fees					290
		Miscellaneous					15,889
			Total expenses						2,840,002
			Expenses paid indirectly (Note 4)						(6)
				Net expenses					2,839,996
					Net investment income				3,837,745
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss from:
		Investment transactions							(40,964,511)
		Foreign currency transactions							(14,128)
Net change in unrealized appreciation (depreciation)									155,373,588
	Net realized and unrealized gain on investments and foreign currency transactions								114,394,949
		Net increase in net assets resulting from operations						$	118,232,694
*Net of foreign taxes withheld as follows								$	73,330
See Notes to Financial Statements

13

DAVIS VALUE PORTFOLIO Statements of Changes in Net Assets

		Year ended December 31,
		2009		2008
OPERATIONS:
	Net investment income	$	3,837,745	$	4,955,792
	Net realized gain (loss) from investments and foreign currency transactions		(40,978,639)		605,679
	Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions		155,373,588		(246,836,174)
	Net increase (decrease) in net assets resulting from operations		118,232,694		(241,274,703)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
	Net investment income		(3,982,003)		(4,909,074)
	Realized gains from investment transactions		–		(8,550,201)
CAPITAL SHARE TRANSACTIONS:
	Net increase (decrease) in net assets resulting from capital share transactions (Note 5)		72,001,466		(70,813,149)
Total increase (decrease) in net assets			186,252,157		(325,547,127)
NET ASSETS:
	Beginning of year		333,151,807		658,698,934
	End of year*	$	519,403,964	$	333,151,807
*Including undistributed net investment income of		$	126,666	$	285,052
See Notes to Financial Statements

14

DAVIS VALUE PORTFOLIO	Notes to Financial Statements
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Fund is a separate series of Davis Variable Account Fund, Inc. (a Maryland corporation), which is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company.  Only insurance companies, for the purpose of funding variable annuity or variable life insurance contracts, may purchase shares of the Fund.  The following is a summary of significant accounting policies followed by the Fund in the preparation of 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.  Securities whose values have been materially affected by what Davis Selected Advisers, L.P. (“Davis Advisors” or “Adviser”), the Fund’s investment 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.

Value Measurements - Fair value is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used to determine the fair value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

        Level 3 – significant unobservable inputs (including Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

15

DAVIS VALUE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)

Value Measurements – (Continued)

The following is a summary of the inputs used as of December 31, 2009 in valuing the Fund’s investments carried at value:

	Investments in Securities at Value
	Valuation Inputs
			Level 2:		Level 3:
			Other Significant		Significant
	Level 1:		Observable		Unobservable
	Quoted Prices		Inputs*		Inputs		Total
Equity securities:
Consumer discretionary	$	42,314,970	$	992,348	$	–	$	43,307,318
Consumer staples		57,103,157		5,923,032		–		63,026,189
Energy		77,892,047		4,813,023		–		82,705,070
Financials		145,419,036		5,585,876		–		151,004,912
Health care		46,123,513		–		–		46,123,513
Industrials		22,025,978		10,190,618		–		32,216,596
Information technology		42,512,377		–		–		42,512,377
Materials		26,196,297		4,833,682		–		31,029,979
Utilities		809,248		–		–		809,248
Convertible debt securities		–		2,993,860		–		2,993,860
Corporate debt securities		–		2,449,958		–		2,449,958
Short-term securities		–		15,333,000		–		15,333,000
Total	$	460,396,623	$	53,115,397	$	–	$	513,512,020

*Includes certain securities trading primarily outside the U.S. whose value the Fund adjusted as a result of significant market movements following the close of local trading.

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.

16

DAVIS VALUE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

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 the 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.  The Adviser has analyzed the Fund’s tax positions taken on federal and state income tax returns for all open tax years and has concluded that as of December 31, 2009, no provision for income tax would be required in the Fund’s financial statements.  The Fund’s federal and state (Arizona and Maryland) income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.  The earliest tax year that remains subject to examination by these jurisdictions is 2006.  At December 31, 2009, the Fund had available for federal income tax purposes unused capital loss carryforwards and post October 2009 capital losses as follows:

	Capital Loss Carryforwards		Post October 2009  Capital Losses
Expiring
12/31/2017	$	30,445,000	$	–
12/31/2018		–		9,789,000
	$	30,445,000	$	9,789,000

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.

17

DAVIS VALUE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

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) on investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales, passive foreign investment company shares, and foreign currency transactions.  The character of dividends and distributions made during the fiscal year from net investment income and net realized securities gains may differ from their ultimate characterization for federal income tax purposes.  Also, due to the timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which income or realized gain was recorded by the Fund.  The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax rules. Accordingly, during the year ended December 31, 2009, amounts have been reclassified to reflect a decrease in undistributed net investment income of $14,128 and a corresponding decrease in accumulated net realized losses from investments and foreign currency transactions.  Net assets have not been affected by this reclassification.

The tax character of distributions paid during the years ended December 31, 2009 and 2008 were as follows:

	2009		2008
Ordinary income	$	3,982,003	$	4,912,728
Long-term capital gain		–		8,546,547
Total	$	3,982,003	$	13,459,275

As of December 31, 2009, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

Undistributed net investment income	$	790,168
Accumulated net realized losses from investments and
foreign currency transactions		(40,234,828)
Net unrealized appreciation on investments		137,632,593
Total	$	98,187,933

Indemnification - - Under the Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund.  In addition, some of the Fund’s contracts with its service providers contain general indemnification clauses.  The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims.

Use of Estimates in Financial Statements- In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period.  Actual results may differ from these estimates.

NOTE 2 - PURCHASES AND SALES OF SECURITIES

Purchases and sales of investment securities (excluding short-term securities) during the year ended December 31, 2009 were $149,251,682 and $74,542,809, respectively.

18

DAVIS VALUE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser. Prior to July 1, 2009, the annual rate was 0.75% of the Fund’s average net assets.  Effective July 1, 2009, the annual rate is 0.55% of the Fund’s average net assets.  Advisory fees paid during the year ended December 31, 2009 approximated 0.63% of the average net assets.

Boston Financial Data Services, Inc. (“BFDS”) is the Fund’s primary transfer agent.  State Street Bank and Trust Company (“State Street Bank”) is the Fund’s primary accounting provider.  Fees for such services are included in the custodian fee as State Street Bank also serves as the Fund’s custodian.  The Adviser is also paid for certain accounting services.  The fee paid to the Adviser for these services for the year ended December 31, 2009 amounted to $6,252.  Certain directors and officers of the Fund are also directors and officers of the general partner of the Adviser.

Davis Selected Advisers-NY, Inc. (“DSA-NY”), a wholly-owned subsidiary of the Adviser, acts as sub-adviser to the Fund.  DSA-NY performs research and portfolio management services for the Fund under a Sub-Advisory Agreement with the Adviser.  The Fund pays no fees directly to DSA-NY.

NOTE 4 - 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 $6 during the year ended December 31, 2009.

NOTE 5 - CAPITAL STOCK

At December 31, 2009, there were 500 million shares of capital stock ($0.001 par value per share) authorized. Transactions in capital stock were as follows:

	Year ended			Year ended
	December 31, 2009			December 31, 2008
	Shares	Amount		Shares	Amount
Shares sold	16,029,614	$	142,471,775	5,699,870	$	61,188,955
Shares issued in reinvestment of distributions	368,022		3,982,003	1,734,051		13,459,275
	16,397,636		146,453,778	7,433,921		74,648,230
Shares redeemed	(8,410,774)		(74,452,312)	(12,622,781)		(145,461,379)
Net increase (decrease)	7,986,862	$	72,001,466	(5,188,860)	$	(70,813,149)

NOTE 6 - BANK BORROWINGS

The Fund may borrow up to 5% of its assets from a bank to purchase portfolio securities, or for temporary and emergency purposes.  The purchase of securities with borrowed funds creates leverage in the Fund.  The Fund has entered into an agreement, which enables it to participate with certain other 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 higher of the Federal Funds Rate or the Overnight Libor Rate, plus 1.25%.  The Fund had no borrowings during the year ended December 31, 2009.

19

DAVIS VALUE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 7 - ILLIQUID AND RESTRICTED SECURITIES

Securities may be considered illiquid if they lack a readily available market or if valuation has not changed for a certain period of time. Restricted securities are not registered under the Securities Act of 1933 and may have contractual restrictions on resale. They are valued under methods approved by the Board of Directors as reflecting fair value. The aggregate value of illiquid securities amounted to $3,819,818 or 0.74% of the Fund’s net assets as of December 31, 2009.  The aggregate value of restricted securities amounted to $164,920 or 0.03% of the Fund’s net assets as of December 31, 2009.

Information regarding illiquid and restricted securities is as follows:

Security	Acquisition Date	Principal	Units/ Shares	Cost per Unit/Share		Valuation per  Unit/Share as of December 31, 2009
Harley-Davidson, Inc., Sr. Notes, 15.00%, 02/01/14	02/03/09	$    2,000,000	20,000	$	100.00	$	122.50
Level 3 Communications, Inc., Conv. Sr. Notes, 15.00%, 01/15/13	12/23/08	$    400,000	4,000	$	100.00	$	125.00
Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13	07/17/08	$    736,000	7,360	$	100.00	$	118.19
Sino-Forest Corp., 144A	12/11/09	NA	8,900	$	15.85	$	18.53

NOTE 8 - SUBSEQUENT EVENTS

Fund management has determined that no material events or transactions occurred subsequent to December 31, 2009 and through February 9, 2010, the date the Fund’s financial statements were issued, which require adjustments and/or additional disclosure in the Fund’s financial statements.

20

DAVIS VALUE PORTFOLIO Financial Highlights

The following financial information represents selected data for each share of capital stock outstanding throughout each period:
			Year ended  December 31,
			2009			2008			2007			2006			2005
Net Asset Value, Beginning of Period			$	8.26		$	14.48		$	14.58		$	12.77		$	11.78
Income (Loss) from Investment Operations:
	Net Investment Income		0.08			0.13			0.17			0.11			0.12
	Net Realized and Unrealized Gains (Losses)		2.49			(6.00)			0.51			1.81			0.99
		Total from Investment Operations	2.57			(5.87)			0.68			1.92			1.11
Dividends and Distributions:
	Dividends from Net Investment Income		(0.08)			(0.12)			(0.17)			(0.11)			(0.11)
	Distributions from Realized Gains		–			(0.23)			(0.61)			–			–
	Distributions in Excess of Net Investment Income		–			–			–			–			(0.01)
		Total Dividends and Distributions	(0.08)			(0.35)			(0.78)			(0.11)			(0.12)
Net Asset Value, End of Period			$	10.75		$	8.26		$	14.48		$	14.58		$	12.77
Total Returna			31.16		%	(40.32)		%	4.64		%	15.00		%	9.44		%
Ratios/Supplemental Data:
	Net Assets, End of Period (in thousands)		$	519,404		$	333,152		$	658,699		$	771,828		$	620,369
	Ratio of Expenses to Average Net Assets:
		Gross	0.71		%	0.82		%	0.81		%	0.81		%	0.81		%
		Netb	0.71		%	0.82		%	0.81		%	0.81		%	0.81		%
Ratio of Net Investment Income to Average Net Assets			0.97		%	0.98		%	1.11		%	0.83		%	0.87		%
Portfolio Turnover Ratec			20		%	17		%	9		%	19		%	14		%

a	Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period.  Total returns do not reflect charges attributable to your insurance company’s separate account.  Inclusion of these charges would reduce the total returns shown.
b	The Net Ratio of Expenses to Average Net Assets reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.
c	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.
See Notes to Financial Statements

21

DAVIS VALUE PORTFOLIO Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

of Davis Variable Account Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of Davis Value Portfolio (a separate series of the Davis Variable Account Fund, Inc.), including the schedule of investments, as of December 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended.  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 December 31, 2009, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received.  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 Value Portfolio as of December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

KPMG LLP

Denver, Colorado

February 9, 2010

22

DAVIS VALUE PORTFOLIO Fund Information

Federal Income Tax Information (Unaudited)

During the calendar year ended 2009, $3,982,003 or 100% of dividends paid by the Fund constituted income qualifying for the corporate dividends-received deduction.

