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, 2010

Date of reporting period: December 31, 2010

____________________

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	14
Davis Financial Portfolio	19
Davis Real Estate Portfolio	21
Statements of Assets and Liabilities	24
Statements of Operations	25
Statements of Changes in Net Assets	26
Notes to Financial Statements	28
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
Matters Submitted to a Vote of Shareholders	41
Directors and Officers	42

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 12.76% for the year ended December 31, 2010. Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 15.06%. Every sector1 within the Index registered increases over the year. Consumer discretionary, industrials, and materials were the sectorswithin Index that increased the most. Health care and utilities were the sectors within the Index that increased the least.

Factors Impacting the Portfolio’s Performance

The Portfolio had more invested in financials than any other sector and they were the most important contributor2 to the Portfolio’s performance. The Portfolio’s financial companies out-performed the corresponding sector within the Index (up 17% versus up 11% for the Index) and had a higher relative average weighting (28% versus 16% for the Index). Berkshire Hathaway3, Wells Fargo, and Julius Baer Group were among the most important contributors to performance. Visa was among the most important detractors from performance.

Consumer staple companies were the second most important contributor to the Portfolio’s performance. The Portfolio’s consumer staple companies out-performed the corresponding sector within the Index (up 18% versus up 14% for the Index) and had a higher relative average weighting (15% versus 11% for the Index). Costco Wholesale was among the most important contributors to performance.

Energy companies made positive contributions to absolute performance, but were the most important reason that the Portfolio lagged the Index. The Portfolio’s energy companies under-performed the corresponding sector within the Index (up 8% versus up 20% for the Index), but had a higher relative average weighting (16% versus 11% for the Index) in this stronger performing sector. Occidental Petroleum and Canadian Natural Resources were among the most important contributors to performance. EOG Resources, Transocean, and China Coal Energy were among the most important detractors from performance.

Industrial companies also made positive contributions to absolute performance, but were the second most important reason that the Portfolio’s performance lagged the Index. The Portfolio’s industrial companies under-performed the corresponding sector within the Index (up 16% versus up 27% for the Index) and had a lower relative average weighting (6% versus 11% for the Index) in this stronger performing sector. China Shipping Development was among the most important detractors from performance.

Other important detractors from the Portfolio’s performance included two information technology companies, Hewlett-Packard and Microsoft. Both companies turned in negative returns for the year despite generally positive returns in both the information technology sector and in the overall market.

The Portfolio had approximately 21% of its net assets invested in foreign companies at December 31, 2010. As a whole, those 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. Davis Value Portfolio’s principal risks are: market risk, company risk, financial services risk, foreign country risk, small- and medium-capitalization risk, fees and expenses risk, and headline 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, 2000

Average Annual Total Return for periods ended December 31, 2010

Fund & Benchmark Index	1-Year	5-Year	10-Year	Since Fund’s Inception (07/01/99)	Gross Expense Ratio	Net Expense Ratio
Davis Value Portfolio	12.76%	1.21%	2.43%	3.14%	0.63%	0.63%
Standard & Poor’s 500® Index	15.06%	2.29%	1.41%	0.99%

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 11.10% for the year ended December 31, 2010.  Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 15.06%.The Portfolio’s financial sector holdings out-performed the corresponding sector1 holdings within the Index, but under-performed the Index as a whole.

Factors Impacting the Portfolio’s Performance

The Portfolio’s diversified financial companies were the most important contributor2 to the Portfolio’s performance. The Portfolio’s diversified financial companies out-performed the corresponding industry group within the Index (up 14% versus up 4% for the Index). Julius Baer Group3, Brookfield Asset Management, Oaktree, and American Express were among the most important contributors to performance. Bank of America, Charles Schwab, and Visa were among the most important detractors from performance.

The Portfolio’s insurance companies under-performed the corresponding industry group within the Index (up 5% versus up 16% for the Index). Loews, Progressive, and Markel were among the top contributors to performance. China Life Insurance was among the most important detractors from performance.

The Portfolio’s banking companies out-performed the corresponding industry group within the Index (up 25% versus up 20% for the Index). Wells Fargo and State Bank of India were among the most important contributors to performance.

The Portfolio had a limited amount of assets invested in other sectors. Overall, those sectors made positive contributions to performance, but detracted relative to the Index. Canadian Natural Resources was among the most important contributors to performance while Sealed Air and D&B Corp. were among the most important detractors from performance. The Portfolio no longer owns Sealed Air.

The Portfolio had approximately 31% of its assets invested in foreign companies at December 31, 2010. As a whole, those 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.  Davis Financial Portfolio’s principal risks are: market risk, company risk, concentrated financial services portfolio risk, foreign country risk, small- and medium-capitalization risk, fees and expenses risk, focused portfolio risk, and headline 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, 2000

Average Annual Total Return for periods ended December 31, 2010

Fund & Benchmark Index	1-Year	5-Year	10-Year	Since Fund’s Inception (07/01/99)	Gross Expense Ratio	Net Expense Ratio
Davis Financial Portfolio	11.10%	(1.30)%	0.99%	2.59%	0.69%	0.69%
Standard & Poor’s 500® Index	15.06%	2.29%	1.41%	0.99%

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 19.70% for the year ended December 31, 2010. Over the same time period, the Wilshire U.S. Real Estate Securities Index(“Index”) returned 29.12%. Every sub-industry1 within the Index delivered positive returns. Real estate operating companies, residential REITs, and retail REITs delivered the strongest performances while office REITs, industrial REITs, and diversified REITs delivered the weakest (but still positive) performances.

Factors Impacting the Portfolio’s Performance

Retail REITs were the most important contributor2 to performance. The Portfolio’s retail REITs under-performed the corresponding sub-industry within the Index (up 32% versus up 33% for the Index) and had a lower relative average weighting (13% versus 24% for the Index). Regency Centers3 and CBL & Associates were among the most important contributors to performance.

The Portfolio had more invested in office REITs than in any other sub-industry and they were an important contributor to the Portfolio’s absolute performance.  However, office REITs were the most important detractor relative to the Index. The Portfolio’s office REITs under-performed the corresponding sector within the Index (up 12% versus up 17% for the Index) and had a higher relative average weighting (31% versus 17% for the Index) in this weaker performing sub-industry. Boston Properties and Alexandria Real Estate were among the most important contributors to performance. DuPont Fabros Technology, Coresite Realty, and Corporate Office Properties were among the most important detractors from performance.

Residential REITs were also an important contributor to the Portfolio’s absolute performance, but similar to office REITs, were also an important detractor from performance relative to the Index. The Portfolio’s residential REITs under-performed the corresponding sub-industry within the Index (up 32% versus up 46% for the Index) and had a lower relative average weighting (11% versus 17% for the Index) in this stronger performing sub-industry. Essex Property Trust and American Campus were among the most important contributors to performance.

Forest City Enterprises was the single most important contributor to the Portfolio’s performance. The Portfolio benefited from both its large investment in Forest City Enterprises (approximately 8% at December 31, 2010) together with its strong investment performance (up 42%). Cousins Properties and ProLogis were among the most important detractors from performance. The Portfolio no longer owns Cousins Properties or ProLogis.

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.  Davis Real Estate Portfolio’s principal risks are: market risk, company risk, concentrated real estate services portfolio risk, focused portfolio risk, foreign country risk, small- and medium-capitalization risk, fees and expenses risk, and headline 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, 2000

Average Annual Total Return for periods ended December 31, 2010

Fund & Benchmark Indices	1-Year	5-Year	10-Year	Since Fund’s Inception (07/01/99)	Gross Expense Ratio	Net Expense Ratio
Davis Real Estate Portfolio	19.70%	(1.01)%	8.16%	7.95%	0.81%	0.81%
Standard & Poor’s 500® Index	15.06%	2.29%	1.41%	0.99%
Wilshire U.S. Real Estate Securities Index	29.12%	2.32%	10.34%	10.55%

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.  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, 2010

Portfolio Composition		Industry Weightings
(% of Fund’s 12/31/10 Net Assets)		(% of 12/31/10 Long Term Portfolio)
			Fund	S&P 500®
Common Stock (U.S.)	75.86%	Energy	15.61%	12.03%
Common Stock (Foreign)	20.96%	Diversified Financials	13.25%	7.53%
Convertible Bonds (Foreign)	0.21%	Health Care	13.04%	10.91%
Convertible Bonds (U.S.)	0.10%	Insurance	9.07%	3.90%
Short Term Investments	18.49%	Materials	9.06%	3.74%
Other Assets & Liabilities	(15.62)%	Food & Staples Retailing	9.04%	2.36%
	100.00%	Food, Beverage & Tobacco	6.72%	5.87%
		Information Technology	5.07%	18.65%
		Banks	4.72%	3.10%
		Retailing	3.18%	3.71%
		Transportation	2.74%	2.02%
		Commercial & Professional Services	2.53%	0.60%
		Other	2.19%	13.97%
		Automobiles & Components	1.64%	0.87%
		Household & Personal Products	1.14%	2.41%
		Capital Goods	1.00%	8.33%
			100.00%	100.00%

Top 10 Long Term Holdings

(% of Fund’s 12/31/10 Net Assets)

Costco Wholesale Corp.	Food & Staples Retailing	5.01%
Wells Fargo & Co.	Commercial Banks	4.58%
American Express Co.	Consumer Finance	4.28%
CVS Caremark Corp.	Food & Staples Retailing	3.77%
EOG Resources, Inc.	Energy	3.38%
Occidental Petroleum Corp.	Energy	3.28%
Loews Corp.	Multi-line Insurance	3.05%
Merck & Co., Inc.	Pharmaceuticals, Biotechnology & Life Sciences	2.95%
Devon Energy Corp.	Energy	2.95%
Canadian Natural Resources Ltd.	Energy	2.94%

8

DAVIS VARIABLE ACCOUNT FUND, INC.	Fund Overview
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2010

New Positions Added (01/01/10-12/31/10)

(Highlighted positions are those greater than 0.50% of Fund’s 12/31/10 net assets)

Security	Industry	Date of 1st Purchase	% of Fund’s  12/31/10    Net Assets
Air Products and Chemicals, Inc.	Materials	08/24/10	0.26%
America Movil SAB de C.V., Series L, ADR	Telecommunication Services	04/21/10	0.32%
Aon Corp.	Insurance Brokers	07/12/10	0.13%
Baxter International Inc.	Health Care Equipment & Services	04/22/10	0.61%
Charles Schwab Corp.	Capital Markets	08/31/10	0.06%
Fairfax Financial Holdings Ltd., 144A	Multi-line Insurance	02/23/10	0.22%
Kraft Foods Inc., Class A	Food, Beverage & Tobacco	12/17/10	0.29%
Lockheed Martin Corp.	Capital Goods	09/20/10	0.63%
Nestle S.A.	Food, Beverage & Tobacco	03/09/10	0.18%
Praxair, Inc.	Materials	05/21/10	0.22%
Roche Holding AG - Genusschein	Pharmaceuticals, Biotechnology &
	Life Sciences	07/16/10	0.93%
Schlumberger Ltd.	Energy	06/07/10	0.23%
Unilever NV, NY Shares	Food, Beverage & Tobacco	02/09/10	0.40%

Positions Closed (01/01/10-12/31/10)

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

Security	Industry	Date of    Final Sale		Realized Gain (Loss)
ABB Ltd., ADR	Capital Goods	12/01/10	$	461,458
AES Corp.	Utilities	02/17/10		(15,445)
Amazon.com, Inc.	Retailing	07/13/10		1,639,800
Berkshire Hathaway Inc., Class B	Property & Casualty Insurance	05/07/10		159,903
Cardinal Health, Inc.	Health Care Equipment & Services	07/09/10		382,905
CareFusion Corp.	Health Care Equipment & Services	08/13/10		51,431
Comcast Corp., Special Class A	Media	02/24/10		(440,803)
ConocoPhillips	Energy	07/09/10		864,106
Cosco Pacific Ltd.	Transportation	09/17/10		(695,400)
DIRECTV, Class A	Media	01/21/10		1,491,847
Garmin Ltd.	Consumer Durables & Apparel	01/04/10		4,522
H&R Block, Inc.	Consumer Services	09/10/10		(140,129)
Harley-Davidson, Inc., Sr. Notes, 15.00%,  02/01/14	Automobiles & Components	12/08/10		564,023
Hartford Financial Services Group, Inc.	Multi-line Insurance	01/13/10		1,192,361
Laboratory Corp. of America Holdings	Health Care Equipment & Services	05/28/10		487,432
Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11	Telecommunication Services	05/27/10		26,720
News Corp., Class A	Media	09/24/10		(754,990)
PACCAR Inc.	Capital Goods	06/10/10		436,101
Principal Financial Group, Inc.	Life & Health Insurance	02/01/10		(23,370)
UnitedHealth Group Inc.	Health Care Equipment & Services	01/05/10		99,533
United Parcel Service, Inc., Class B	Transportation	07/23/10		320,294
Walt Disney Co.	Media	10/05/10		1,970,493

9

DAVIS VARIABLE ACCOUNT FUND, INC.	Fund Overview
DAVIS FINANCIAL PORTFOLIO	December 31, 2010

Portfolio Composition		Industry Weightings
(% of Fund’s 12/31/10 Net Assets)		(% of  12/31/10 Stock Holdings)
			Fund	S&P 500®
Common Stock (U.S.)	67.63%	Diversified Financials	41.41%	7.53%
Common Stock (Foreign)	30.70%	Insurance	31.71%	3.90%
Short Term Investments	1.21%	Banks	17.39%	3.10%
Other Assets & Liabilities	0.46%	Energy	6.77%	12.03%
	100.00%	Commercial & Professional Services	2.72%	0.60%
		Information Technology	–	18.65%
		Health Care	–	10.91%
		Capital Goods	–	8.33%
		Food, Beverage & Tobacco	–	5.87%
		Other	–	29.08%
			100.00%	100.00%

Top 10 Long Term Holdings

(% of Fund’s 12/31/10 Net Assets)

Transatlantic Holdings, Inc.	Reinsurance	8.82%
State Bank of India Ltd., GDR	Commercial Banks	8.01%
American Express Co.	Consumer Finance	7.80%
Loews Corp.	Multi-line Insurance	7.02%
Wells Fargo & Co.	Commercial Banks	6.68%
Canadian Natural Resources Ltd.	Energy	6.66%
Oaktree Capital Group LLC, Class A	Diversified Financial Services	5.46%
Julius Baer Group Ltd.	Capital Markets	5.34%
Bank of New York Mellon Corp.	Capital Markets	5.21%
Markel Corp.	Property & Casualty Insurance	4.91%

New Positions Added (01/01/10-12/31/10)

(Highlighted positions are those greater than 0.30% of Fund’s 12/31/10 net assets)

Security	Industry	Date of 1st Purchase	% of Fund’s  12/31/10    Net Assets
SKBHC Holdings LLC	Commercial Banks	11/08/10	0.48%
U.S. Bancorp	Commercial Banks	02/11/10	0.47%

Positions Closed (01/01/10-12/31/10)

(Gains greater than $500,000 are highlighted)

Security	Industry	Date of       Final Sale			Realized Gain
FPIC Insurance Group, Inc.	Property & Casualty Insurance	05/19/10	$	610,195
JPMorgan Chase & Co.	Diversified Financial Services	04/08/10		395,944
Sealed Air Corp.	Materials	02/01/10		250,135

10

DAVIS VARIABLE ACCOUNT FUND, INC.	Fund Overview
DAVIS REAL ESTATE PORTFOLIO	December 31, 2010

Portfolio Composition		Industry Weightings
(% of Fund’s 12/31/10 Net Assets)		(% of 12/31/10 Long Term Portfolio)
				Wilshire U.S. Real Estate          Securities Index
Common Stock	85.08%
Preferred Stock	7.86%		Fund
Convertible Bonds	2.68%	Office REITs	34.98%	15.55%
Short Term Investments	4.19%	Residential REITs	11.74%	17.14%
Other Assets & Liabilities	0.19%	Retail REITs	10.42%	24.36%
	100.00%	Real Estate Operating Companies	10.27%	2.24%
		Specialized REITs	9.96%	25.88%
		Telecommunication Services	8.71%	–
		Other	7.81%	8.83%
		Industrial REITs	6.11%	6.00%
			100.00%	100.00%

Top 10 Long Term Holdings

(% of Fund’s 12/31/10 Net Assets)

Forest City Enterprises, Inc., Class A	Real Estate Operating Companies	7.51%
American Campus Communities, Inc.	Residential REITs	5.73%
Alexandria Real Estate Equities, Inc.	Office REITs	5.39%
DuPont Fabros Technology Inc.	Office REITs	4.44%
Essex Property Trust, Inc.	Residential REITs	3.97%
Regency Centers Corp.	Retail REITs	3.94%
Alexander & Baldwin, Inc.	Transportation	3.44%
Ventas, Inc.	Specialized REITs	3.29%
Alexandria Real Estate Equities, Inc., 7.00%, Series D, Conv. Pfd.	Office REITs	3.26%
Crown Castle International Corp.	Telecommunication Services	3.01%

11

DAVIS VARIABLE ACCOUNT FUND, INC.	Fund Overview
DAVIS REAL ESTATE PORTFOLIO - (CONTINUED)	December 31, 2010

New Positions Added (01/01/10-12/31/10)

(Highlighted positions are those greater than 3.00% Fund’s of 12/31/10 net assets)

Security	Industry	Date of 1st Purchase	% of Fund’s  12/31/10     Net Assets
American Tower Corp., Class A	Telecommunication Services	01/11/10	2.52%
AvalonBay Communities, Inc.	Residential REITs	01/20/10	–
Brookdale Senior Living Inc.	Real Estate Operating Companies	10/22/10	1.86%
CB Richard Ellis Group, Inc., Class A	Real Estate Services	10/26/10	1.14%
Coresite Realty Corp.	Office REITs	09/22/10	2.93%
Crown Castle International Corp.	Telecommunication Services	01/11/10	3.01%
DuPont Fabros Technology Inc.	Office REITs	05/13/10	4.44%
EastGroup Properties, Inc.	Industrial REITs	09/13/10	2.19%
Entertainment Properties Trust	Specialized REITs	01/22/10	2.93%
Highwoods Properties, Inc.	Office REITs	04/22/10	2.65%
SBA Communications Corp., Class A	Telecommunication Services	01/11/10	2.80%
Toll Brothers, Inc.	Homebuilding	08/26/10	0.63%
UDR, Inc.	Residential REITs	04/22/10	1.52%

Positions Closed (01/01/10-12/31/10)

(Gains and losses greater than $200,000 are highlighted)

Security	Industry	Date of    Final Sale		Realized    Gain (Loss)
AvalonBay Communities, Inc.	Residential REITs	04/21/10	$	158,182
Brookfield Asset Management Inc., Class A	Capital Markets	03/03/10		(44,148)
CBL & Associates Properties, Inc.	Retail REITs	10/29/10		303,225
Cousins Properties, Inc.	Diversified REITs	07/19/10		(903,447)
Digital Realty Trust, Inc., 8.50%, Series A	Office REITs	08/24/10		53,750
Equity Residential	Residential REITs	12/17/10		52,251
Host Hotels & Resorts Inc.	Specialized REITs	04/15/10		132,235
Macerich Co.	Retail REITs	01/07/10		16,340
ProLogis	Industrial REITs	01/28/10		107,017
ProLogis, Conv. Sr. Notes, 2.25%, 04/01/37	Industrial REITs	05/26/10		213,214

12

DAVIS VARIABLE ACCOUNT FUND, INC. Expense Example

Example

As a shareholder of each 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, 2010. 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 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.