Portfolio Proxy Voting Policies and Procedures

The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities held by the Fund.  A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year.  The Fund’s Form N-PX filing is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

Form N-Q

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Fund’s Form N-Q is available without charge, upon request, by calling 1-800-279-0279 or on the Fund’s website at www.davisfunds.com or on the SEC’s website at www.sec.gov.  The Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

23

DAVIS VALUE PORTFOLIO Directors and Officers

For the purposes of their service as directors to the Davis Funds, the business address for each of the directors is 2949 E. Elvira Road, Suite 101, Tucson, AZ 85756. Each Director serves until their retirement, resignation, death or removal. Subject to exceptions and exemptions, which may be granted by the Independent Directors, Directors must retire at the close of business on the last day of the calendar year in which the Director attains age seventy-four (74).

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 (09/09/42)	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 Investment Counsel & Trust Company N.A. (asset management company) and Rodney Trust Company (Delaware).
John S. Gates, Jr. (08/02/53)	Director	Director since 2007	Chairman and Chief Executive Officer of PortaeCo LLC, a private investment company (beginning in 2006); Co-founder of Centerpoint Properties Trust (a REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (a REIT).
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; Director, Washington Post Co. (newspaper publisher); Director, Colfax Corp. (engineering and manufacturer of pumps and fluid handling equipment).
G. Bernard Hamilton (03/18/37)	Director	Director since 1978	Managing General Partner, Avanti Partners, L.P. (investment partnership), retired 2005.	13	none
Samuel H. Iapalucci (07/19/52)	Director	Director since 2006	Former Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc. (engineering).	13	none
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (an investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director	Director since 1990	General Partner, Tuxedo Park Associates (land holding and development firm).	13	none
Marsha Williams (03/28/51)	Director	Director since 1999	Senior Vice President and Chief Financial Officer, Orbitz Worldwide, Inc. (travel-services provider) since 2007; former Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a REIT).	13	Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering); Director, Fifth Third Bancorp (diversified financial services).

24

DAVIS VALUE PORTFOLIO Directors and Officers – (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 (08/16/35)	Director / Chairman (retired 12/31/09)	Director since 1994	Vice Chairman, Member of the Audit Committee and Member of the International Investment Committee, former Chief Investment Officer (1980 through 2005), all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P.	13	none
Christopher C. Davis (07/13/65)	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).	10	Director, Davis New York Venture Fund, Inc. (consisting of four portfolios); Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (newspaper publisher).

*      Jeremy H. Biggs 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.

25

DAVIS VALUE PORTFOLIO Directors and Officers – (Continued)

Officers

Christopher C. Davis (born 07/13/65, Davis Funds officer since 1997). See description in the section on Inside Directors.

Andrew A. Davis (born 06/25/63, Davis Funds officer since 1997). President or Vice President of each of the Davis Funds (consisting of 13 portfolios) and Selected Funds (consisting of three portfolios); President, Davis Selected Advisers, L.P., serves as an executive officer in certain companies affiliated with the Adviser; Director of Davis Series, Inc. (consisting of six portfolios) and the Selected Funds (consisting of three portfolios).

Kenneth C. Eich (born 08/14/53, Davis Funds officer since 1997). Executive Vice President and Principal Executive Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Chief Operating Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Douglas A. Haines (born 03/04/71, Davis Funds officer since 2004). Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Director of Fund Accounting, Davis Selected Advisers, L.P.

Sharra L. Haynes (born 09/25/66, Davis Funds officer since 1997). Vice President, Chief Compliance Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Chief Compliance Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Thomas D. Tays (born 03/07/57, Davis Funds officer since 1997). Vice President and Secretary of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President, Chief Legal Officer and Secretary, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Arthur Don (born 09/24/53, Davis Funds officer since 1991). Assistant Secretary (for clerical purposes only) of each of the Davis Funds and Selected Funds; Shareholder, Greenberg Traurig, LLP (a law firm); counsel to the Independent Directors and the Davis Funds.

26

DAVIS VALUE PORTFOLIO

Investment Adviser

Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”)

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

(800) 279-0279

Distributor

Davis Distributors, LLC

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

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

Greenberg Traurig, LLP

77 West Wacker Drive, Suite 3100

Chicago, Illinois 60601

Independent Registered Public Accounting Firm

KPMG LLP

707 Seventeenth Street, Suite 2700

Denver, Colorado 80202

For more information about Davis Value Portfolio, including management fee, charges, and expenses, see the current prospectus, which must precede or accompany this report.  The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge upon request by calling 1-800-279-0279 and on the Fund’s website at www.davisfunds.com.  Quarterly Fact sheets are available on the Fund’s website at www.davisfunds.com.

27

DAVIS FINANCIAL PORTFOLIO Table of Contents

Management’s Discussion of Fund Performance	2
Fund Overview	4
Expense Example	5
Schedule of Investments	6
Statement of Assets and Liabilities	8
Statement of Operations	9
Statements of Changes in Net Assets	10
Notes to Financial Statements	11
Financial Highlights	16
Report of Independent Registered Public Accounting Firm	17
Fund Information	18
Directors and Officers	19

This Annual Report is authorized for use by existing shareholders.  Prospective shareholders must receive a current Davis Variable Account Fund, Inc. (including Davis Financial Portfolio) prospectus, which contains more information about investment strategies, risks, charges, and expenses.  Please read the prospectus carefully before investing or sending money.

Shares of the Davis Financial Portfolio 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.

DAVIS FINANCIAL PORTFOLIO Management’s Discussion of Fund Performance

Performance Overview

Davis Financial Portfolio delivered a total return on net asset value of 41.18% for the year ended December 31, 2009.  Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 26.46%.  The Index’s diversified financials and insurance industry groups1 turned in positive performances, while the banking industry group turned in a negative performance.

Factors Impacting the Portfolio’s Performance

The Portfolio’s financial sector holdings out-performed those of the Index (up 44% versus up 17% for the Index).  The Portfolio had a portion of its assets invested in other sectors and these non-financial holdings overall contributed2 to performance.

The Portfolio’s diversified financial companies were the largest contributors to performance.  The Portfolio’s diversified financial companies out-performed the corresponding industry group within the Index (up 56% versus up 30% for the Index).  American Express3, Oaktree, Goldman Sachs, and GAM Holding were among the most important contributors to performance.  JPMorgan Chase, Bank of New York Mellon, Julius Baer Group, and Bank of America were among the most important detractors from performance.

The Portfolio’s insurance companies were the second largest contributor to performance (up 24% versus up 14% for the corresponding industry group within the Index).  Transatlantic Holdings, China Life Insurance, and Loews were among the most important contributors to performance.  FPIC Insurance and American International Group were among the most important detractors from performance.  The Fund no longer owns American International Group.

The Portfolio’s banking companies contributed positively to performance (up 63% versus down 7% for the Index).  Wells Fargo and State Bank of India were among the most important contributors to performance.

The Portfolio received a favorable class action settlement from a former holding, Tyco International.  This settlement had an approximate impact of 0.4% on the investment performance of the Portfolio in 2009.

The Portfolio ended the year with approximately 25% of its net assets invested in foreign companies.  As a whole these companies out-performed the domestic companies held by the Portfolio.

Davis Financial Portfolio’s investment objective is long-term growth of capital.  There can be no assurance that the Portfolio will achieve its objective.  The primary risks of an investment in Davis Financial Portfolio are: (1) market risk, (2) company risk, (3) concentrated financial services portfolio risk, (4) foreign country risk, (5) headline risk, and (6) selection risk.  See the prospectus for a full description of each risk.

Davis Financial Portfolio concentrates its investments in the financial sector, and it may be subject to greater risks than a portfolio that does not concentrate its investments in a particular sector.  The Portfolio’s investment performance, both good and bad, is expected to reflect the economic performance of the financial sector more than a portfolio that does not concentrate its portfolio.

1     The companies included in the Standard & Poor’s 500® Index are divided into ten sectors.  One or more industry groups make up a sector.

 2     A company’s or sector’s contribution to or detraction from the Portfolio’s performance is a product both of 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%.

3     This Management Discussion of Fund Performance 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 Portfolio’s holdings of each company discussed.

2

DAVIS FINANCIAL PORTFOLIO Management’s Discussion of Fund Performance – (Continued)

Comparison of a $10,000 investment in Davis Financial Portfolio versus the Standard & Poor’s 500® Indexover 10 years for an investment made on December 31, 1999

Average Annual Total Return for periods ended December 31, 2009

F Fund & Benchmark Index	1-Year	5-Year	10-Year	Since Fund’s Inception	Inception Date	Gross Expense Ratio	Net Expense Ratio
Davis Financial Portfolio	41.18%	(1.79)%	2.66%	1.81%	07/01/99	0.78%	0.78%
Standard & Poor’s 500® Index	26.46%	0.42%	(0.95)%	(0.26)%

The Standard & Poor’s 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange.  The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.  Investments cannot be made directly in the Index.

The performance data for Davis Financial Portfolio 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 Portfolio today.  The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed.  Portfolio performance changes over time and current performance may be higher or lower than stated.  The operating expense ratio may vary in future years.  For more current information please call Davis Funds Investor Services at 1-800-279-0279.

Portfolio performance numbers are net of all Portfolio operating expenses, but do not include any insurance charges imposed by your insurance company’s separate account.  If performance included the effect of these additional charges, the return would be lower.

Davis Financial Portfolio received a favorable class action settlement from a company that it no longer owns.  This settlement had a material impact on the investment performance of the Portfolio in 2009.  This was a one-time event that is unlikely to be repeated.

3

DAVIS FINANCIAL PORTFOLIO	Fund Overview
	December 31, 2009

Portfolio Composition		Industry Weightings
(% of Fund’s Net Assets)		(% of Stock Holdings)
			Fund	S&P 500®
Common Stock (U.S.)	73.93%	Diversified Financials	44.67%	7.87%
Common Stock (Foreign)	25.14%	Insurance	33.19%	2.41%
Short Term Investments	0.95%	Banks	12.52%	2.86%
Other Assets & Liabilities	(0.02)%	Energy	5.17%	11.48%
	100.00%	Commercial & Professional Services	2.90%	0.66%
		Materials	1.55%	3.60%
		Information Technology	–	19.85%
		Health Care	–	12.63%
		Capital Goods	–	7.49%
		Food, Beverage & Tobacco	–	5.84%
		Other	–	25.31%
			100.00%	100.00%

Top 10 Holdings

(% of Fund’s Net Assets)

American Express Co.	Consumer Finance	9.07%
Transatlantic Holdings, Inc.	Reinsurance	8.35%
Loews Corp.	Multi-line Insurance	6.15%
State Bank of India Ltd., GDR	Commercial Banks	5.71%
Wells Fargo & Co.	Commercial Banks	5.45%
Canadian Natural Resources Ltd.	Energy	5.12%
Oaktree Capital Group LLC, Class A	Diversified Financial Services	4.83%
Goldman Sachs Group, Inc.	Capital Markets	4.71%
Bank of New York Mellon Corp.	Capital Markets	4.66%
Markel Corp.	Property & Casualty Insurance	4.34%

New Positions Added (01/01/09-12/31/09)

(Highlighted positions are those greater than 0.30% of 12/31/09 total net assets)

Security	Industry	Date of 1st Purchase	% of 12/31/09 Fund Net Assets
Banco Santander Brasil S.A., ADS	Commercial Banks	10/07/09	0.32%
Cielo S.A.	Diversified Financial Services	06/26/09	0.26%

Positions Closed (01/01/09-12/31/09)

(Gains and losses greater than $1,000,000 are highlighted)

		Date of		Realized
Security	Industry	Final Sale		Gain (Loss)
Ambac Financial Group, Inc.	Property & Casualty Insurance	02/20/09	$	(615,674)
American International Group, Inc.	Multi-line Insurance	03/12/09		(6,106,028)
H&R Block, Inc.	Consumer Services	11/24/09		(96,600)
MBIA Inc.	Property & Casualty Insurance	03/06/09		(1,153,345)

4

DAVIS FINANCIAL PORTFOLIO Expense Example

Example

As a shareholder of the Fund, you incur ongoing costs only, including advisory and administrative 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 the Fund is for the six-month period ended December 31, 2009. Please note that the Expense Example is general and does not reflect charges imposed by your insurance company’s separate account or account specific costs, which may increase your total costs of investing in the Fund. If these charges 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 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. 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.