	Beginning Account Value (07/01/10)	Ending Account Value (12/31/10)	Expenses Paid During Period* (07/01/10-12/31/10)
Davis Value Portfolio
(annualized expense ratio 0.63%**)
Actual	$1,000.00	$1,214.64	$3.52
Hypothetical	$1,000.00	$1,022.03	$3.21
Davis Financial Portfolio
(annualized expense ratio 0.69%**)
Actual	$1,000.00	$1,194.81	$3.82
Hypothetical	$1,000.00	$1,021.73	$3.52
Davis Real Estate Portfolio
(annualized expense ratio 0.79%**)
Actual	$1,000.00	$1,150.65	$4.28
Hypothetical	$1,000.00	$1,021.22	$4.02
Hypothetical assumes 5% annual return before expenses.
*Expenses are equal to each Fund’s annualized operating expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
**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.	Schedule of Investments
DAVIS VALUE PORTFOLIO	December 31, 2010

					Shares		Value (Note 1)
COMMON STOCK – (96.82%)
	CONSUMER DISCRETIONARY – (5.51%)
		Automobiles & Components – (1.60%)
			Harley-Davidson, Inc.			217,500	$	7,540,725
		Consumer Durables & Apparel – (0.23%)
			Hunter Douglas NV  (Netherlands)			20,299		1,073,358
		Media – (0.59%)
			Grupo Televisa S.A., ADR  (Mexico)*			86,400		2,240,352
			Liberty Media - Starz, Series A  *			8,506		566,202
								2,806,554
		Retailing – (3.09%)
			Bed Bath & Beyond Inc.  *			166,105		8,163,230
			CarMax, Inc.  *			145,340		4,633,439
			Liberty Media Corp. - Interactive, Series A  *			115,034		1,812,936
								14,609,605
				Total Consumer Discretionary				26,030,242
	CONSUMER STAPLES – (16.42%)
		Food & Staples Retailing – (8.78%)
			Costco Wholesale Corp.			327,640		23,663,799
			CVS Caremark Corp.			512,678		17,825,814
								41,489,613
		Food, Beverage & Tobacco – (6.53%)
			Coca-Cola Co.			93,710		6,163,307
			Diageo PLC, ADR  (United Kingdom)			92,433		6,870,545
			Heineken Holding NV  (Netherlands)			128,621		5,590,274
			Hershey Co.			11,520		543,168
			Kraft Foods Inc., Class A			44,000		1,386,440
			Mead Johnson Nutrition Co.			36,465		2,269,946
			Nestle S.A.  (Switzerland)			14,600		854,920
			Philip Morris International Inc.			90,990		5,325,645
			Unilever NV, NY Shares  (Netherlands)			59,700		1,874,580
								30,878,825
		Household & Personal Products – (1.11%)
			Natura Cosmeticos S.A.  (Brazil)			31,800		913,580
			Procter & Gamble Co.			67,240		4,325,549
								5,239,129
				Total Consumer Staples				77,607,567
	ENERGY – (15.16%)
			Canadian Natural Resources Ltd.  (Canada)			312,850		13,896,797
			China Coal Energy Co. - H  (China)			2,607,900		4,073,166
			Devon Energy Corp.			177,330		13,922,178
			EOG Resources, Inc.			174,780		15,976,640
			Occidental Petroleum Corp.			158,160		15,515,496
			OGX Petroleo e Gas Participacoes S.A.  (Brazil)*			291,600		3,513,253
			Schlumberger Ltd.			13,200		1,102,200
			Transocean Ltd.  *			52,604		3,656,504
				Total Energy				71,656,234

14

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2010

						Shares		Value (Note 1)
COMMON STOCK – (CONTINUED)
	FINANCIALS – (27.15%)
		Banks – (4.58%)
			Commercial Banks – (4.58%)
				Wells Fargo & Co.			698,824	$	21,656,556
		Diversified Financials – (12.87%)
			Capital Markets – (7.83%)
				Ameriprise Financial, Inc.			82,620		4,754,781
				Bank of New York Mellon Corp.			442,400		13,360,480
				Brookfield Asset Management Inc., Class A  (Canada)			112,600		3,748,454
				Charles Schwab Corp.			17,300		296,003
				GAM Holding Ltd.  (Switzerland)*			100,360		1,658,355
				Goldman Sachs Group, Inc.			16,660		2,801,546
				Julius Baer Group Ltd.  (Switzerland)			221,460		10,374,276
									36,993,895
			Consumer Finance – (4.28%)
				American Express Co.			471,019		20,216,135
			Diversified Financial Services – (0.76%)
				JPMorgan Chase & Co.			11,368		482,231
				Moody's Corp.			69,730		1,850,634
				Visa Inc., Class A			18,200		1,280,916
									3,613,781
									60,823,811
		Insurance – (8.80%)
			Insurance Brokers – (0.13%)
				Aon Corp.			13,620		626,656
			Multi-line Insurance – (3.71%)
				Fairfax Financial Holdings Ltd.  (Canada)			5,130		2,096,323
				Fairfax Financial Holdings Ltd., 144A  (Canada)(a)(b)			2,490		1,024,223
				Loews Corp.			370,390		14,411,875
									17,532,421
			Property & Casualty Insurance – (3.92%)
				Berkshire Hathaway Inc., Class A  *			56		6,745,200
				Markel Corp.  *			1,390		525,601
				Progressive Corp. (Ohio)			566,320		11,252,778
									18,523,579
			Reinsurance – (1.04%)
				Transatlantic Holdings, Inc.			95,807		4,945,558
									41,628,214
		Real Estate – (0.90%)
				Hang Lung Group Ltd.  (Hong Kong)			643,000		4,235,488
					Total Financials				128,344,069
	HEALTH CARE – (12.66%)
		Health Care Equipment & Services – (3.47%)
				Baxter International Inc.			57,051		2,887,922
				Becton, Dickinson and Co.			60,760		5,135,435
				Express Scripts, Inc.  *			155,660		8,411,866
									16,435,223

15

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2010

					Shares		Value (Note 1)
COMMON STOCK – (CONTINUED)
	HEALTH CARE – (CONTINUED)
		Pharmaceuticals, Biotechnology & Life Sciences – (9.19%)
			Agilent Technologies, Inc.  *			110,280	$	4,568,900
			Johnson & Johnson			189,780		11,737,893
			Merck & Co., Inc.			386,585		13,932,524
			Pfizer Inc.			502,140		8,792,472
			Roche Holding AG - Genusschein  (Switzerland)			30,100		4,410,374
								43,442,163
				Total Health Care				59,877,386
	INDUSTRIALS – (6.09%)
		Capital Goods – (0.97%)
			Lockheed Martin Corp.			42,590		2,977,467
			Tyco International Ltd.			39,504		1,637,046
								4,614,513
		Commercial & Professional Services – (2.46%)
			D&B Corp.			46,900		3,850,021
			Iron Mountain Inc.			310,867		7,774,784
								11,624,805
		Transportation – (2.66%)
			China Merchants Holdings International Co., Ltd.  (China)			1,561,055		6,165,653
			China Shipping Development Co. Ltd. - H  (China)			1,129,000		1,504,791
			Kuehne & Nagel International AG  (Switzerland)			32,464		4,513,711
			LLX Logistica S.A.  (Brazil)*			76,670		218,463
			PortX Operacoes Portuarias S.A.  (Brazil)*			76,670		171,353
								12,573,971
				Total Industrials				28,813,289
	INFORMATION TECHNOLOGY – (4.92%)
		Semiconductors & Semiconductor Equipment – (1.73%)
			Texas Instruments Inc.			251,600		8,177,000
		Software & Services – (2.43%)
			Activision Blizzard, Inc.			215,200		2,676,012
			Google Inc., Class A  *			8,230		4,888,003
			Microsoft Corp.			140,410		3,918,843
								11,482,858
		Technology Hardware & Equipment – (0.76%)
			Hewlett-Packard Co.			85,831		3,613,485
				Total Information Technology				23,273,343

16

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2010

					Shares/Principal			Value (Note 1)
COMMON STOCK – (CONTINUED)
	MATERIALS – (8.59%)
		Air Products and Chemicals, Inc.					13,420	$	1,220,549
		BHP Billiton PLC  (United Kingdom)					95,530		3,799,479
		Martin Marietta Materials, Inc.					42,380		3,909,131
		Monsanto Co.					80,600		5,612,984
		Potash Corp. of Saskatchewan Inc.  (Canada)					10,054		1,556,661
		Praxair, Inc.					10,800		1,031,076
		Rio Tinto PLC  (United Kingdom)					52,005		3,637,697
		Sealed Air Corp.					429,975		10,942,864
		Sino-Forest Corp.  (Canada)*					314,550		7,367,866
		Sino-Forest Corp., 144A  (Canada)*(a)(b)					8,900		208,469
		Vulcan Materials Co.					29,790		1,321,484
				Total Materials					40,608,260
	TELECOMMUNICATION SERVICES – (0.32%)
		America Movil SAB de C.V., Series L, ADR  (Mexico)					26,280		1,506,895
				Total Telecommunication Services					1,506,895
			TOTAL COMMON STOCK – (Identified cost $290,238,207)						457,717,285
CONVERTIBLE BONDS – (0.31%)
	MATERIALS – (0.21%)
		Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13   (Canada)(b)				$	736,000		994,980
				Total Materials					994,980
	TELECOMMUNICATION SERVICES – (0.10%)
		Level 3 Communications, Inc., Conv. Sr. Notes, 15.00%, 01/15/13					400,000		450,000
				Total Telecommunication Services					450,000
			TOTAL CONVERTIBLE BONDS – (Identified cost $1,136,000)						1,444,980
SHORT TERM INVESTMENTS – (18.49%)
		Banc of America Securities LLC Joint Repurchase Agreement, 0.25%, 01/03/11, dated 12/31/10, repurchase value of $16,808,350 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 2.104%-6.50%, 06/01/25-12/01/40, total market value $17,144,160)					16,808,000		16,808,000
		Goldman, Sachs & Co. Joint Repurchase Agreement, 0.16%, 01/03/11, dated 12/31/10, repurchase value of $20,170,269 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.50%-6.50%, 12/01/25-01/01/41, total market value $20,573,400)					20,170,000		20,170,000
		Mizuho Securities USA Inc. Joint Repurchase Agreement, 0.24%, 01/03/11, dated 12/31/10, repurchase value of $50,426,009 (collateralized by: U.S. Government agency obligations in a pooled cash account, 3.125%-7.50%, 01/31/12-05/15/37, total market value $51,433,500)					50,425,000		50,425,000
			TOTAL SHORT TERM INVESTMENTS – (Identified cost $87,403,000)						87,403,000

	Total Investments – (115.62%) – (Identified cost $378,777,207) – (c)			546,565,265
	Liabilities Less Other Assets – (15.62%)			(73,831,055)
		Net Assets – (100.00%)	$	472,734,210
ADR: American Depositary Receipt

17

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS VALUE PORTFOLIO - (CONTINUED)	December 31, 2010

	*	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 $1,232,692 or 0.26% of the Fund's net assets as of December 31, 2010.
	(b)	Restricted Security – See Note 7 of the Notes to Financial Statements.
	(c)	Aggregate cost for federal income tax purposes is $381,345,068.  At December 31, 2010 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
			Unrealized appreciation		$	166,674,172
			Unrealized depreciation			(1,453,975)
				Net unrealized appreciation	$	165,220,197
See Notes to Financial Statements

18

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS FINANCIAL PORTFOLIO	December 31, 2010