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During Period*
	(07/01/2009)	(12/31/2009)	(07/01/2009-12/31/2009)
Actual	$1,000.00	$1,251.81	$3.86
Hypothetical	$1,000.00	$1,021.78	$3.47

Hypothetical assumes 5% annual return before expenses.

* Expenses are equal to the Fund’s annualized operating expense ratio (0.68%)**, multiplied by the average account valueover the period, multiplied by 184/365 (to reflect the one-half year period).

** The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.  

5

DAVIS FINANCIAL PORTFOLIO	Schedule of Investments
	December 31, 2009

Shares						Security			Value (Note 1)
COMMON STOCK – (99.07%)
	ENERGY – (5.12%)
	62,500			Canadian Natural Resources Ltd.  (Canada)			$	4,496,875
					Total Energy			4,496,875
	FINANCIALS – (89.54%)
		Banks – (12.41%)
			Commercial Banks – (12.41%)
	20,000			Banco Santander Brasil S.A., ADS  (Brazil)				278,800
	21,600			ICICI Bank Ltd., ADR  (India)				814,536
	50,948			State Bank of India Ltd., GDR  (India)				5,012,519
	177,500			Wells Fargo & Co.				4,790,725
								10,896,580
		Diversified Financials – (44.25%)
			Capital Markets – (21.10%)
	60,460			Ameriprise Financial, Inc.				2,347,057
	146,200			Bank of New York Mellon Corp.				4,089,214
	124,300			Brookfield Asset Management Inc., Class A  (Canada)				2,756,974
	20,100			Charles Schwab Corp.				378,483
	93,910			GAM Holding Ltd.  (Switzerland)				1,137,162
	24,520			Goldman Sachs Group, Inc.				4,139,957
	93,910			Julius Baer Group Ltd.  (Switzerland)				3,302,669
	7,260			T. Rowe Price Group Inc.				386,704
								18,538,220
			Consumer Finance – (9.55%)
	196,700			American Express Co.				7,970,284
	194,994			First Marblehead Corp.  *				415,337
								8,385,621
			Diversified Financial Services – (13.60%)
	14,486			Bank of America Corp.				218,159
	25,700			Cielo S.A.  (Brazil)				226,444
	23,748			JPMorgan Chase & Co.				989,579
	122,000			Moody's Corp.				3,269,600
	126,700			Oaktree Capital Group LLC, Class A  (a)				4,244,450
	62,000			RHJ International  (Belgium)*				470,852
	28,900			Visa Inc., Class A				2,527,594
								11,946,678
								38,870,519
		Insurance – (32.88%)
			Life & Health Insurance – (4.08%)
	48,833			China Life Insurance Co., Ltd., ADR  (China)				3,581,901
			Multi-line Insurance – (6.15%)
	148,600			Loews Corp.				5,401,610
			Property & Casualty Insurance – (11.00%)
	24,600			ACE Ltd.				1,239,840
	24,800			FPIC Insurance Group, Inc.  *				958,024
	11,200			Markel Corp.  *				3,808,000
	203,300			Progressive Corp. (Ohio)  *				3,657,367
								9,663,231

6

DAVIS FINANCIAL PORTFOLIO	Schedule of Investments - (Continued)
	December 31, 2009

Shares/Principal										Security			Value (Note 1)
COMMON STOCK – (CONTINUED)
	FINANCIALS – (CONTINUED)
		Insurance – (Continued)
			Reinsurance – (11.65%)
	33,900					Everest Re Group, Ltd.					$	2,904,552
	140,737					Transatlantic Holdings, Inc.						7,333,805
												10,238,357
												28,885,099
									Total Financials			78,652,198
	INDUSTRIALS – (2.87%)
		Commercial & Professional Services – (2.87%)
	29,900					D&B Corp.						2,522,663
									Total Industrials			2,522,663
	MATERIALS – (1.54%)
	61,700					Sealed Air Corp.						1,348,762
									Total Materials			1,348,762
						TOTAL COMMON STOCK  – (Identified cost $70,873,846)						87,020,498
SHORT TERM INVESTMENTS – (0.95%)
$	278,000					Banc of America Securities LLC Joint Repurchase Agreement,
							0.01%, 01/04/10, dated 12/31/09, repurchase value of $278,000
							(collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.131%-5.959%, 02/01/35-06/01/38, total market value $283,560)					278,000
	557,000					Mizuho Securities USA Inc. Joint Repurchase Agreement,
							0.03%, 01/04/10, dated 12/31/09, repurchase value of $557,002
							(collateralized by: U.S. Government agency obligations in a pooled cash account, 0.93%-2.625%, 03/30/10-12/31/14, total market value $568,140)					557,000
						TOTAL SHORT TERM INVESTMENTS – (Identified cost $835,000)						835,000
					Total Investments – (100.02%) – (Identified cost $71,708,846) – (b)							87,855,498
					Liabilities Less Other Assets – (0.02%)							(18,277)
								Net Assets – (100.00%)			$	87,837,221
	ADR: American Depositary Receipt
	ADS: American Depositary Share
	GDR: Global Depositary Receipt
	*			Non-Income producing security.
	(a)			Illiquid Security – See Note 7 of the Notes to Financial Statements.
	(b)			Aggregate cost for federal income tax purposes is $71,862,391.  At December 31, 2009 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
					Unrealized appreciation						$	21,504,253
					Unrealized depreciation							(5,511,146)
								Net unrealized appreciation			$	15,993,107
See Notes to Financial Statements

7

DAVIS FINANCIAL PORTFOLIO	Statement of Assets and Liabilities
	At December 31, 2009

ASSETS:
Investments in securities at value* (see accompanying Schedule of Investments)			$	87,855,498
Cash				111,594
Receivables:
	Capital stock sold			141,202
	Dividends and interest			26,942
Prepaid expenses				1,327
		Total assets		88,136,563
LIABILITIES:
Payables:
	Capital stock redeemed			233,756
Accrued management fee				41,994
Other accrued expenses				23,592
		Total liabilities		299,342
NET ASSETS			$	87,837,221
SHARES OUTSTANDING				8,798,369
NET ASSET VALUE, offering, and redemption price per share (Net assets ÷ Shares outstanding)			$	9.98
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	8,798
Additional paid-in capital				84,602,067
Undistributed net investment income				478,082
Accumulated net realized losses from investments				(13,399,316)
Net unrealized appreciation on investments and foreign currency transactions				16,147,590
		Net Assets	$	87,837,221
*Including:
Cost of Investments			$	71,708,846
See Notes to Financial Statements

8

DAVIS FINANCIAL PORTFOLIO	Statement of Operations
	For the year ended December 31, 2009

INVESTMENT INCOME:
Income:
		Dividends*						$		1,050,512
		Interest							8,223
			Total income						1,058,735
Expenses:
		Management fees (Note 3)			$	463,102
		Custodian fees				23,874
		Transfer agent fees				9,083
		Audit fees				18,000
		Legal fees				2,508
		Accounting fees (Note 3)				2,004
		Reports to shareholders				19,941
		Directors’ fees and expenses				23,027
		Registration and filing fees				54
		Miscellaneous				7,822
			Total expenses						569,415
				Net investment income					489,320
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss from:
		Investment transactions							(8,123,481)
		Foreign currency transactions							(261)
Net change in unrealized appreciation (depreciation)									34,312,747
	Net realized and unrealized gain on investments and foreign currency transactions								26,189,005
		Net increase in net assets resulting from operations					$		26,678,325
*Net of foreign taxes withheld as follows							$		19,778
See Notes to Financial Statements

9

DAVIS FINANCIAL PORTFOLIO Statements of Changes in Net Assets

		Year ended December 31,
		2009		2008
OPERATIONS:
	Net investment income	$	489,320	$	630,375
	Net realized loss from investments and foreign currency transactions		(8,123,742)		(5,207,088)
	Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions		34,312,747		(46,773,677)
	Net increase (decrease) in net assets resulting from operations		26,678,325		(51,350,390)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
	Net investment income		(629,608)		–
	Realized gains from investment transactions		–		(3,340,762)
CAPITAL SHARE TRANSACTIONS:
	Net increase (decrease) in net assets resulting from capital share transactions (Note 5)		4,467,751		(4,713,395)
Total increase (decrease) in net assets			30,516,468		(59,404,547)
NET ASSETS:
	Beginning of year		57,320,753		116,725,300
	End of year*	$	87,837,221	$	57,320,753
*Including undistributed net investment income of		$	478,082	$	610,730
See Notes to Financial Statements

10

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Fund is a separate series of Davis Variable Account Fund, Inc. (a Maryland corporation), which is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company.  Only insurance companies, for the purpose of funding variable annuity or variable life insurance contracts, may purchase shares of the Fund.  The following is a summary of significant accounting policies followed by the Fund in the preparation of 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.  Securities whose values have been materially affected by what Davis Selected Advisers, L.P. (“Davis Advisors” or “Adviser”), the Fund’s investment 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.

Value Measurements - Fair value is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used to determine the fair value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

        Level 3 – significant unobservable inputs (including Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of December 31, 2009 in valuing the Fund’s investments carried at value:

	Investments in Securities at Value
	Valuation Inputs
			Level 2:		Level 3:
			Other Significant		Significant
	Level 1:		Observable		Unobservable
	Quoted Prices		Inputs*		Inputs		Total
Equity securities:
Energy		4,496,875		–		–		4,496,875
Financials		67,787,215		10,864,983		–		78,652,198
Industrials		2,522,663		–		–		2,522,663
Materials		1,348,762		–		–		1,348,762
Short-term securities		–		835,000		–		835,000
Total	$	76,155,515	$	11,699,983	$	–	$	87,855,498

*Includes certain securities trading primarily outside the U.S. whose value the Fund adjusted as a result of significant market movements following the close of local trading.

11

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)

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.

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 the 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.  The Adviser has analyzed the Fund’s tax positions taken on federal and state income tax returns for all open tax years and has concluded that as of December 31, 2009, no provision for income tax would be required in the Fund’s financial statements.  The Fund’s federal and state (Arizona and Maryland) income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.  The earliest tax year that remains subject to examination by these jurisdictions is 2006.  At December 31, 2009, the Fund had available for federal income tax purposes unused capital loss carryforwards and post October 2009 capital losses as follows:

	Capital Loss Carryforwards		Post October 2009  Capital Losses
Expiring
12/31/2016	$	4,739,000	$	–
12/31/2017		8,267,000		–
12/31/2018		–		239,000
	$	13,006,000	$	239,000

12

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)

Securities Transactions and Related Investment Income- Securities transactions are accounted for on the trade date (date the order to buy or sell is executed) with realized gain or loss on the sale of securities being determined based upon identified cost.  Dividend income is recorded on the ex-dividend date.  Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.

Dividends and Distributions to Shareholders - Dividends and distributions to shareholders are recorded on the ex-dividend date.  Net investment income (loss), net realized gains (losses), and net unrealized appreciation (depreciation) on investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales, foreign currency transactions, and partnership income.  The character of dividends and distributions made during the fiscal year from net investment income and net realized securities gains may differ from their ultimate characterization for federal income tax purposes.  Also, due to the timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which income or realized gain was recorded by the Fund.  The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax rules. Accordingly, during the year ended December 31, 2009, amounts have been reclassified to reflect an increase in undistributed net investment income of $7,640 and a corresponding increase in accumulated net realized losses from investments. The Fund’s net assets have not been affected by this reclassification.

The tax character of distributions paid during the years ended December 31, 2009 and 2008 was as follows:

	2009		2008
Ordinary income	$	629,608	$	18,252
Long-term capital gain		–		3,322,510
Total	$	629,608	$	3,340,762

As of December 31, 2009, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

Undistributed net investment income	$	478,082
Accumulated net realized losses from investments		(13,245,770)
Net unrealized appreciation on investments		15,994,044
Total	$	3,226,356

Indemnification - - Under the Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund.  In addition, some of the Fund’s contracts with its service providers contain general indemnification clauses.  The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims.

Use of Estimates in Financial Statements- In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period.  Actual results may differ from these estimates.

NOTE 2 - PURCHASES AND SALES OF SECURITIES

Purchases and sales of investment securities (excluding short-term securities) during the year ended December 31, 2009 were $14,698,421 and $6,805,846, respectively.

13

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser. Prior to July 1, 2009, the annual rate was 0.75% of the Fund’s average net assets.  Effective July 1, 2009, the annual rate is 0.55% of the Fund’s average net assets.  Advisory fees paid during the year ended December 31, 2009 approximated 0.63% of the average net assets.

Boston Financial Data Services, Inc. (“BFDS”) is the Fund’s primary transfer agent.  State Street Bank and Trust Company (“State Street Bank”) is the Fund’s primary accounting provider.  Fees for such services are included in the custodian fee as State Street Bank also serves as the Fund’s custodian.  The Adviser is also paid for certain accounting services.  The fee paid to the Adviser for these services for the year ended December 31, 2009 amounted to $2,004.  Certain directors and officers of the Fund are also directors and officers of the general partner of the Adviser.

Davis Selected Advisers-NY, Inc. (“DSA-NY”), a wholly-owned subsidiary of the Adviser, acts as sub-adviser to the Fund.  DSA-NY performs research and portfolio management services for the Fund under a Sub-Advisory Agreement with the Adviser.  The Fund pays no fees directly to DSA-NY.

NOTE 4 - 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.  There were no reductions during the year ended December 31, 2009.

NOTE 5 - CAPITAL STOCK

At December 31, 2009, there were 500 million shares of capital stock ($0.001 par value per share) authorized. Transactions in capital stock were as follows:

	Year ended			Year ended
	December 31, 2009			December 31, 2008
	Shares	Amount		Shares	Amount
Shares sold	3,303,661	$	26,457,753	2,481,240	$	26,265,738
Shares issued in reinvestment of distributions	63,087		629,608	531,968		3,340,762
	3,366,748		27,087,361	3,013,208		29,606,500
Shares redeemed	(2,616,379)		(22,619,610)	(3,147,595)		(34,319,895)
Net increase (decrease)	750,369	$	4,467,751	(134,387)	$	(4,713,395)

NOTE 6 - BANK BORROWINGS

The Fund may borrow up to 5% of its assets from a bank to purchase portfolio securities, or for temporary and emergency purposes.  The purchase of securities with borrowed funds creates leverage in the Fund.  The Fund has entered into an agreement, which enables it to participate with certain other 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 higher of the Federal Funds Rate or the Overnight Libor Rate, plus 1.25%.  The Fund had no borrowings during the year ended December 31, 2009.

14

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 7 - ILLIQUID SECURITIES

Securities may be considered illiquid if they lack a readily available market or if valuation has not changed for a certain period of time.  The aggregate value of illiquid securities amounted to $4,244,450 or 4.83% of the Fund’s net assets as of December 31, 2009.

Information regarding illiquid securities is as follows:

Security	Acquisition Date	Shares	Cost per Share		Valuation per Share as of December 31, 2009
Oaktree Capital Group LLC, Class A	05/21/07	126,700	$	23.84	$	33.50

NOTE 8 - SUBSEQUENT EVENTS

Fund management has determined that no material events or transactions occurred subsequent to December 31, 2009 and through February 9, 2010, the date the Fund’s financial statements were issued, which require adjustments and/or additional disclosure in the Fund’s financial statements.

15

DAVIS FINANCIAL PORTFOLIO Financial Highlights

The following financial information represents selected data for each share of capital stock outstanding throughout each period:
			Year ended  December 31,
			2009			2008			2007			2006			2005
Net Asset Value, Beginning of Period			$	7.12		$	14.27		$	16.29		$	13.83		$	12.82
Income (Loss) from Investment Operations:
	Net Investment Income		0.05			0.08			0.17			0.09			0.07
	Net Realized and Unrealized Gains (Losses)		2.88			(6.76)			(1.12)			2.47			1.00
		Total from Investment Operations	2.93			(6.68)			(0.95)			2.56			1.07
Dividends and Distributions:
	Dividends from Net Investment Income		(0.07)			–			(0.17)			(0.09)			(0.06)
	Distributions from Realized Gains		–			(0.47)			(0.90)			(0.01)			–
		Total Dividends and Distributions	(0.07)			(0.47)			(1.07)			(0.10)			(0.06)
Net Asset Value, End of Period			$	9.98		$	7.12		$	14.27		$	16.29		$	13.83
Total Returna			41.18		%b	(46.36)		%	(6.05)		%	18.50		%	8.38		%
Ratios/Supplemental Data:
	Net Assets, End of Period (in thousands)		$	87,837		$	57,321		$	116,725		$	155,807		$	124,060
	Ratio of Expenses to Average Net Assets:
		Gross	0.78		%	0.88		%	0.85		%	0.84		%	0.85		%
		Netc	0.78		%	0.88		%	0.85		%	0.84		%	0.85		%
Ratio of Net Investment Income to Average Net Assets			0.67		%	0.73		%	0.97		%	0.66		%	0.52		%
Portfolio Turnover Rated			10		%	16		%	17		%	9		%	21		%

a	Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns  do not reflect charges attributable to your insurance company’s separate account.  Inclusion of these charges would reduce the total returns shown.
b	Davis Financial Portfolio received a favorable class action settlement from a company that it no longer owns. This settlement had an approximate impact of 0.4% on the investment performance of the Fund in 2009. This was a one-time event that is unlikely to be repeated.
c	The Net Ratio of Expenses to Average Net Assets reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.
d	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.
See Notes to Financial Statements

16

DAVIS FINANCIAL PORTFOLIO Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

of Davis Variable Account Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of Davis Financial Portfolio (a separate series of the Davis Variable Account Fund, Inc.), including the schedule of investments, as of December 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended.  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 December 31, 2009, 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 Financial Portfolio as of December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

KPMG LLP

Denver, Colorado

February 9, 2010

17

DAVIS FINANCIAL PORTFOLIO Fund Information

Federal Income Tax Information (Unaudited)

During the calendar year ended 2009, $629,608 or 100% of dividends paid by the Fund constituted income qualifying for the corporate dividends-received deduction.

Portfolio Proxy Voting Policies and Procedures

The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities held by the Fund.  A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year.  The Fund’s Form N-PX filing is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

Form N-Q

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Fund’s Form N-Q is available without charge, upon request, by calling 1-800-279-0279 or on the Fund’s website at www.davisfunds.com or on the SEC’s website at www.sec.gov.  The Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

18

 DAVIS FINANCIAL PORTFOLIO Directors and Officers

For the purposes of their service as directors to the Davis Funds, the business address for each of the directors is 2949 E. Elvira Road, Suite 101, Tucson, AZ 85756. Each Director serves until their retirement, resignation, death or removal. Subject to exceptions and exemptions, which may be granted by the Independent Directors, Directors must retire at the close of business on the last day of the calendar year in which the Director attains age seventy-four (74).

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 (09/09/42)	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 Investment Counsel & Trust Company N.A. (asset management company) and Rodney Trust Company (Delaware).
John S. Gates, Jr. (08/02/53)	Director	Director since 2007	Chairman and Chief Executive Officer of PortaeCo LLC, a private investment company (beginning in 2006); Co-founder of Centerpoint Properties Trust (a REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (a REIT).
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; Director, Washington Post Co. (newspaper publisher); Director, Colfax Corp. (engineering and manufacturer of pumps and fluid handling equipment).
G. Bernard Hamilton (03/18/37)	Director	Director since 1978	Managing General Partner, Avanti Partners, L.P. (investment partnership), retired 2005.	13	none
Samuel H. Iapalucci (07/19/52)	Director	Director since 2006	Former Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc. (engineering).	13	none
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (an investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director	Director since 1990	General Partner, Tuxedo Park Associates (land holding and development firm).	13	none
Marsha Williams (03/28/51)	Director	Director since 1999	Senior Vice President and Chief Financial Officer, Orbitz Worldwide, Inc. (travel-services provider) since 2007; former Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a REIT).	13	Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering); Director, Fifth Third Bancorp (diversified financial services).

19

DAVIS FINANCIAL PORTFOLIO Directors and Officers – (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 (08/16/35)	Director / Chairman (retired 12/31/09)	Director since 1994	Vice Chairman, Member of the Audit Committee and Member of the International Investment Committee, former Chief Investment Officer (1980 through 2005), all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P.	13	none
Christopher C. Davis (07/13/65)	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).	10	Director, Davis New York Venture Fund, Inc. (consisting of four portfolios); Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (newspaper publisher).

*      Jeremy H. Biggs 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.

20

DAVIS FINANCIAL PORTFOLIO Directors and Officers – (Continued)

Officers

Christopher C. Davis (born 07/13/65, Davis Funds officer since 1997). See description in the section on Inside Directors.

Andrew A. Davis (born 06/25/63, Davis Funds officer since 1997). President or Vice President of each of the Davis Funds (consisting of 13 portfolios) and Selected Funds (consisting of three portfolios); President, Davis Selected Advisers, L.P., serves as an executive officer in certain companies affiliated with the Adviser; Director of Davis Series, Inc. (consisting of six portfolios) and the Selected Funds (consisting of three portfolios).

Kenneth C. Eich (born 08/14/53, Davis Funds officer since 1997). Executive Vice President and Principal Executive Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Chief Operating Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Douglas A. Haines (born 03/04/71, Davis Funds officer since 2004). Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Director of Fund Accounting, Davis Selected Advisers, L.P.

Sharra L. Haynes (born 09/25/66, Davis Funds officer since 1997). Vice President, Chief Compliance Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Chief Compliance Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Thomas D. Tays (born 03/07/57, Davis Funds officer since 1997). Vice President and Secretary of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President, Chief Legal Officer and Secretary, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Arthur Don (born 09/24/53, Davis Funds officer since 1991). Assistant Secretary (for clerical purposes only) of each of the Davis Funds and Selected Funds; Shareholder, Greenberg Traurig, LLP (a law firm); counsel to the Independent Directors and the Davis Funds.