						Shares		Value (Note 1)
COMMON STOCK – (98.33%)
	ENERGY – (6.66%)
				Canadian Natural Resources Ltd.  (Canada)			123,500	$	5,485,870
					Total Energy				5,485,870
	FINANCIALS – (89.00%)
		Banks – (17.10%)
			Commercial Banks – (17.10%)
				Banco Santander Brasil S.A., ADS  (Brazil)			20,000		272,000
				ICICI Bank Ltd., ADR  (India)			18,400		931,776
				SKBHC Holdings LLC  *(a)			122		395,726
				State Bank of India Ltd., GDR  (India)			50,948		6,597,766
				U.S. Bancorp			14,500		391,065
				Wells Fargo & Co.			177,500		5,500,725
									14,089,058
		Diversified Financials – (40.72%)
			Capital Markets – (21.96%)
				Ameriprise Financial, Inc.			19,340		1,113,017
				Bank of New York Mellon Corp.			142,100		4,291,420
				Brookfield Asset Management Inc., Class A  (Canada)			96,700		3,219,143
				Charles Schwab Corp.			20,100		343,911
				GAM Holding Ltd.  (Switzerland)  *			63,810		1,054,401
				Goldman Sachs Group, Inc.			19,520		3,282,483
				Julius Baer Group Ltd.  (Switzerland)			93,910		4,399,206
				T. Rowe Price Group Inc.			6,060		391,052
									18,094,633
			Consumer Finance – (8.31%)
				American Express Co. (b)			149,800		6,429,416
				First Marblehead Corp.  *			194,994		423,137
									6,852,553
			Diversified Financial Services – (10.45%)
				Bank of America Corp.			14,486		193,243
				Cielo S.A.  (Brazil)			69,500		563,117
				Moody's Corp.			47,100		1,250,034
				Oaktree Capital Group LLC, Class A  (a)			126,700		4,497,850
				RHJ International  (Belgium)  *			62,000		513,674
				Visa Inc., Class A			22,600		1,590,588
									8,608,506
									33,555,692
		Insurance – (31.18%)
			Life & Health Insurance – (2.74%)
				China Life Insurance Co., Ltd., ADR  (China)			36,933		2,259,192
			Multi-line Insurance – (7.02%)
				Loews Corp. (b)			148,600		5,782,026
			Property & Casualty Insurance – (9.80%)
				ACE Ltd.			15,500		964,875
				Markel Corp.  *			10,700		4,045,991
				Progressive Corp. (Ohio)			154,100		3,061,967
									8,072,833

19

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS FINANCIAL PORTFOLIO - (CONTINUED)	December 31, 2010

									Shares/Principal			Value (Note 1)
COMMON STOCK – (CONTINUED)
	FINANCIALS – (CONTINUED)
		Insurance – (Continued)
			Reinsurance – (11.62%)
				Everest Re Group, Ltd.							27,300	$	2,315,586
				Transatlantic Holdings, Inc.							140,737		7,264,844
													9,580,430
													25,694,481
								Total Financials					73,339,231
	INDUSTRIALS – (2.67%)
		Commercial & Professional Services – (2.67%)
				D&B Corp.							26,800		2,200,012
								Total Industrials					2,200,012
						TOTAL COMMON STOCK – (Identified cost $58,783,844)							81,025,113
SHORT TERM INVESTMENTS – (1.21%)
				Banc of America Securities LLC Joint Repurchase Agreement, 0.25%, 01/03/11, dated 12/31/10, repurchase value of $191,004 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 2.104%-6.50%, 06/01/25-12/01/40, total market value $194,820)						$	191,000		191,000
				Goldman, Sachs & Co. Joint Repurchase Agreement, 0.16%, 01/03/11, dated 12/31/10, repurchase value of $230,003 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.50%-6.50%, 12/01/25-01/01/41, total market value $234,600)							230,000		230,000
				Mizuho Securities USA Inc. Joint Repurchase Agreement, 0.24%, 01/03/11, dated 12/31/10, repurchase value of $574,011 (collateralized by: U.S. Government agency obligations in a pooled cash account, 3.125%-7.50%, 01/31/12-05/15/37, total market value $585,480)							574,000		574,000
						TOTAL SHORT TERM INVESTMENTS – (Identified cost $995,000)							995,000
					Total Investments – (99.54%) – (Identified cost $59,778,844) – (c)								82,020,113
					Other Assets Less Liabilities – (0.46%)								382,458
							Net Assets – (100.00%)					$	82,402,571
	ADR: American Depositary Receipt
	ADS: American Depositary Share
	GDR: Global Depositary Receipt
	*              Non-Income producing security.
	(a) Restricted Security – See Note 7 of the Notes to Financial Statements.
	(b)A portion of these securities is pledged to cover unfunded capital commitments at December 31, 2010.
	(c)Aggregate cost for federal income tax purposes is $60,471,943.  At December 31, 2010 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
					Unrealized appreciation							$	26,696,204
					Unrealized depreciation								(5,148,034)
							Net unrealized appreciation					$	21,548,170
See Notes to Financial Statements

20

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS REAL ESTATE PORTFOLIO	December 31, 2010

						Shares		Value (Note 1)
COMMON STOCK – (85.08%)
	CONSUMER DISCRETIONARY – (0.63%)
		Consumer Durables & Apparel – (0.63%)
				Homebuilding – (0.63%)
				Toll Brothers, Inc.  *			8,400	$	159,600
					Total Consumer Discretionary				159,600
	FINANCIALS – (72.68%)
		Real Estate – (72.68%)
			Real Estate Investment Trusts (REITs) – (62.18%)
				Diversified REITs – (2.27%)
				Vornado Realty Trust			6,870		572,477
				Industrial REITs – (4.72%)
				DCT Industrial Trust Inc.			120,000		637,200
				EastGroup Properties, Inc.			13,100		554,392
									1,191,592
				Office REITs – (25.26%)
				Alexandria Real Estate Equities, Inc.			18,600		1,362,636
				Boston Properties, Inc.			6,500		559,650
				Coresite Realty Corp.			54,200		739,288
				Corporate Office Properties Trust			17,490		611,276
				Digital Realty Trust, Inc.			11,800		608,172
				Douglas Emmett, Inc.			42,800		710,480
				DuPont Fabros Technology Inc.			52,800		1,123,056
				Highwoods Properties, Inc.			21,000		668,850
									6,383,408
				Residential REITs – (11.22%)
				American Campus Communities, Inc.			45,600		1,448,256
				Essex Property Trust, Inc.			8,790		1,003,994
				UDR, Inc.			16,300		383,376
									2,835,626
				Retail REITs – (9.19%)
				Federal Realty Investment Trust			4,150		323,409
				Regency Centers Corp.			23,600		996,864
				Simon Property Group, Inc.			6,292		625,991
				Taubman Centers, Inc.			7,460		376,581
									2,322,845
				Specialized REITs – (9.52%)
				Cogdell Spencer, Inc.			69,583		403,581
				Entertainment Properties Trust			16,000		740,000
				LaSalle Hotel Properties			16,400		432,960
				Ventas, Inc.			15,820		830,234
									2,406,775
									15,712,723
			Real Estate Management & Development – (10.50%)
				Real Estate Operating Companies – (9.36%)
				Brookdale Senior Living Inc.  *			21,900		468,879
				Forest City Enterprises, Inc., Class A  *			113,680		1,897,319
									2,366,198

21

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS REAL ESTATE PORTFOLIO - (CONTINUED)	December 31, 2010

							Shares/Principal			Value (Note 1)
COMMON STOCK – (CONTINUED)
	FINANCIALS – (CONTINUED)
		Real Estate – (Continued)
			Real Estate Management & Development – (Continued)
				Real Estate Services – (1.14%)
				CB Richard Ellis Group, Inc., Class A  *					14,000	$	286,720
											2,652,918
											18,365,641
						Total Financials					18,365,641
	INDUSTRIALS – (3.44%)
		Transportation – (3.44%)
				Alexander & Baldwin, Inc.					21,700		868,651
						Total Industrials					868,651
	TELECOMMUNICATION SERVICES – (8.33%)
				American Tower Corp., Class A  *					12,300		635,172
				Crown Castle International Corp.  *					17,350		760,450
				SBA Communications Corp., Class A  *					17,300		708,435
						Total Telecommunication Services					2,104,057
					TOTAL COMMON STOCK – (Identified cost $17,692,295)						21,497,949
PREFERRED STOCK – (7.86%)
	FINANCIALS – (7.86%)
		Real Estate – (7.86%)
			Real Estate Investment Trusts (REITs) – (7.86%)
				Industrial REITs – (1.13%)
				AMB Property Corp., 6.75%, Series M					11,900		285,243
				Office REITs – (5.95%)
				Alexandria Real Estate Equities, Inc., 7.00%, Series D, Conv. Pfd.					33,272		823,482
				Digital Realty Trust, Inc., 5.50%, Series D, Cum. Conv. Pfd.					5,700		181,510
				SL Green Realty Corp., 7.625%, Series C					19,930		499,495
											1,504,487
				Retail REITs – (0.78%)
				CBL & Associates Properties, Inc., 7.375%, Series D					8,280		195,843
						Total Financials					1,985,573
					TOTAL PREFERRED STOCK – (Identified cost $940,569)						1,985,573
CONVERTIBLE BONDS – (2.68%)
	FINANCIALS – (2.68%)
		Real Estate – (2.68%)
			Real Estate Investment Trusts (REITs) – (2.23%)
				Office REITs – (2.23%)
				Digital Realty Trust, Inc., 144A Conv. Sr. Notes, 5.50%, 04/15/29   (a)				$	344,000		461,820
				SL Green Realty Corp., 144A Conv. Sr. Notes, 3.00%, 03/30/27    (a)					104,000		102,180
											564,000
			Real Estate Management & Development – (0.45%)
				Real Estate Operating Companies – (0.45%)
				Forest City Enterprises, Inc., Conv. Sr. Notes, 5.00%, 10/15/16					80,000		114,100
						Total Financials					678,100
					TOTAL CONVERTIBLE BONDS – (Identified cost $526,554)						678,100

22

DAVIS VARIABLE ACCOUNT FUND, INC.	Schedule of Investments
DAVIS REAL ESTATE PORTFOLIO - (CONTINUED)	December 31, 2010