21

DAVIS FINANCIAL PORTFOLIO

Investment Adviser

Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”)

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

(800) 279-0279

Distributor

Davis Distributors, LLC

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

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

Greenberg Traurig, LLP

77 West Wacker Drive, Suite 3100

Chicago, Illinois 60601

Independent Registered Public Accounting Firm

KPMG LLP

707 Seventeenth Street, Suite 2700

Denver, Colorado 80202

For more information about Davis Financial Portfolio, including management fee, charges, and expenses, see the  current Davis Variable Account Fund, Inc. (including Davis Financial Portfolio) prospectus, which must precede or accompany this report.  The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge upon request by calling 1-800-279-0279 and on the Fund’s website at www.davisfunds.com.  Quarterly Fact sheets are available on the Fund’s website at www.davisfunds.com.

22

DAVIS REAL ESTATE PORTFOLIO Table of Contents

Management's Discussion of Fund Performance	2
Fund Overview	4
Expense Example	6
Schedule of Investments	7
Statement of Assets and Liabilities	10
Statement of Operations	11
Statements of Changes in Net Assets	12
Notes to Financial Statements	13
Financial Highlights	17
Report of Independent Registered Public Accounting Firm	18
Fund Information	19
Directors and Officers	20

This Annual Report is authorized for use by existing shareholders.  Prospective shareholders must receive a current Davis Variable Account Funds, Inc. (including Davis Real Estate Portfolio) prospectus, which contains more information about investment strategies, risks, charges, and expenses.  Please read the prospectus carefully before investing or sending money.

Shares of the Davis Real Estate Portfolio 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.

DAVIS REAL ESTATE PORTFOLIO Management’s Discussion of Fund Performance

Performance Overview

Davis Real Estate Portfolio delivered a total return on net asset value of 31.73% for the year ended December 31, 2009.  Over the same time period, the Wilshire U.S. Real Estate Securities Index(“Index”) returned 29.20%.  Every sub-industry1 within the Index delivered positive returns, with real estate operating companies, office REITs, and residential REITs turning in the strongest performance.

Factors Impacting the Portfolio’s Performance

The Portfolio’s office REITs were important contributors2 to performance.  A higher relative average weighting in this sub-industry (27% versus 17% for the Index) was a strong contributor to the Portfolio’s performance.  Alexandria Real Estate3, Digital Realty Trust, and SL Green Realty were among the most important contributors to performance.  Derwent London was among the most important detractors from performance.  The Portfolio no longer owns Derwent London.

The Portfolio’s retail REITs were the most important contributor to performance relative to the Index.  The Portfolio’s retail REITs out-performed the corresponding sub-industry within the Index (up 51% versus up 28% for the Index).  Simon Property Group and Taubman Centers were among the most important contributors to performance.

Diversified REITs were the largest detractor from the Portfolio’s performance relative to the Index.  The Portfolio’s diversified REITs under-performed the corresponding sub-industry within the Index (down 17% versus up 24% for the Index).  Cousins Properties was among the most important detractors from performance.

Forest City Enterprises and ProLogis were among the most important contributors to the Portfolio’s performance.  Brixton, First Potomac Realty, and Cogdell Spencer were among the most important detractors from performance.  The Portfolio no longer owns Brixton or First Potomac Realty.

Davis Real Estate Portfolio’s investment objective is total return through a combination of growth and income.  There can be no assurance that the Portfolio will achieve its objective.  The primary risks of an investment in Davis Real Estate Portfolio are: (1) market risk, (2) company risk, (3) concentrated real estate portfolio risk, (4) focused portfolio risk, (5) small- and medium-capitalization risk, (6) foreign country risk, (7) headline risk, and (8) selection risk.  See the prospectus for a full description of each risk.

Davis Real Estate Portfolio concentrates its investments in the real estate sector, and it may be subject to greater risks than a portfolio that does not concentrate its investments in a particular sector.  The Portfolio’s investment performance, both good and bad, is expected to reflect the economic performance of the real estate sector much more than a portfolio that does not concentrate its portfolio.

Davis Real Estate Portfolio is allowed to focus its investments in fewer companies, and it may be subject to greater risks than a more diversified portfolio that is not allowed to focus its investments in a few companies.  Should the portfolio manager determine that it is prudent to focus the Portfolio’s portfolio in a few companies, the Portfolio’s investment performance, both good and bad, is expected to reflect the economic performance of its more focused portfolio.

1The companies included in the Wilshire U.S. Real Estate Securities Index are divided into eight sub-industries.

2     A company’s or sector’s contribution to or detraction from the Portfolio’s performance is a product both of 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%.

3     This Management Discussion of Fund Performance 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 Portfolio’s holdings of each company discussed.

2

DAVIS REAL ESTATE PORTFOLIO Management’s Discussion of Fund Performance – (Continued)

Comparison of a $10,000 investment in Davis Real Estate Portfolio versus the Standard & Poor’s 500® Index and the Wilshire U.S. Real Estate Securities Indexover 10 years for an investment made on December 31, 1999

Average Annual Total Return for periods ended December 31, 2009

F Fund & Benchmark Indices	1-Year	5-Year	10-Year	Since Fund’s Inception	Inception Date	Gross Expense Ratio	Net Expense Ratio
Davis Real Estate Portfolio	31.73%	(2.12)%	8.49%	6.89%	07/01/99	0.98%	0.98%
Standard & Poor’s 500® Index	26.46%	0.42%	(0.95)%	(0.26)%
Wilshire U.S. Real Estate Securities Index	29.20%	(0.23)%	10.47%	8.93%

The Standard & Poor’s 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange.  The Index is adjusted for dividends, weighted towards stocks with large market capitalizations, and represents approximately two-thirds of the total market value of all domestic common stocks.  Investments cannot be made directly in the Index.

The Wilshire U.S. Real Estate Securities Index is a broad measure of the performance of publicly traded real estate securities. It reflects no deduction for fees or expenses.  The Index was formerly named the “Dow Jones Wilshire Real Estate Securities Index.” Investments cannot be made directly in the Index.

The performance data for Davis Real Estate Portfolio 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 Portfolio today.  The investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed.  Portfolio performance changes over time and current performance may be higher or lower than stated.  The operating expense ratio may vary in future years.  For more current information please call Davis Funds Investor Services at 1-800-279-0279.

Portfolio performance numbers are net of all Portfolio operating expenses, but do not include any insurance charges imposed by your insurance company’s separate account.  If performance included the effect of these additional charges, the return would be lower.

3

DAVIS REAL ESTATE PORTFOLIO	Fund Overview
	December 31, 2009

Portfolio Composition		Industry Weightings
(% of Fund’s Net Assets)		(% of Long Term Portfolio)
				Wilshire U.S. Real Estate Securities Index
Common Stock (U.S.)	74.80%
Common Stock (Foreign)	1.90%		Fund
Preferred Stock	8.34%	Office REITs	32.57%	17.23%
Convertible Bonds	4.27%	Retail REITs	19.59%	22.72%
Short Term Investments	9.13%	Specialized REITs	11.69%	26.07%
Other Assets & Liabilities	1.56%	Residential REITs	10.11%	15.91%
	100.00%	Industrial REITs	9.55%	6.21%
		Diversified REITs	6.48%	9.18%
		Other	5.66%	0.59%
		Real Estate Operating Companies	4.35%	2.09%
			100.00%	100.00%

Top 10 Holdings

(% of Fund’s Net Assets)

Corporate Office Properties Trust	Office REITs	5.10%
Ventas, Inc.	Specialized REITs	5.02%
American Campus Communities, Inc.	Residential REITs	4.97%
Alexandria Real Estate Equities, Inc.	Office REITs	4.61%
Simon Property Group, Inc.	Retail REITs	4.36%
Federal Realty Investment Trust	Retail REITs	3.92%
Vornado Realty Trust	Diversified REITs	3.88%
Essex Property Trust, Inc.	Residential REITs	3.73%
Douglas Emmett, Inc.	Office REITs	3.70%
Taubman Centers, Inc.	Retail REITs	3.59%

4

DAVIS REAL ESTATE PORTFOLIO	Fund Overview – (Continued)
	December 31, 2009

New Positions Added (01/01/09-12/31/09)

(Highlighted positions are those greater than 2.00% of 12/31/09 total net assets)

Security	Industry	Date of 1st Purchase	% of 12/31/09 Fund Net Assets
Alexandria Real Estate Equities, Inc., 7.00%,
Series D, Conv. Pfd.	Office REITs	04/21/09	3.04%
AMB Property Corp.	Industrial REITs	02/12/09	–
AvalonBay Communities, Inc.	Residential REITs	02/27/09	–
CBL & Associates Properties, Inc.	Retail REITs	01/14/09	1.27%
CBL & Associates Properties, Inc., 7.375%,
Series D	Retail REITs	01/14/09	0.68%
Digital Realty Trust, Inc., 5.50%,
Series D, Cum. Conv. Pfd.	Office REITs	01/21/09	0.74%
Digital Realty Trust, Inc., 144A Conv.
Sr. Notes, 5.50%, 04/15/29	Office REITs	04/14/09	1.90%
Forest City Enterprises, Inc., 144A Conv.
Sr. Notes, 5.00%, 10/15/16	Real Estate Operating Companies	10/20/09	0.37%
Highwoods Properties, Inc.	Office REITs	05/27/09	–
Host Hotels & Resorts Inc.	Specialized REITs	01/08/09	1.92%
Kilroy Realty Corp.	Office REITs	01/29/09	–
LaSalle Hotel Properties	Specialized REITs	01/14/09	2.04%
Liberty Property Trust	Diversified REITs	02/12/09	–
Macerich Co.	Retail REITs	10/22/09	0.47%
ProLogis	Industrial REITs	08/11/09	2.30%
Regency Centers Corp.	Retail REITs	07/17/09	3.20%
Simon Property Group, Inc.	Retail REITs	01/20/09	4.36%
U-Store-It Trust	Specialized REITs	08/13/09	–
Vornado Realty Trust	Diversified REITs	05/29/09	3.88%

Positions Closed (01/01/09-12/31/09)

(Gains and losses greater than $500,000 are highlighted)

		Date of		Realized
Security	Industry	Final Sale		Gain (Loss)
AMB Property Corp.	Industrial REITs	07/24/09	$	42,447
AvalonBay Communities, Inc.	Residential REITs	03/10/09		38,421
Brixton PLC	Industrial REITs	03/19/09		(926,705)
Burlington Northern Santa Fe Corp.	Transportation	12/08/09		181,386
Derwent London PLC	Office REITs	02/09/09		(1,713,282)
First Potomac Realty Trust	Industrial REITs	02/18/09		(755,195)
General Growth Properties, Inc.	Retail REITs	01/08/09		(2,644,945)
Highwoods Properties, Inc.	Office REITs	07/31/09		22,507
Kilroy Realty Corp.	Office REITs	08/05/09		7,020
Liberty Property Trust	Diversified REITs	06/12/09		27,446
Minerva PLC	Real Estate Operating Companies	04/02/09		(417,058)
Mitsui Fudosan Co., Ltd.	Diversified Real Estate Activities	02/19/09		(247,701)
SL Green Realty Corp.	Office REITs	08/27/09		(334,601)
St. Joe Co.	Diversified Real Estate Activities	08/05/09		72,140
U-Store-It Trust	Specialized REITs	12/21/09		46,652

5

DAVIS REAL ESTATE PORTFOLIO Expense Example

Example

As a shareholder of the Fund, you incur ongoing costs only, including advisory and administrative 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 the Fund is for the six-month period ended December 31, 2009. Please note that the Expense Example is general and does not reflect charges imposed by your insurance company’s separate account or account specific costs, which may increase your total costs of investing in the Fund. If these charges 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 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. 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.

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During Period*
	(07/01/09)	(12/31/09)	(07/01/09-12/31/09)
Actual	$1,000.00	$1,400.23	$5.87
Hypothetical	$1,000.00	$1,020.32	$4.94

Hypothetical assumes 5% annual return before expenses.

* Expenses are equal to the Fund’s annualized operating expense ratio (0.97%)**, multiplied by the average account valueover the period, multiplied by 184/365 (to reflect the one-half year period).

** The expense ratio reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.  

6

DAVIS REAL ESTATE PORTFOLIO Schedule of Investments

 December 31, 2009

Shares							Security			Value (Note 1)
COMMON STOCK – (76.70%)
	FINANCIALS – (73.54%)
		Diversified Financials – (1.90%)
			Capital Markets – (1.90%)
	20,240				Brookfield Asset Management Inc., Class A  (Canada)			$	448,923
		Real Estate – (71.64%)
			Real Estate Investment Trusts (REITs) – (68.12%)
				Diversified REITs – (5.79%)
	59,032				Cousins Properties, Inc.				450,414
	13,070				Vornado Realty Trust				914,116
									1,364,530
				Industrial REITs – (5.88%)
	168,200				DCT Industrial Trust Inc.				844,364
	39,600				ProLogis				542,124
									1,386,488
				Office REITs – (20.50%)
	16,900				Alexandria Real Estate Equities, Inc.				1,086,501
	12,400				Boston Properties, Inc.				831,668
	32,790				Corporate Office Properties Trust				1,201,098
	16,700				Digital Realty Trust, Inc.				839,676
	61,200				Douglas Emmett, Inc.				872,100
									4,831,043
				Residential REITs – (8.70%)
	41,700				American Campus Communities, Inc.				1,171,770
	10,490				Essex Property Trust, Inc.				877,488
									2,049,258
				Retail REITs – (16.81%)
	30,960				CBL & Associates Properties, Inc.				299,383
	13,650				Federal Realty Investment Trust				924,378
	3,053				Macerich Co.				109,755
	21,500				Regency Centers Corp.				753,790
	12,892				Simon Property Group, Inc.				1,028,782
	23,560				Taubman Centers, Inc.				846,040
									3,962,128
				Specialized REITs – (10.44%)
	60,583				Cogdell Spencer, Inc.				342,900
	38,803				Host Hotels & Resorts Inc.  *				452,831
	22,700				LaSalle Hotel Properties				481,921
	27,020				Ventas, Inc.				1,181,855
									2,459,507
									16,052,954
			Real Estate Management & Development – (3.52%)
				Real Estate Operating Companies – (3.52%)
	70,380				Forest City Enterprises, Inc., Class A  *				829,076
									16,882,030
						Total Financials			17,330,953

7

DAVIS REAL ESTATE PORTFOLIO Schedule of Investments – (Continued)

 December 31, 2009

Shares/Principal							Security			Value (Note 1)
COMMON STOCK – (CONTINUED)
	INDUSTRIALS – (3.16%)
		Transportation – (3.16%)
	21,700				Alexander & Baldwin, Inc.			$	742,791
						Total Industrials			742,791
					TOTAL COMMON STOCK  – (Identified cost $18,128,897)				18,073,744
PREFERRED STOCK – (8.34%)
	FINANCIALS – (8.34%)
		Real Estate – (8.34%)
			Real Estate Investment Trusts (REITs) – (8.34%)
				Industrial REITs – (1.06%)
	11,900				AMB Property Corp., 6.75%, Series M				249,483
				Office REITs – (6.27%)
	33,272				Alexandria Real Estate Equities, Inc., 7.00%, Series D, Conv. Pfd.				717,428
	5,700				Digital Realty Trust, Inc., 5.50%, Series D, Cum. Conv. Pfd.				174,385
	5,014				Digital Realty Trust, Inc., 8.50%, Series A				127,230
	19,930				SL Green Realty Corp., 7.625%, Series C				458,639
									1,477,682
				Residential REITs – (0.33%)
	2,000				Equity Residential, 7.00%, Series E, Cum. Conv. Pfd.				77,688
				Retail REITs – (0.68%)
	8,280				CBL & Associates Properties, Inc., 7.375%, Series D				160,404
						Total Financials			1,965,257
					TOTAL PREFERRED STOCK – (Identified cost $1,072,511)				1,965,257
CONVERTIBLE BONDS – (4.27%)
	FINANCIALS – (4.27%)
		Real Estate – (4.27%)
			Real Estate Investment Trusts (REITs) – (3.90%)
				Industrial REITs – (1.59%)
$	401,000				ProLogis, Conv. Sr. Notes, 2.25%, 04/01/37				373,933
				Office REITs – (2.31%)
	344,000				Digital Realty Trust, Inc., 144A Conv. Sr. Notes, 5.50%, 04/15/29  (a)				449,350
	104,000				SL Green Realty Corp., 144A Conv. Sr. Notes, 3.00%, 03/30/27  (a)				96,070
									545,420
									919,353
			Real Estate Management & Development – (0.37%)
				Real Estate Operating Companies – (0.37%)
	80,000				Forest City Enterprises, Inc., 144A Conv. Sr. Notes, 5.00%, 10/15/16  (a)				87,400
						Total Financials			1,006,753
					TOTAL CONVERTIBLE BONDS – (Identified cost $686,033)				1,006,753

8

DAVIS REAL ESTATE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2009

Principal							Security			Value (Note 1)
SHORT TERM INVESTMENTS – (9.13%)
$	717,000			Banc of America Securities LLC Joint Repurchase Agreement,
					0.01%, 01/04/10, dated 12/31/09, repurchase value of $717,001
					(collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.131%-5.959%, 02/01/35-06/01/38, total market value $731,340)			$	717,000
	1,435,000			Mizuho Securities USA Inc. Joint Repurchase Agreement,
					0.03%, 01/04/10, dated 12/31/09, repurchase value of $1,435,005
					(collateralized by: U.S. Government agency obligations in a pooled cash account, 0.93%-2.625%, 03/30/10-12/31/14, total market value $1,463,700)				1,435,000
				TOTAL SHORT TERM INVESTMENTS – (Identified cost $2,152,000)					2,152,000
			Total Investments – (98.44%) – (Identified cost $22,039,441) – (b)						23,197,754
			Other Assets Less Liabilities – (1.56%)						368,599
						Net Assets – (100.00%)		$	23,566,353
	*	Non-Income producing security.
	(a)	These securities are subject to Rule 144A.  The Board of Directors of the Fund has determined that there is sufficient liquidity in these securities to realize current valuations.  These securities amounted to $632,820, or 2.68% of the Fund's net assets, as of December 31, 2009.
	(b)	Aggregate cost for federal income tax purposes is $23,463,635.  At December 31, 2009 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
			Unrealized appreciation					$	3,205,644
			Unrealized depreciation						(3,471,525)
						Net unrealized depreciation		$	(265,881)
See Notes to Financial Statements

9

DAVIS REAL ESTATE PORTFOLIO	Statement of Assets and Liabilities
	At December 31, 2009

ASSETS:
Investments in securities at value* (see accompanying Schedule of Investments)			$	23,197,754
Cash				29,464
Receivables:
	Capital stock sold			5,618
	Dividends and interest			117,988
	Investment securities sold			292,307
Prepaid expenses				419
		Total assets		23,643,550
LIABILITIES:
Payables:
	Capital stock redeemed			40,470
Accrued audit fees				12,100
Accrued management fee				13,033
Other accrued expenses				9,244
Due to Adviser				2,350
		Total liabilities		77,197
NET ASSETS			$	23,566,353
SHARES OUTSTANDING				3,186,708
NET ASSET VALUE, offering, and redemption price per share                                                    (Net assets ÷ Shares outstanding)			$	7.40
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	3,187
Additional paid-in capital				38,068,873
Undistributed net investment income				7,288
Accumulated net realized losses from investments and foreign currency transactions				(15,671,007)
Net unrealized appreciation on investments and foreign currency transactions				1,158,012
		Net Assets	$	23,566,353
*Including:
Cost of Investments			$	22,039,441
See Notes to Financial Statements

10

DAVIS REAL ESTATE PORTFOLIO	Statement of Operations
	For the year ended December 31, 2009

INVESTMENT INCOME:
Income:
		Dividends*					$	674,233
		Interest						32,159
			Total income					706,392
Expenses:
		Management fees (Note 3)			$	118,341
		Custodian fees				20,497
		Transfer agent fees				6,255
		Audit fees				18,000
		Legal fees				650
		Accounting fees (Note 3)				2,004
		Reports to shareholders				3,909
		Directors’ fees and expenses				7,676
		Registration and filing fees				13
		Miscellaneous				6,003
			Total expenses					183,348
				Net investment income				523,044
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss from:
		Investment transactions						(12,770,370)
		Foreign currency transactions						(1,820)
Net change in unrealized appreciation (depreciation)								17,711,950
	Net realized and unrealized gain on investments and foreign currency transactions							4,939,760
		Net increase in net assets resulting from operations					$	5,462,804
*Net of foreign taxes withheld as follows							$	2,080
See Notes to Financial Statements

11

DAVIS REAL ESTATE PORTFOLIO Statements of Changes in Net Assets

		Year ended December 31,
		2009		2008
OPERATIONS:
	Net investment income	$	523,044	$	654,938
	Net realized loss from investments and foreign currency transactions		(12,772,190)		(2,901,263)
	Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions		17,711,950		(16,471,893)
	Net increase (decrease) in net assets resulting from operations		5,462,804		(18,718,218)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
	Net investment income		(513,936)		(804,817)
	Realized gains from investment transactions		–		(368,670)
	Return of capital		–		(28,370)
CAPITAL SHARE TRANSACTIONS:
	Net decrease in net assets resulting from capital share transactions (Note 5)		(713,924)		(10,296,476)
Total increase (decrease) in net assets			4,234,944		(30,216,551)
NET ASSETS:
	Beginning of year		19,331,409		49,547,960
	End of year*	$	23,566,353	$	19,331,409
*Including undistributed net investment income of		$	7,288	$	–
See Notes to Financial Statements

12

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Fund is a separate series of Davis Variable Account Fund, Inc. (a Maryland corporation), which is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company.  Only insurance companies, for the purpose of funding variable annuity or variable life insurance contracts, may purchase shares of the Fund.  The following is a summary of significant accounting policies followed by the Fund in the preparation of 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.  Securities whose values have been materially affected by what Davis Selected Advisers, L.P. (“Davis Advisors” or “Adviser”), the Fund’s investment 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.

Value Measurements - Fair value is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used to determine the fair value of the Fund’s  investments. These inputs are summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

        Level 3 – significant unobservable inputs (including Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of December 31, 2009 in valuing the Fund’s investments carried at value:

	Investments in Securities at Value
	Valuation Inputs
			Level 2:		Level 3:
			Other Significant		Significant
	Level 1:		Observable		Unobservable
	Quoted Prices		Inputs		Inputs		Total
Equity securities:
Financials	$	19,121,825	$	174,385	$	–	$	19,296,210
Industrials		742,791		–		–		742,791
Convertible debt securities		–		1,006,753		–		1,006,753
Short-term securities		–		2,152,000		–		2,152,000
Total	$	19,864,616	$	3,333,138	$	–	$	23,197,754

13

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)

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.

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 the 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.  The Adviser has analyzed the Fund’s tax positions taken on federal and state income tax returns for all open tax years and has concluded that as of December 31, 2009, no provision for income tax would be required in the Fund’s financial statements.  The Fund’s federal and state (Arizona and Maryland) income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.  The earliest tax year that remains subject to examination by these jurisdictions is 2006.  At December 31, 2009, the Fund had available for federal income tax purposes unused capital loss carryforwards as follows:

	Capital Loss Carryforwards
Expiring
12/31/2016	$	2,585,000
12/31/2017		11,662,000
	$	14,247,000

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.  Dividend income from REIT securities may include return of capital.  Upon notification from the issuer, the amount of the return of capital is reclassified to adjust dividend income, reduce the cost basis, and/or adjust realized gain/loss.  Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.