						Principal			Value (Note 1)
SHORT TERM INVESTMENTS – (4.19%)
		Banc of America Securities LLC Joint Repurchase Agreement, 0.25%, 01/03/11, dated 12/31/10, repurchase value of $203,004 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 2.104%-6.50%, 06/01/25-12/01/40, total market value $207,060)					$	203,000	$	203,000
		Goldman, Sachs & Co. Joint Repurchase Agreement, 0.16%, 01/03/11, dated 12/31/10, repurchase value of $245,003 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.50%-6.50%, 12/01/25-01/01/41, total market value $249,900)						245,000		245,000
		Mizuho Securities USA Inc. Joint Repurchase Agreement, 0.24%, 01/03/11, dated 12/31/10, repurchase value of $612,012 (collateralized by: U.S. Government agency obligations in a pooled cash account, 3.125%-7.50%, 01/31/12-05/15/37, total market value $624,240)						612,000		612,000
				TOTAL SHORT TERM INVESTMENTS – (Identified cost $1,060,000)						1,060,000
			Total Investments – (99.81%) – (Identified cost $20,219,418) – (b)							25,221,622
			Other Assets Less Liabilities – (0.19%)							47,664
					Net Assets – (100.00%)				$	25,269,286
	* 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 $564,000 or 2.23% of the Fund's    net assets as of December 31, 2010.
	(b)        Aggregate cost for federal income tax purposes is $21,614,504 At December 31, 2010 unrealized appreciation              (depreciation) of securities for federal income tax purposes is as follows:
			Unrealized appreciation						$	4,821,698
			Unrealized depreciation							(1,214,580)
					Net unrealized appreciation				$	3,607,118
See Notes to Financial Statements

23

DAVIS VARIABLE ACCOUNT FUND, INC.	Statements of Assets and Liabilities
	At December 31, 2010

				Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
ASSETS:
Investments in securities at value* (see accompanying Schedules of Investments)			$	546,565,265	$	82,020,113	$	25,221,622
Cash				6,081		2,061		3,922
Receivables:
	Capital stock sold			57,661		4,968		15,397
	Dividends and interest			551,202		27,530		118,423
	Investment securities sold			260,909		455,691		–
Prepaid expenses				7,862		1,235		466
		Total assets		547,448,980		82,511,598		25,359,830
LIABILITIES:
Payables:
	Capital stock redeemed			74,260,411		43,757		51,460
	Investment securities purchased			132,874		–		–
Accrued audit fees				13,900		12,100		12,100
Accrued management fees				260,962		39,439		13,924
Other accrued expenses				46,623		13,731		13,060
		Total liabilities		74,714,770		109,027		90,544
NET ASSETS			$	472,734,210	$	82,402,571	$	25,269,286
SHARES OUTSTANDING				39,497,648		7,488,987		2,908,309
NET ASSET VALUE, offering, and redemption price per share (Net assets ÷ Shares outstanding)			$	11.97	$	11.00	$	8.69
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	39,498	$	7,489	$	2,908
Additional paid-in capital				316,660,454		71,670,142		35,769,746
Undistributed (overdistributed) net investment income				(1,425,334)		853,377		(1,276)
Accumulated net realized losses from investments				(10,336,998)		(12,370,712)		(15,503,918)
Net unrealized appreciation on investments and foreign currency transactions				167,796,590		22,242,275		5,001,826
		Net Assets	$	472,734,210	$	82,402,571	$	25,269,286
*Including:
	Cost of investments		$	378,777,207	$	59,778,844	$	20,219,418
	Cost and market value of repurchase agreements (if greater than 10% of net assets)			87,403,000		–		–
See Notes to Financial Statements

24

DAVIS VARIABLE ACCOUNT FUND, INC.	Statements of Operations
	For the year ended December 31, 2010

			Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
INVESTMENT INCOME:
Income:
Dividends*		$	8,019,447	$	1,356,663	$	559,207
Interest			482,376		3,219		33,745
	Total income		8,501,823		1,359,882		592,952
Expenses:
Management fees (Note 3)			2,827,394		445,386		136,388
Custodian fees			104,315		27,465		18,305
Transfer agent fees			17,703		8,350		5,651
Audit fees			20,400		18,000		18,000
Legal fees			15,100		2,384		720
Accounting fees (Note 3)			6,750		2,004		2,004
Reports to shareholders			95,000		24,150		5,800
Directors’ fees and expenses			114,072		20,397		8,410
Registration and filing fees			303		49		15
Miscellaneous			16,819		7,782		6,761
Total expenses			3,217,856		555,967		202,054
Expenses paid indirectly (Note 4)			(14)		(3)		(2)
	Net expenses		3,217,842		555,964		202,052
Net investment income			5,283,981		803,918		390,900
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
	Investment transactions		31,050,561		1,263,561		167,089
	Foreign currency transactions		(62)		(12,825)		–
Net realized gain			31,050,499		1,250,736		167,089
Net increase in unrealized appreciation			28,380,743		6,094,685		3,843,814
	Net realized and unrealized gain on investments and foreign currency transactions		59,431,242		7,345,421		4,010,903
Net increase in net assets resulting from operations		$	64,715,223	$	8,149,339	$	4,401,803
*Net of foreign taxes withheld as follows		$	121,773	$	27,900	$	395
See Notes to Financial Statements

25

DAVIS VARIABLE ACCOUNT FUND, INC.	Statements of Changes in Net Assets
	For the year ended December 31, 2010

			Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
OPERATIONS:
Net investment income		$	5,283,981	$	803,918	$	390,900
Net realized gain from investments and foreign currency transactions			31,050,499		1,250,736		167,089
Net increase in unrealized appreciation on investments and foreign currency transactions			28,380,743		6,094,685		3,843,814
	Net increase in net assets resulting from operations		64,715,223		8,149,339		4,401,803
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income			(6,868,898)		(650,801)		(470,072)
CAPITAL SHARE TRANSACTIONS:
Net decrease in net assets resulting from capital share transactions (Note 5)			(104,516,079)		(12,933,188)		(2,228,798)
	Total increase (decrease) in net assets		(46,669,754)		(5,434,650)		1,702,933
NET ASSETS:
Beginning of year			519,403,964		87,837,221		23,566,353
End of year*		$	472,734,210	$	82,402,571	$	25,269,286
*Including undistributed (overdistributed) net investment income of		$	(1,425,334)	$	853,377	$	(1,276)
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.	Notes to Financial Statements
	December 31, 2010

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.

28

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2010

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

Value Measurements – (Continued)

The following is a summary of the inputs used as of December 31, 2010 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	$	26,030,242	$	–	$	159,600
Consumer staples		77,607,567		–		–
Energy		71,656,234		5,485,870		–
Financials		128,344,069		68,445,655		20,169,704
Health care		59,877,386		–		–
Industrials		28,813,289		2,200,012		868,651
Information technology		23,273,343		–		–
Materials		40,608,260		–		–
Telecommunication services		1,506,895		–		2,104,057
Total Level 1		457,717,285		76,131,537		23,302,012
Level 2 – Other Significant Observable Inputs:
Convertible debt securities		1,444,980		–		678,100
Equity securities:
Financials		–		4,497,850		181,510
Short-term securities		87,403,000		995,000		1,060,000
Total Level 2		88,847,980		5,492,850		1,919,610
Level 3 – Significant Unobservable Inputs:
Equity securities:
Financials		–		395,726		–
Total	$	546,565,265	$	82,020,113	$	25,221,622
Level 2 to Level 1 transfers*:
Consumer discretionary	$	1,073,358	$	–	$	–
Consumer staples		5,590,274		–		–
Energy		4,073,166		–		–
Financials		5,893,843		8,165,841		–
Industrials		12,184,155		–		–
Materials		7,437,176		–		–
Total	$	36,251,972	$	8,165,841	$	–

*Application of fair value procedures for securities traded on foreign exchanges triggered transfers between Level 1 and Level 2 assets during the year ended December 31, 2010.

29

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2010

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

Value Measurements – (Continued)

The following table reconciles the valuation of assets in which significant unobservable inputs (Level 3) were used in determining fair value for the year ended December 31, 2010:

	Davis Financial Portfolio
Investment Securities:
Beginning balance	$	–
Change in unrealized appreciation (depreciation)		(213,086)
Net purchases (sales)		608,812
Ending balance	$	395,726

The cost of purchases and the proceeds from sales may include securities received or delivered through corporate actions or exchanges.  Realized and unrealized gains (losses) are included in the related amounts on investments in the Statement of Operations.

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.

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.

30

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2010

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

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, 2010, 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 2007.  The Funds have available for federal income tax purposes unused capital loss carryforwards as follows:

	Capital Loss Carryforwards
	Davis		Davis		Davis
	Value		Financial		Real Estate
	Portfolio		Portfolio		Portfolio
Expiring
12/31/2016	$	–	$	3,410,000	$	2,447,000
12/31/2017		9,111,000		8,268,000		11,662,000
Total	$	9,111,000	$	11,678,000	$	14,109,000
Utilized in 2010	$	21,334,000	$	1,329,000	$	138,000

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010.   The Act makes changes to several tax rules impacting the Funds. In general, the provisions of the Act will be effective for the Funds’ fiscal year ending December 31, 2011. Although the Act provides several benefits, including the unlimited carryforward of future capital losses, there may be a greater likelihood that all or a portion of each Fund’s pre-enactment capital loss carryforwards may expire without being utilized due to the fact that post-enactment capital losses get utilized before pre-enactment capital loss carryforwards. Relevant information regarding the impact of the Act on the Funds, if any, will be contained within the “Federal Income Taxes” section of the Notes to Financial Statements for the fiscal year ending December 31, 2011.

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, 2010

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 certain components of capital to reflect permanent differences between financial statement amounts and net income and realized gains/losses determined in accordance with income tax rules.  Accordingly, during the year ended December 31, 2010, for Davis Value Portfolio, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $32,917 and a corresponding increase 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 $222,178, an increase in accumulated net realized losses from investments and foreign currency transactions of $222,132, and a decrease in paid in capital of $46; for Davis Real Estate Portfolio, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $70,608 and a corresponding decrease in paid in capital.  The Funds’ net assets have not been affected by these reclassifications.

The tax character of distributions paid during the years ended December 31, 2010 and 2009 was as follows:

	Ordinary Income		Long-Term Capital Gain		Return of Capital		Total
Davis Value Portfolio
2010	$	6,868,898	$	–	$	–	$	6,868,898
2009		3,982,003		–		–		3,982,003
Davis Financial Portfolio
2010		650,801		–		–		650,801
2009		629,608		–		–		629,608
Davis Real Estate Portfolio
2010		470,072		–		–		470,072
2009		513,936		–		–		513,936

As of December 31, 2010, 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 (overdistributed) net investment income	$		(57,474)	$	857,441	$	–
Accumulated net realized losses from investments and foreign currency transactions		(9,111,145)			(11,677,614)		(14,108,832)
Net unrealized appreciation on investments			165,228,729		21,549,176		3,606,740
Total	$		156,060,110	$	10,729,003	$	(10,502,092)

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, 2010

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.

Directors Fees and Expenses - The Funds set up a Rabbi Trust to provide for the deferred compensation plan for Independent Directors that enables them to elect to defer receipt of all or a portion of annual fees they are entitled to receive. The value of an eligible Director’s account is based upon years of service and fees paid to each Director during the years of service. The amount paid to the Director by the Trust under the plan will be determined based upon the performance of the Davis Funds in which the amounts are invested.

Unfunded Captial Commitments - Unfunded capital commitments represent agreements which obligate a fund to meet capital calls in the future. Payments would be made when a capital call is requested. Capital calls can only be made if and when certain requirements have been fulfilled; thus, the timing and the amount of such capital calls cannot readily be determined. Unfunded capital commitments are recorded when capital calls are requested. As of December 31, 2010, unfunded capital commitments in Davis Financial Portfolio amounted to $1,291,188.

NOTE 2 - PURCHASES AND SALES OF SECURITIES

The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) during the year ended December 31, 2010 were as follows:

	Davis		Davis		Davis
	Value		Financial		Real Estate
	Portfolio		Portfolio		Portfolio
Cost of purchases	$	100,313,108	$	1,369,704	$	9,875,366
Proceeds of sales		198,766,570		14,702,556		10,533,846

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser.  The annual rate for each Fund is 0.55% of the average net assets.

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, 2010 for Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio amounted to $6,750, $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 $14, $3, and $2 for Davis Value Portfolio, Davis Financial Portfolio, and Davis Real Estate Portfolio, respectively, during the year ended December 31, 2010.

33

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2010

NOTE 5 - CAPITAL STOCK

At December 31, 2010, 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, 2010
			Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
Shares sold			5,615,497		1,402,090		352,772
Shares issued in reinvestment of distributions			573,843		59,325		58,913
			6,189,340		1,461,415		411,685
Shares redeemed			(14,994,784)		(2,770,797)		(690,084)
	Net decrease		(8,805,444)		(1,309,382)		(278,399)
Proceeds from shares sold		$	58,765,835	$	14,260,345	$	2,867,737
Proceeds from shares issued in reinvestment of distributions			6,868,898		650,801		470,072
			65,634,733		14,911,146		3,337,809
Cost of shares redeemed			(170,150,812)		(27,844,334)		(5,566,607)
	Net decrease	$	(104,516,079)	$	(12,933,188)	$	(2,228,798)
		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)

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, 2010.

34

DAVIS VARIABLE ACCOUNT FUND, INC.	Notes to Financial Statements – (Continued)
	December 31, 2010

NOTE 7 - RESTRICTED SECURITIES

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 restricted securities in Davis Value Portfolio amounted to $2,227,672 or 0.47% of the Fund’s net assets as of December 31, 2010.  The aggregate value of restricted securities in Davis Financial Portfolio amounted to $4,893,576 or 5.94% of the Fund’s net assets as of December 31, 2010.

Information regarding restricted securities is as follows:

Fund	Security	Acquisition Date	Principal	Shares/    Units	Cost per Share/Unit		Valuation per  Share/Unit as of December 31, 2010
Davis Value Portfolio	Fairfax Financial Holdings Ltd., 144A	02/23/10	NA	2,490	$	355.00	$	411.33
Davis Value Portfolio	Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13	07/17/08	$    736,000	7,360	$	100.00	$	135.19
Davis Value Portfolio	Sino-Forest Corp., 144A	12/11/09	NA	8,900	$	15.85	$	23.42
Davis Financial Portfolio	Oaktree Capital Group LLC, Class A	05/21/07	NA	126,700	$	23.84	$	35.50
Davis Financial Portfolio	SKBHC Holdings LLC	11/08/10	NA	122	$	5,000.01	$	3,250.00

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,
			2010			2009			2008			2007			2006
Net Asset Value, Beginning of Period			$	10.75		$	8.26		$	14.48		$	14.58		$	12.77
Income (Loss) from Investment Operations:
Net Investment Income			0.11			0.08			0.13			0.17			0.11
Net Realized and Unrealized Gains (Losses)			1.26			2.49			(6.00)			0.51			1.81
	Total from Investment Operations		1.37			2.57			(5.87)			0.68			1.92
Dividends and Distributions:
Dividends from Net Investment Income			(0.15)			(0.08)			(0.12)			(0.17)			(0.11)
Distributions from Realized Gains			–			–			(0.23)			(0.61)			–
	Total Dividends and Distributions		(0.15)			(0.08)			(0.35)			(0.78)			(0.11)
Net Asset Value, End of Period			$	11.97		$	10.75		$	8.26		$	14.48		$	14.58
Total Returna			12.76		%	31.16		%	(40.32)		%	4.64		%	15.00		%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)			$	472,734		$	519,404		$	333,152		$	658,699		$	771,828
Ratio of Expenses to Average Net Assets:
	Gross		0.63		%	0.71		%	0.82		%	0.81		%	0.81		%
	Netb		0.63		%	0.71		%	0.82		%	0.81		%	0.81		%
Ratio of Net Investment Income to Average Net Assets			1.03		%	0.97		%	0.98		%	1.11		%	0.83		%
Portfolio Turnover Ratec			21		%	20		%	17		%	9		%	19		%
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,
			2010			2009			2008			2007			2006
Net Asset Value, Beginning of Period			$	9.98		$	7.12		$	14.27		$	16.29		$	13.83
Income (Loss) from Investment Operations:
Net Investment Income			0.12			0.05			0.08			0.17			0.09
Net Realized and Unrealized Gains (Losses)			0.99			2.88			(6.76)			(1.12)			2.47
	Total from Investment Operations		1.11			2.93			(6.68)			(0.95)			2.56
Dividends and Distributions:
Dividends from Net Investment Income			(0.09)			(0.07)			–			(0.17)			(0.09)
Distributions from Realized Gains			–			–			(0.47)			(0.90)			(0.01)
	Total Dividends and Distributions		(0.09)			(0.07)			(0.47)			(1.07)			(0.10)
Net Asset Value, End of Period			$	11.00		$	9.98		$	7.12		$	14.27		$	16.29
Total Returna			11.10		%	41.18		%b	(46.36)		%	(6.05)		%	18.50		%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)			$	82,403		$	87,837		$	57,321		$	116,725		$	155,807
Ratio of Expenses to Average Net Assets:
	Gross		0.69		%	0.78		%	0.88		%	0.85		%	0.84		%
	Netc		0.69		%	0.78		%	0.88		%	0.85		%	0.84		%
Ratio of Net Investment Income to Average Net Assets			0.99		%	0.67		%	0.73		%	0.97		%	0.66		%
Portfolio Turnover Rated			2		%	10		%	16		%	17		%	9		%
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,
			2010			2009			2008			2007			2006
Net Asset Value, Beginning of Period			$	7.40		$	5.80		$	11.45		$	20.43		$	17.33
Income (Loss) from Investment Operations:
Net Investment Income			0.13			0.16			0.19			0.42			0.34
Net Realized and Unrealized Gains (Losses)			1.31			1.60			(5.50)			(3.40)			5.58
	Total from Investment Operations		1.44			1.76			(5.31)			(2.98)			5.92
Dividends and Distributions:
Dividends from Net Investment Income			(0.15)			(0.16)			(0.22)			(0.64)			(0.60)
Distributions from Realized Gains			–			–			(0.11)			(5.36)			(2.22)
Return of Capital			–			–			(0.01)			–			–
	Total Dividends and Distributions		(0.15)			(0.16)			(0.34)			(6.00)			(2.82)
Net Asset Value, End of Period			$	8.69		$	7.40		$	5.80		$	11.45		$	20.43
Total Returna			19.70		%	31.73		%	(46.91)		%	(15.48)		%	34.37		%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)			$	25,269		$	23,566		$	19,331		$	49,548		$	89,738
Ratio of Expenses to Average Net Assets:
	Gross		0.81		%	0.98		%	0.98		%	0.88		%	0.86		%
	Netb		0.81		%	0.98		%	0.98		%	0.87		%	0.86		%
Ratio of Net Investment Income to Average Net Assets			1.58		%	2.81		%	1.84		%	1.92		%	1.63		%
Portfolio Turnover Ratec			43		%	70		%	41		%	49		%	38		%
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 (each a series of the Davis Variable Account Fund, Inc.), including the schedules of investments, as of December 31, 2010, 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, 2010, 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, 2010, 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, 2011

39

DAVIS VARIABLE ACCOUNT FUND, INC. Fund Information

Federal Income Tax Information (Unaudited)

Each Fund designates the following amounts distributed during the calendar year ended December 31, 2010 as dividends eligible for the corporate dividends-received deduction.

		Davis Value Portfolio		Davis Financial Portfolio		Davis Real Estate Portfolio
Income dividends	$	6,868,898	$	650,801	$	470,072
Income qualifying for corporate dividends-received deduction	$	6,868,898	$	647,927	$	32,799
		100%		100%		7%

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 information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

40

DAVIS VARIABLE ACCOUNT FUND, INC. Matters Submitted to a Vote of Shareholders (Unaudited)

A special meeting of shareholders was held on November 18, 2010.  The number of votes necessary to conduct the meeting and approve the proposal was obtained.  The results of the votes of shareholders are listed below.

			Davis Value Portfolio	Davis Financial Portfolio	Davis Real Estate Portfolio
PROPOSAL Election of Directors
	Marc Blum
		For	471,572,527	73,449,515	23,958,514
		Withheld	17,026,929	2,034,846	1,628,294
	Christopher Davis
		For	471,503,824	73,367,994	24,332,566
		Withheld	17,095,632	2,116,367	1,254,242
	Andrew Davis
		For	471,616,486	73,365,995	24,164,567
		Withheld	16,982,970	2,118,366	1,422,241
	John Gates Jr.
		For	471,843,570	73,377,445	24,319,928
		Withheld	16,755,886	2,106,916	1,266,880
	Thomas Gayner
		For	471,757,049	73,516,253	24,332,566
		Withheld	16,842,407	1,968,108	1,254,242
	G. Bernard Hamilton
		For	470,145,131	73,295,934	24,038,919
		Withheld	18,454,325	2,188,427	1,547,889
	Samuel Iapalucci
		For	471,546,968	73,323,243	24,164,567
		Withheld	17,052,488	2,161,118	1,422,241
	Robert Morgenthau
		For	471,485,673	73,435,705	24,240,888
		Withheld	17,113,783	2,048,656	1,345,920
	Christian Sonne
		For	470,436,387	73,307,594	24,026,281
		Withheld	18,163,069	2,176,767	1,560,527
	Marsha Williams
		For	471,821,964	73,362,265	24,268,899
		Withheld	16,777,492	2,122,096	1,317,909

41

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 (REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (REIT); Chairman, Regional Transportation Authority.
Thomas S. Gayner (12/16/61)	Director/ Chairman	Director since 2004	President and Chief Investment Officer, Markel Corporation (insurance company).	13	Director, Washington Post Co. (publishing company); 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 Companies, Ltd. (engineering).	13	Director, Trow Global Holdings Inc. (engineering & consulting).
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director (Retired 12/31/10)	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 (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).