14

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

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) on investments may differ for financial statement and tax purposes primarily due to differing treatments of wash sales and foreign currency transactions.  The character of dividends and distributions made during the fiscal year from net investment income and net realized securities gains may differ from their ultimate characterization for federal income tax purposes.  Also, due to the timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which income or realized gain was recorded by the Fund.  The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax rules.  Accordingly, during the year ended December 31, 2009, amounts have been reclassified to reflect a decrease in undistributed net investment income of $1,820 and a corresponding decrease in accumulated net realized losses from investments and foreign currency transactions.  Net assets have not been affected by this reclassification.

The tax character of distributions paid during the years ended December 31, 2009 and 2008 was as follows:

	2009		2008
Ordinary income	$	513,936	$	805,314
Long-term capital gain		–		368,173
Return of capital		–		28,370
Total	$	513,936	$	1,201,857

As of December 31, 2009, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

Undistributed net investment income	$	7,288
Accumulated net realized losses from investments and
foreign currency transactions		(14,246,813)
Net unrealized depreciation on investments		(266,182)
Total	$	(14,505,707)

Indemnification - - Under the Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund.  In addition, some of the Fund’s contracts with its service providers contain general indemnification clauses.  The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims.

Use of Estimates in Financial Statements- In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period.  Actual results may differ from these estimates.

NOTE 2 - PURCHASES AND SALES OF SECURITIES

Purchases and sales of investment securities (excluding short-term securities) during the year ended December 31, 2009 were $11,903,585 and $13,426,525, respectively.

15

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2009

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser. Prior to July 1, 2009, the annual rate was 0.75% of the Fund’s average net assets.  Effective July 1, 2009, the annual rate is 0.55% of the Fund’s average net assets.  Advisory fees paid during the year ended December 31, 2009 approximated 0.64% of the average net assets.

Boston Financial Data Services, Inc. (“BFDS”) is the Fund’s primary transfer agent.  State Street Bank and Trust Company (“State Street Bank”) is the Fund’s primary accounting provider.  Fees for such services are included in the custodian fee as State Street Bank also serves as the Fund’s custodian.  The Adviser is also paid for certain accounting services.  The fee paid to the Adviser for these services for the year ended December 31, 2009 amounted to $2,004.  Certain directors and officers of the Fund are also directors and officers of the general partner of the Adviser.

Davis Selected Advisers-NY, Inc. (“DSA-NY”), a wholly-owned subsidiary of the Adviser, acts as sub-adviser to the Fund.  DSA-NY performs research and portfolio management services for the Fund under a Sub-Advisory Agreement with the Adviser.  The Fund pays no fees directly to DSA-NY.

NOTE 4 - 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.  There were no reductions during the year ended December 31, 2009.

NOTE 5 - CAPITAL STOCK

At December 31, 2009, there were 500 million shares of capital stock ($0.001 par value per share) authorized. Transactions in capital stock were as follows:

	Year ended			Year ended
	December 31, 2009			December 31, 2008
	Shares	Amount		Shares	Amount
Shares sold	708,612	$	4,050,873	276,678	$	2,700,154
Shares issued in reinvestment of distributions	102,105		513,936	161,544		1,201,857
	810,717		4,564,809	438,222		3,902,011
Shares redeemed	(956,040)		(5,278,733)	(1,432,521)		(14,198,487)
Net decrease	(145,323)	$	(713,924)	(994,299)	$	(10,296,476)

NOTE 6 - BANK BORROWINGS

The Fund may borrow up to 5% of its assets from a bank to purchase portfolio securities, or for temporary and emergency purposes.  The purchase of securities with borrowed funds creates leverage in the Fund.  The Fund has entered into an agreement, which enables it to participate with certain other 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 higher of the Federal Funds Rate or the Overnight Libor Rate, plus 1.25%.  The Fund had no borrowings during the year ended December 31, 2009.

NOTE 7 - SUBSEQUENT EVENTS

Fund management has determined that no material events or transactions occurred subsequent to December 31, 2009 and through February 9, 2010, the date the Fund’s financial statements were issued, which require adjustments and/or additional disclosure in the Fund’s financial statements.

16

DAVIS REAL ESTATE PORTFOLIO Financial Highlights

The following financial information represents selected data for each share of capital stock outstanding throughout each period:
			Year ended  December 31,
			2009			2008			2007			2006			2005
Net Asset Value, Beginning of Period			$	5.80		$	11.45		$	20.43		$	17.33		$	16.80
Income (Loss) from Investment Operations:
	Net Investment Income		0.16			0.19			0.42			0.34			0.30
	Net Realized and Unrealized Gains (Losses)		1.60			(5.50)			(3.40)			5.58			1.86
		Total from Investment Operations	1.76			(5.31)			(2.98)			5.92			2.16
Dividends and Distributions:
	Dividends from Net Investment Income		(0.16)			(0.22)			(0.64)			(0.60)			(0.54)
	Distributions from Realized Gains		–			(0.11)			(5.36)			(2.22)			(1.09)
	Return of Capital		–			(0.01)			–			–			–
		Total Dividends and Distributions	(0.16)			(0.34)			(6.00)			(2.82)			(1.63)
Net Asset Value, End of Period			$	7.40		$	5.80		$	11.45		$	20.43		$	17.33
Total Returna			31.73		%	(46.91)		%	(15.48)		%	34.37		%	13.14		%
Ratios/Supplemental Data:
	Net Assets, End of Period (in thousands)		$	23,566		$	19,331		$	49,548		$	89,738		$	64,556
	Ratio of Expenses to Average Net Assets:
		Gross	0.98		%	0.98		%	0.88		%	0.86		%	0.87		%
		Netb	0.98		%	0.98		%	0.87		%	0.86		%	0.87		%
Ratio of Net Investment Income to Average Net Assets			2.81		%	1.84		%	1.92		%	1.63		%	1.71		%
Portfolio Turnover Ratec			70		%	41		%	49		%	38		%	28		%

a	Assumes hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period.  Total returns do not reflect charges attributable to your insurance company’s separate account.  Inclusion of these charges would reduce the total returns shown.
b	The Net Ratio of Expenses to Average Net Assets reflects the impact, if any, of the reduction of expenses paid indirectly and of certain reimbursements from the Adviser.
c	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.
See Notes to Financial Statements

17

DAVIS REAL ESTATE PORTFOLIO Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

of Davis Variable Account Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of Davis Real Estate Portfolio (a separate series of the Davis Variable Account Fund, Inc.), including the schedule of investments, as of December 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended.  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 December 31, 2009, 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 Real Estate Portfolio as of December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

KPMG LLP

Denver, Colorado

February 9, 2010

18

DAVIS REAL ESTATE PORTFOLIO Fund Information

Federal Income Tax Information (Unaudited)

During the calendar year ended 2009, $37,710 or 7% of dividends paid by the Fund constituted income qualifying for the corporate dividends-received deduction.

Portfolio Proxy Voting Policies and Procedures

The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities held by the Fund.  A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year.  The Fund’s Form N-PX filing is available (i) without charge, upon request, by calling the Fund toll-free at 1-800-279-0279, (ii) on the Fund’s website at www.davisfunds.com, and (iii) on the SEC’s website at www.sec.gov.

Form N-Q

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Fund’s Form N-Q is available without charge, upon request, by calling 1-800-279-0279 or on the Fund’s website at www.davisfunds.com or on the SEC’s website at www.sec.gov.  The Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

19

DAVIS REAL ESTATE PORTFOLIO Directors and Officers

For the purposes of their service as directors to the Davis Funds, the business address for each of the directors is 2949 E. Elvira Road, Suite 101, Tucson, AZ 85756. Each Director serves until their retirement, resignation, death or removal. Subject to exceptions and exemptions, which may be granted by the Independent Directors, Directors must retire at the close of business on the last day of the calendar year in which the Director attains age seventy-four (74).

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 (09/09/42)	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 Investment Counsel & Trust Company N.A. (asset management company) and Rodney Trust Company (Delaware).
John S. Gates, Jr. (08/02/53)	Director	Director since 2007	Chairman and Chief Executive Officer of PortaeCo LLC, a private investment company (beginning in 2006); Co-founder of Centerpoint Properties Trust (a REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (a REIT).
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; Director, Washington Post Co. (newspaper publisher); Director, Colfax Corp. (engineering and manufacturer of pumps and fluid handling equipment).
G. Bernard Hamilton (03/18/37)	Director	Director since 1978	Managing General Partner, Avanti Partners, L.P. (investment partnership), retired 2005.	13	none
Samuel H. Iapalucci (07/19/52)	Director	Director since 2006	Former Executive Vice President and Chief Financial Officer, CH2M-Hill, Inc. (engineering).	13	none
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (an investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director	Director since 1990	General Partner, Tuxedo Park Associates (land holding and development firm).	13	none
Marsha Williams (03/28/51)	Director	Director since 1999	Senior Vice President and Chief Financial Officer, Orbitz Worldwide, Inc. (travel-services provider) since 2007; former Executive Vice President and Chief Financial Officer, Equity Office Properties Trust (a REIT).	13	Director, Modine Manufacturing, Inc. (heat transfer technology); Director, Chicago Bridge & Iron Company, N.V. (industrial construction and engineering); Director, Fifth Third Bancorp (diversified financial services).

20

DAVIS REAL ESTATE PORTFOLIO Directors and Officers – (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 (08/16/35)	Director / Chairman (retired 12/31/09)	Director since 1994	Vice Chairman, Member of the Audit Committee and Member of the International Investment Committee, former Chief Investment Officer (1980 through 2005), all for Fiduciary Trust Company International (money management firm); Consultant to Davis Selected Advisers, L.P.	13	none
Christopher C. Davis (07/13/65)	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).	10	Director, Davis New York Venture Fund, Inc. (consisting of four portfolios); Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (newspaper publisher).

*      Jeremy H. Biggs 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.

21

DAVIS REAL ESTATE PORTFOLIO Directors and Officers – (Continued)

Officers

Christopher C. Davis (born 07/13/65, Davis Funds officer since 1997). See description in the section on Inside Directors.

Andrew A. Davis (born 06/25/63, Davis Funds officer since 1997). President or Vice President of each of the Davis Funds (consisting of 13 portfolios) and Selected Funds (consisting of three portfolios); President, Davis Selected Advisers, L.P., serves as an executive officer in certain companies affiliated with the Adviser; Director of Davis Series, Inc. (consisting of six portfolios) and the Selected Funds (consisting of three portfolios).

Kenneth C. Eich (born 08/14/53, Davis Funds officer since 1997). Executive Vice President and Principal Executive Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Chief Operating Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Douglas A. Haines (born 03/04/71, Davis Funds officer since 2004). Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Director of Fund Accounting, Davis Selected Advisers, L.P.

Sharra L. Haynes (born 09/25/66, Davis Funds officer since 1997). Vice President, Chief Compliance Officer of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President and Chief Compliance Officer, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Thomas D. Tays (born 03/07/57, Davis Funds officer since 1997). Vice President and Secretary of each of the Davis Funds (consisting of 13 portfolios), Selected Funds (consisting of three portfolios), and Clipper Fund, Inc. (consisting of one portfolio); Vice President, Chief Legal Officer and Secretary, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.

Arthur Don (born 09/24/53, Davis Funds officer since 1991). Assistant Secretary (for clerical purposes only) of each of the Davis Funds and Selected Funds; Shareholder, Greenberg Traurig, LLP (a law firm); counsel to the Independent Directors and the Davis Funds.