42

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*

Andrew A. Davis (06/25/63)	Director	Director since 1997	President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.	16	Director, the Selected Funds (consisting of three portfolios) since 1998.
Christopher C. Davis (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).	16	Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (publishing company).

*   Andrew A. Davis and Christopher C. Davis own partnership units (directly, indirectly, or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.

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). See description in the section on Inside Directors.

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 (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 12.76% for the year ended December 31, 2010. Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 15.06%. Every sector1 within the Index registered increases over the year. Consumer discretionary, industrials, and materials were the sectorswithin Index that increased the most. Health care and utilities were the sectors within the Index that increased the least.

Factors Impacting the Portfolio’s Performance

The Portfolio had more invested in financials than any other sector and they were the most important contributor2 to the Portfolio’s performance. The Portfolio’s financial companies out-performed the corresponding sector within the Index (up 17% versus up 11% for the Index) and had a higher relative average weighting (28% versus 16% for the Index). Berkshire Hathaway3, Wells Fargo, and Julius Baer Group were among the most important contributors to performance. Visa was among the most important detractors from performance.

Consumer staple companies were the second most important contributor to the Portfolio’s performance. The Portfolio’s consumer staple companies out-performed the corresponding sector within the Index (up 18% versus up 14% for the Index) and had a higher relative average weighting (15% versus 11% for the Index). Costco Wholesale was among the most important contributors to performance.

Energy companies made positive contributions to absolute performance, but were the most important reason that the Portfolio lagged the Index. The Portfolio’s energy companies under-performed the corresponding sector within the Index (up 8% versus up 20% for the Index), but had a higher relative average weighting (16% versus 11% for the Index) in this stronger performing sector. Occidental Petroleum and Canadian Natural Resources were among the most important contributors to performance. EOG Resources, Transocean, and China Coal Energy were among the most important detractors from performance.

Industrial companies also made positive contributions to absolute performance, but were the second most important reason that the Portfolio’s performance lagged the Index. The Portfolio’s industrial companies under-performed the corresponding sector within the Index (up 16% versus up 27% for the Index) and had a lower relative average weighting (6% versus 11% for the Index) in this stronger performing sector. China Shipping Development was among the most important detractors from performance.

Other important detractors from the Portfolio’s performance included two information technology companies, Hewlett-Packard and Microsoft. Both companies turned in negative returns for the year despite generally positive returns in both the information technology sector and in the overall market.

The Portfolio had approximately 21% of its net assets invested in foreign companies at December 31, 2010. As a whole, those 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. Davis Value Portfolio’s principal risks are: market risk, company risk, financial services risk, foreign country risk, small- and medium-capitalization risk, fees and expenses risk, and headline 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, 2000

Average Annual Total Return for periods ended December 31, 2010

Fund & Benchmark Index	1-Year	5-Year	10-Year	Since  Fund’s Inception (07/01/99)	Gross Expense Ratio	Net Expense Ratio
Davis Value Portfolio	12.76%	1.21%	2.43%	3.14%	0.63%	0.63%
Standard & Poor’s 500® Index	15.06%	2.29%	1.41%	0.99%

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, 2010

Portfolio Composition		Industry Weightings
(% of Fund’s 12/31/10 Net Assets)		(% of 12/31/10 Long Term Portfolio)
			Fund	S&P 500®
Common Stock (U.S.)	75.86%	Energy	15.61%	12.03%
Common Stock (Foreign)	20.96%	Diversified Financials	13.25%	7.53%
Convertible Bonds (Foreign)	0.21%	Health Care	13.04%	10.91%
Convertible Bonds (U.S.)	0.10%	Insurance	9.07%	3.90%
Short Term Investments	18.49%	Materials	9.06%	3.74%
Other Assets & Liabilities	(15.62)%	Food & Staples Retailing	9.04%	2.36%
	100.00%	Food, Beverage & Tobacco	6.72%	5.87%
		Information Technology	5.07%	18.65%
		Banks	4.72%	3.10%
		Retailing	3.18%	3.71%
		Transportation	2.74%	2.02%
		Commercial & Professional Services	2.53%	0.60%
		Other	2.19%	13.97%
		Automobiles & Components	1.64%	0.87%
		Household & Personal Products	1.14%	2.41%
		Capital Goods	1.00%	8.33%
			100.00%	100.00%

Top 10 Long Term Holdings

(% of Fund’s 12/31/10 Net Assets)

Costco Wholesale Corp.	Food & Staples Retailing	5.01%
Wells Fargo & Co.	Commercial Banks	4.58%
American Express Co.	Consumer Finance	4.28%
CVS Caremark Corp.	Food & Staples Retailing	3.77%
EOG Resources, Inc.	Energy	3.38%
Occidental Petroleum Corp.	Energy	3.28%
Loews Corp.	Multi-line Insurance	3.05%
Merck & Co., Inc.	Pharmaceuticals, Biotechnology & Life Sciences	2.95%
Devon Energy Corp.	Energy	2.95%
Canadian Natural Resources Ltd.	Energy	2.94%

4

DAVIS VALUE PORTFOLIO	Fund Overview – (Continued)
	December 31, 2010

New Positions Added (01/01/10-12/31/10)

(Highlighted positions are those greater than 0.50% of Fund’s 12/31/10 net assets)

Security	Industry	Date of 1st Purchase	% of Fund’s 12/31/10 Net Assets
Air Products and Chemicals, Inc.	Materials	08/24/10	0.26%
America Movil SAB de C.V., Series L, ADR	Telecommunication Services	04/21/10	0.32%
Aon Corp.	Insurance Brokers	07/12/10	0.13%
Baxter International Inc.	Health Care Equipment & Services	04/22/10	0.61%
Charles Schwab Corp.	Capital Markets	08/31/10	0.06%
Fairfax Financial Holdings Ltd., 144A	Multi-line Insurance	02/23/10	0.22%
Kraft Foods Inc., Class A	Food, Beverage & Tobacco	12/17/10	0.29%
Lockheed Martin Corp.	Capital Goods	09/20/10	0.63%
Nestle S.A.	Food, Beverage & Tobacco	03/09/10	0.18%
Praxair, Inc.	Materials	05/21/10	0.22%
Roche Holding AG - Genusschein	Pharmaceuticals, Biotechnology &
	Life Sciences	07/16/10	0.93%
Schlumberger Ltd.	Energy	06/07/10	0.23%
Unilever NV, NY Shares	Food, Beverage & Tobacco	02/09/10	0.40%

Positions Closed (01/01/10-12/31/10)

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

Security	Industry	Date of Final Sale		Realized Gain (Loss)
ABB Ltd., ADR	Capital Goods	12/01/10	$	461,458
AES Corp.	Utilities	02/17/10	$	(15,445)
Amazon.com, Inc.	Retailing	07/13/10		1,639,800
Berkshire Hathaway Inc., Class B	Property & Casualty Insurance	05/07/10		159,903
Cardinal Health, Inc.	Health Care Equipment & Services	07/09/10		382,905
CareFusion Corp.	Health Care Equipment & Services	08/13/10		51,431
Comcast Corp., Special Class A	Media	02/24/10		(440,803)
ConocoPhillips	Energy	07/09/10		864,106
Cosco Pacific Ltd.	Transportation	09/17/10		(695,400)
DIRECTV, Class A	Media	01/21/10		1,491,847
Garmin Ltd.	Consumer Durables & Apparel	01/04/10		4,522
H&R Block, Inc.	Consumer Services	09/10/10		(140,129)
Harley-Davidson, Inc., Sr. Notes, 15.00%,  02/01/14	Automobiles & Components	12/08/10		564,023
Hartford Financial Services Group, Inc.	Multi-line Insurance	01/13/10		1,192,361
Laboratory Corp. of America Holdings	Health Care Equipment & Services	05/28/10		487,432
Level 3 Communications, Inc., Conv. Sr. Notes, 10.00%, 05/01/11	Telecommunication Services	05/27/10		26,720
News Corp., Class A	Media	09/24/10		(754,990)
PACCAR Inc.	Capital Goods	06/10/10		436,101
Principal Financial Group, Inc.	Life & Health Insurance	02/01/10		(23,370)
UnitedHealth Group Inc.	Health Care Equipment & Services	01/05/10		99,533
United Parcel Service, Inc., Class B	Transportation	07/23/10		320,294
Walt Disney Co.	Media	10/05/10		1,970,493

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, 2010. 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*
	(07/01/10)	(12/31/10)	(07/01/10-12/31/10)
Actual	$1,000.00	$1,214.64	$3.52
Hypothetical	$1,000.00	$1,022.03	$3.21

Hypothetical assumes 5% annual return before expenses.

* Expenses are equal to the Fund’s annualized operating expense ratio (0.63%)**, 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, 2010

					Shares		Value (Note 1)
COMMON STOCK – (96.82%)
	CONSUMER DISCRETIONARY – (5.51%)
		Automobiles & Components – (1.60%)
			Harley-Davidson, Inc.			217,500	$	7,540,725
		Consumer Durables & Apparel – (0.23%)
			Hunter Douglas NV  (Netherlands)			20,299		1,073,358
		Media – (0.59%)
			Grupo Televisa S.A., ADR  (Mexico)*			86,400		2,240,352
			Liberty Media - Starz, Series A  *			8,506		566,202
								2,806,554
		Retailing – (3.09%)
			Bed Bath & Beyond Inc.  *			166,105		8,163,230
			CarMax, Inc.  *			145,340		4,633,439
			Liberty Media Corp. - Interactive, Series A  *			115,034		1,812,936
								14,609,605
				Total Consumer Discretionary				26,030,242
	CONSUMER STAPLES – (16.42%)
		Food & Staples Retailing – (8.78%)
			Costco Wholesale Corp.			327,640		23,663,799
			CVS Caremark Corp.			512,678		17,825,814
								41,489,613
		Food, Beverage & Tobacco – (6.53%)
			Coca-Cola Co.			93,710		6,163,307
			Diageo PLC, ADR  (United Kingdom)			92,433		6,870,545
			Heineken Holding NV  (Netherlands)			128,621		5,590,274
			Hershey Co.			11,520		543,168
			Kraft Foods Inc., Class A			44,000		1,386,440
			Mead Johnson Nutrition Co.			36,465		2,269,946
			Nestle S.A.  (Switzerland)			14,600		854,920
			Philip Morris International Inc.			90,990		5,325,645
			Unilever NV, NY Shares  (Netherlands)			59,700		1,874,580
								30,878,825
		Household & Personal Products – (1.11%)
			Natura Cosmeticos S.A.  (Brazil)			31,800		913,580
			Procter & Gamble Co.			67,240		4,325,549
								5,239,129
				Total Consumer Staples				77,607,567
	ENERGY – (15.16%)
			Canadian Natural Resources Ltd.  (Canada)			312,850		13,896,797
			China Coal Energy Co. - H  (China)			2,607,900		4,073,166
			Devon Energy Corp.			177,330		13,922,178
			EOG Resources, Inc.			174,780		15,976,640
			Occidental Petroleum Corp.			158,160		15,515,496
			OGX Petroleo e Gas Participacoes S.A.  (Brazil)*			291,600		3,513,253
			Schlumberger Ltd.			13,200		1,102,200
			Transocean Ltd.  *			52,604		3,656,504
				Total Energy				71,656,234