22

DAVIS REAL ESTATE PORTFOLIO

Investment Adviser

Davis Selected Advisers, L.P. (Doing business as “Davis Advisors”)

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

(800) 279-0279

Distributor

Davis Distributors, LLC

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

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

Greenberg Traurig, LLP

77 West Wacker Drive, Suite 3100

Chicago, Illinois 60601

Independent Registered Public Accounting Firm

KPMG LLP

707 Seventeenth Street, Suite 2700

Denver, Colorado 80202

For more information about Davis Real Estate Portfolio, including management fee, charges, and expenses, see the current Davis Variable Account Fund, Inc. (including Davis Real Estate Portfolio) prospectus, which must precede or accompany this report.  The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge upon request by calling 1-800-279-0279 and on the Fund’s website at www.davisfunds.com.  Quarterly Fact sheets are available on the Fund’s website at www.davisfunds.com.

23

ITEM 2.  CODE OF ETHICS

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

A copy of the code of ethics is filed as an exhibit to this form N-CSR.

No waivers were granted to this code of ethics during the period covered by this report.

ITEM 3.  AUDIT COMMITTEE FINANCIAL EXPERT

The registrant’s board of directors has determined that independent trustee Marsha Williams qualifies as the “audit committee financial expert”, as defined in Item 3 of form N-CSR.

ITEM 4.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a)   Audit Fees.  The aggregate Audit Fees billed by KPMP LLP (“KPMG”) for professional    services rendered for the audits of the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for the fiscal year ends December 31, 2009 and December 31, 2008 were $56,400 and $56,400, respectively.

(b)   Audit-Related Fees.  The aggregate Audit-Related Fees billed by KPMG for services rendered for assurance and related services that are not reasonably related to the performance of the audit or review of the fund financial statements, but not reported as Audit Fees fore fiscal year ends December 31, 2009 and December 31, 2008 were $0 and $0, respectively.

(c)   Tax Fees.  The aggregate Tax Fees billed by KPMG for professional services rendered for tax compliance, tax advise and tax planning for the fiscal year ends December 31, 2009 and December 31, 2008 were $19,650 and $19,650, respectively.

Fees included in the Tax Fee category comprise all services performed by professional staff in the independent accountant’s tax division except those services related to the audit.  These services include preparation of tax returns, tax advice related to mergers and a review of the fund income and capital gain distributions.

(d)   All Other Fees.  The aggregate Other Fees billed by KPMG for all other non-audit services rendered to the fund for the fiscal year ends December 31, 2009 and December 31, 2008 were $0 and $0, respectively.

  (e)(1)  Audit Committee Pre-Approval Policies and Procedures.

The fund Audit Committee must pre-approve all audit and non-audit services provided by the independent accountant relating to the operations or financial reporting of the funds.  Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.

The fund Audit Committee has adopted a policy whereby audit and non-audit services performed by the fund independent accountant require pre-approval in advance at regularly scheduled Audit Committee meetings.  If such a service is required between regularly scheduled Audit Committee meetings, pre-approval may be authorized by the Audit Committee Chairperson with ratification at the next scheduled audit committee meeting.

(2)   No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of

Rule 2-01 of Regulation S-X.

  (f)   Not applicable

(g)   The Funds’ independent accountant did not provide any services to the investment advisor or any affiliate for the fiscal years ended December 31, 2009 and December 31, 2008.  The fund has not paid any fees for non-audit not previously disclosed in items 4 (b) – (d).

(h)   The registrant’s audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.  No such services were rendered.

ITEM 5.  AUDIT COMMITTEE OF LISTED REGISTRANTS

Not Applicable

ITEM 6.  SCHEDULE OF INVESTMENTS

Not Applicable.  The complete Schedule of Investments is included in Item 1 of this for N-CSR

ITEM 7.  DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not Applicable

ITEM 8.  PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not Applicable

ITEM 9.  PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS

Not Applicable

ITEM 10.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no changes to the procedure by which shareholders may recommend nominees to the registrant’s Board of Trustees.

ITEM 11.  CONTROLS AND PROCUDURES

(a)   The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3 (c) under the Investment Company Act of 1940, as amended) are effective as of a date within 90 days of the filing date of this report.

(b)   There have been no significant changes in the registrant’s internal controls or in other factors that could significantly affect these controls.

ITEM 12.  EXHIBITS

(a)(1)  The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is filed as an exhibit to this form N-CSR.

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached.

(a)(3)  Not applicable

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DAVIS VARIABLE ACCOUNT FUND, INC.

By           /s/ Kenneth C. Eich

Kenneth C. Eich

Principal Executive Officer

Date:  February 19, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By           /s/ Kenneth C. Eich

Kenneth C. Eich

Principal Executive Officer

Date:  February 19, 2010

By           /s/ Douglas A. Haines

Douglas A. Haines

Principal Financial Officer

Date:  February 19, 2010

EX-99.CERT

DAVIS VARIABLE ACCOUNT FUND, INC.

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

(520) 434-3771

RULE 30A-2(A) CERTIFICATION

I, Kenneth C. Eich , certify that:

1.              I have reviewed this report on Form N-CSR of Davis Variable Account Fund, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Kenneth C. Eich

Kenneth C. Eich

Principal Executive Officer

Date: February 4, 2010

DAVIS VARIABLE ACCOUNT FUND, INC.

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

(520) 434-3771

RULE 30A-2(A) CERTIFICATION

I, Douglas A. Haines, certify that:

1.              I have reviewed this report on Form N-CSR of Davis Variable Account Fund, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Douglas A. Haines

Douglas A. Haines

Principal Financial Officer

Date: February 4, 2010

EX-99.906 CERT

DAVIS VARIABLE ACCOUNT FUND, INC.

2949 East Elvira Road, Suite 101

Tucson, Arizona 85756

(520) 434-3771

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

KENNETH C. EICH, Principal Executive Officer, and DOUGLAS A. HAINES, Principal Financial Officer of Davis Variable Account Fund, Inc. (the "Registrant"), each certify to the best of his or her knowledge that:

(1) The Registrant's periodic report on Form N-CSR for the period ended December 31, 2008 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Principal Executive Officer	Principal Financial Officer
DAVIS VARIABLE ACCOUNT FUND, INC.	DAVIS VARIABLE ACCOUNT FUND, INC.
/s/ Kenneth C. Eich	/s/ Douglas A. Haines
Kenneth C. Eich	Douglas A. Haines
Principal Executive Officer	Principal Financial Officer
Date: February 4, 2010	Date: February 4, 2010

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to DAVIS VARIABLE ACCOUNT FUND, INC. and will be retained by DAVIS VARIABLE ACCOUNT FUND, INC. and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request.

This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission.

EX-99.CODE ETH

SARBANES-OXLEY

CODE OF ETHICS

Davis Funds

Selected Funds

Clipper Fund

(“Funds”)

December 2007

I. Covered Officers/Purpose of the Code

This Sarbanes-Oxley Code of Ethics (“Code”) applies to each Fund’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Controller, or persons performing similar functions elected by the Funds (the “Covered Officers”) for the purposes of promoting:

• honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Funds;

• compliance with applicable laws and governmental rules and regulations;

• the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

• accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of

Interest

Overview. A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of the officer’s family, receives improper personal benefits as a result of a position with the Funds.

Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Funds because of their status as “affiliated persons” of the Funds. The Funds’ and the investment adviser’s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, replace these

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programs and procedures, and such conflicts fall outside of the parameters of this Code (see Section VI below).

Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from the contractual relationships between the Funds and the investment adviser (or advisory affiliates) of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by each Fund’s Board of Directors (each a “Board” and collectively the “Boards”) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds.

Each Covered Officer must:

(a)not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds;

(b)not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Funds;

(c)not use material non-public knowledge of portfolio transactions made or contemplated for the Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions.

There are some conflict of interest situations that should always be discussed by Covered Officers with the Funds’ Chief Legal Officer, if material. Examples of these conflict of interest situations include:

• service as a director on the board of any public or private company;

• the receipt of any gift, gratuity, favor award or other item or benefit having a market value in excess of $100 per person, per year, from or on behalf of any person or entity that does, or seeks to do, business with or on behalf of the Funds. Business-related

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entertainment such as meals, tickets to the theater or a sporting event which are infrequent and of a non-lavish nature are excepted from this prohibition;

• any ownership interest in, or any consulting or employment relationship with, any of the Funds’ service providers, other than its investment adviser, principal underwriter or any of their affiliates; and

• a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

III. Disclosure and Compliance

(a)Each Covered Officer should become familiar with the disclosure requirements generally applicable to the Funds.

(b)Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including to the Funds’ directors and auditors, and to governmental regulators and self-regulatory organizations.

(c)Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds.

(d)It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

Notwithstanding (a) through (d) above, (i) each Covered Officer is entitled to rely upon procedures adopted by the Funds and their affiliates (including their investment adviser, sub-advisers, principal underwriter, transfer agent and custodian) that are intended to ensure accurate and timely filing of documents with the SEC or communications with the public, and (ii) Covered Officers do not have a duty to ensure the Funds’ compliance in areas outside of their span of control (for example, the Principal Financial Officer shall not have any duties with respect to compliance issues delegated to the adviser’s Legal Department, Compliance Department, Marketing Department, etc.).

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IV. Reporting and Accountability

Each Covered Officer must:

(a)upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he or she has received, read, and understands the Code;

(b)annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code;

(c)report at least annually all affiliations or other relationships related to conflicts of interest that are included and described in the Funds’ Directors and Officers Questionnaires.

(d)not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and

(e)notify the Funds’ Chief Legal Officer promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of the Code.

V. Enforcement of Code

The Funds’ Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. The Chief Legal Officer is authorized to consult, as appropriate, with the Chairperson of the Audit Committee, counsel to the Funds and independent legal counsel to the independent directors (as defined in Rule 0-1(a)(6) of the Investment Company Act). However, any approvals or waivers sought by any Covered Officer will be considered by the Audit Committee of the affected Fund (the “Committee”).

The Funds will follow these procedures in investigating and enforcing this Code:

(a)the Chief Legal Officer will take all appropriate action to investigate any reported potential violations;

(b)if, after such investigation, the Chief Legal Officer believes that no material violation has occurred, the Chief Legal Officer is not required to take any further action;

(c)any matter that the Chief Legal Officer believes is a material violation will be reported to the Committee;

(d)if the Committee concurs that a material violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; monetary sanctions based on making a Fund whole for damage suffered or to deter further actions; or a recommendation to suspend or dismiss the Covered Officer;

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(e) the Committee will be responsible for granting waivers, as appropriate;

(f)all waivers shall be accompanied by a written memorandum, including to whom the waiver was granted, the details of the waiver, the nature and scope of the waiver, reasoning for the waiver and the date of the waiver; and

(g)any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

VI. Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds’ adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds’ and their investment adviser’s and principal underwriter’s Code of Ethics under Rule 17j-1 under the Investment Company Act and the adviser’s more detailed policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code.

VII. Amendments

(a)This Code was initially adopted by a majority of both Boards (including a majority of the Independent Directors voting separately).

   (b)Any material amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of both Boards, including a majority of Independent Directors voting separately.

   (c)A copy of each version of the Code and all waivers under the Code shall be maintained for at least six (6) years following the end of the fiscal year in which the amendment or waiver occurred.

VIII. Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its independent counsel.

VIII. Filing

Each Fund shall file a copy of this Code as an exhibit to its annual report on Form N-CSR, and shall similarly file and report all material, substantive amendments to this Code.

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Exhibit A

Persons Covered by this Code of Ethics as of July 30, 2004

Principal Executive Officer – Kenneth Eich

Principal Financial Officer – Douglas Haines

Principal Accounting Officer – Douglas Haines