7

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2010

						Shares		Value (Note 1)
COMMON STOCK – (CONTINUED)
	FINANCIALS – (27.15%)
		Banks – (4.58%)
			Commercial Banks – (4.58%)
				Wells Fargo & Co.			698,824	$	21,656,556
		Diversified Financials – (12.87%)
			Capital Markets – (7.83%)
				Ameriprise Financial, Inc.			82,620		4,754,781
				Bank of New York Mellon Corp.			442,400		13,360,480
				Brookfield Asset Management Inc., Class A  (Canada)			112,600		3,748,454
				Charles Schwab Corp.			17,300		296,003
				GAM Holding Ltd.  (Switzerland)*			100,360		1,658,355
				Goldman Sachs Group, Inc.			16,660		2,801,546
				Julius Baer Group Ltd.  (Switzerland)			221,460		10,374,276
									36,993,895
			Consumer Finance – (4.28%)
				American Express Co.			471,019		20,216,135
			Diversified Financial Services – (0.76%)
				JPMorgan Chase & Co.			11,368		482,231
				Moody's Corp.			69,730		1,850,634
				Visa Inc., Class A			18,200		1,280,916
									3,613,781
									60,823,811
		Insurance – (8.80%)
			Insurance Brokers – (0.13%)
				Aon Corp.			13,620		626,656
			Multi-line Insurance – (3.71%)
				Fairfax Financial Holdings Ltd.  (Canada)			5,130		2,096,323
				Fairfax Financial Holdings Ltd., 144A  (Canada)(a)(b)			2,490		1,024,223
				Loews Corp.			370,390		14,411,875
									17,532,421
			Property & Casualty Insurance – (3.92%)
				Berkshire Hathaway Inc., Class A  *			56		6,745,200
				Markel Corp.  *			1,390		525,601
				Progressive Corp. (Ohio)			566,320		11,252,778
									18,523,579
			Reinsurance – (1.04%)
				Transatlantic Holdings, Inc.			95,807		4,945,558
									41,628,214
		Real Estate – (0.90%)
				Hang Lung Group Ltd.  (Hong Kong)			643,000		4,235,488
					Total Financials				128,344,069
	HEALTH CARE – (12.66%)
		Health Care Equipment & Services – (3.47%)
				Baxter International Inc.			57,051		2,887,922
				Becton, Dickinson and Co.			60,760		5,135,435
				Express Scripts, Inc.  *			155,660		8,411,866
									16,435,223

8

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2010

					Shares		Value (Note 1)
COMMON STOCK – (CONTINUED)
	HEALTH CARE – (CONTINUED)
		Pharmaceuticals, Biotechnology & Life Sciences – (9.19%)
			Agilent Technologies, Inc.  *			110,280	$	4,568,900
			Johnson & Johnson			189,780		11,737,893
			Merck & Co., Inc.			386,585		13,932,524
			Pfizer Inc.			502,140		8,792,472
			Roche Holding AG - Genusschein  (Switzerland)			30,100		4,410,374
								43,442,163
				Total Health Care				59,877,386
	INDUSTRIALS – (6.09%)
		Capital Goods – (0.97%)
			Lockheed Martin Corp.			42,590		2,977,467
			Tyco International Ltd.			39,504		1,637,046
								4,614,513
		Commercial & Professional Services – (2.46%)
			D&B Corp.			46,900		3,850,021
			Iron Mountain Inc.			310,867		7,774,784
								11,624,805
		Transportation – (2.66%)
			China Merchants Holdings International Co., Ltd.  (China)			1,561,055		6,165,653
			China Shipping Development Co. Ltd. - H  (China)			1,129,000		1,504,791
			Kuehne & Nagel International AG  (Switzerland)			32,464		4,513,711
			LLX Logistica S.A.  (Brazil)*			76,670		218,463
			PortX Operacoes Portuarias S.A.  (Brazil)*			76,670		171,353
								12,573,971
				Total Industrials				28,813,289
	INFORMATION TECHNOLOGY – (4.92%)
		Semiconductors & Semiconductor Equipment – (1.73%)
			Texas Instruments Inc.			251,600		8,177,000
		Software & Services – (2.43%)
			Activision Blizzard, Inc.			215,200		2,676,012
			Google Inc., Class A  *			8,230		4,888,003
			Microsoft Corp.			140,410		3,918,843
								11,482,858
		Technology Hardware & Equipment – (0.76%)
			Hewlett-Packard Co.			85,831		3,613,485
				Total Information Technology				23,273,343

9

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2010

					Shares/Principal			Value (Note 1)
COMMON STOCK – (CONTINUED)
	MATERIALS – (8.59%)
		Air Products and Chemicals, Inc.					13,420	$	1,220,549
		BHP Billiton PLC  (United Kingdom)					95,530		3,799,479
		Martin Marietta Materials, Inc.					42,380		3,909,131
		Monsanto Co.					80,600		5,612,984
		Potash Corp. of Saskatchewan Inc.  (Canada)					10,054		1,556,661
		Praxair, Inc.					10,800		1,031,076
		Rio Tinto PLC  (United Kingdom)					52,005		3,637,697
		Sealed Air Corp.					429,975		10,942,864
		Sino-Forest Corp.  (Canada)*					314,550		7,367,866
		Sino-Forest Corp., 144A  (Canada)*(a)(b)					8,900		208,469
		Vulcan Materials Co.					29,790		1,321,484
				Total Materials					40,608,260
	TELECOMMUNICATION SERVICES – (0.32%)
		America Movil SAB de C.V., Series L, ADR  (Mexico)					26,280		1,506,895
				Total Telecommunication Services					1,506,895
			TOTAL COMMON STOCK – (Identified cost $290,238,207)						457,717,285
CONVERTIBLE BONDS – (0.31%)
	MATERIALS – (0.21%)
		Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13   (Canada)(b)				$	736,000		994,980
				Total Materials					994,980
	TELECOMMUNICATION SERVICES – (0.10%)
		Level 3 Communications, Inc., Conv. Sr. Notes, 15.00%, 01/15/13					400,000		450,000
				Total Telecommunication Services					450,000
			TOTAL CONVERTIBLE BONDS – (Identified cost $1,136,000)						1,444,980
SHORT TERM INVESTMENTS – (18.49%)
		Banc of America Securities LLC Joint Repurchase Agreement, 0.25%, 01/03/11, dated 12/31/10, repurchase value of $16,808,350 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 2.104%-6.50%, 06/01/25-12/01/40, total market value $17,144,160)					16,808,000		16,808,000
		Goldman, Sachs & Co. Joint Repurchase Agreement, 0.16%, 01/03/11, dated 12/31/10, repurchase value of $20,170,269 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.50%-6.50%, 12/01/25-01/01/41, total market value $20,573,400)					20,170,000		20,170,000
		Mizuho Securities USA Inc. Joint Repurchase Agreement, 0.24%, 01/03/11, dated 12/31/10, repurchase value of $50,426,009 (collateralized by: U.S. Government agency obligations in a pooled cash account, 3.125%-7.50%, 01/31/12-05/15/37, total market value $51,433,500)					50,425,000		50,425,000
			TOTAL SHORT TERM INVESTMENTS – (Identified cost $87,403,000)						87,403,000

	Total Investments – (115.62%) – (Identified cost $378,777,207) – (c)			546,565,265
	Liabilities Less Other Assets – (15.62%)			(73,831,055)
		Net Assets – (100.00%)	$	472,734,210
ADR: American Depositary Receipt

10

DAVIS VALUE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2010

	*	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 $1,232,692 or 0.26% of the Fund's net assets as of December 31, 2010.
	(b)	Restricted Security – See Note 7 of the Notes to Financial Statements.
	(c)	Aggregate cost for federal income tax purposes is $381,345,068.  At December 31, 2010 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
			Unrealized appreciation		$	166,674,172
			Unrealized depreciation			(1,453,975)
				Net unrealized appreciation	$	165,220,197
See Notes to Financial Statements

11

DAVIS VALUE PORTFOLIO	Statement of Assets and Liabilities
	At December 31, 2010

ASSETS:
Investments in securities at value* (see accompanying Schedule of Investments)			$	546,565,265
Cash				6,081
Receivables:
	Capital stock sold			57,661
	Dividends and interest			551,202
	Investment securities sold			260,909
Prepaid expenses				7,862
		Total assets		547,448,980
LIABILITIES:
Payables:
	Capital stock redeemed			74,260,411
	Investment securities purchased			132,874
Accrued management fee				260,962
Other accrued expenses				60,523
		Total liabilities		74,714,770
NET ASSETS			$	472,734,210
SHARES OUTSTANDING				39,497,648
NET ASSET VALUE, offering, and redemption price per share (Net assets ÷ Shares outstanding)			$	11.97
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	39,498
Additional paid-in capital				316,660,454
Overdistributed net investment income				(1,425,334)
Accumulated net realized losses from investments				(10,336,998)
Net unrealized appreciation on investments and foreign currency transactions				167,796,590
		Net Assets	$	472,734,210
*Including:
	Cost of Investments		$	378,777,207
	Cost and market value of repurchase agreements (if greater than 10% of net assets)			87,403,000
See Notes to Financial Statements

12

DAVIS VALUE PORTFOLIO	Statement of Operations
	For the year ended December 31, 2010

INVESTMENT INCOME:
Income:
Dividends*			$	8,019,447
Interest				482,376
	Total income			8,501,823
Expenses:
Management fees (Note 3)		$                 2,827,394
Custodian fees		104,315
Transfer agent fees		17,703
Audit fees		20,400
Legal fees		15,100
Accounting fees (Note 3)		6,750
Reports to shareholders		95,000
Directors’ fees and expenses		114,072
Registration and filing fees		303
Miscellaneous		16,819
Total expenses				3,217,856
Expenses paid indirectly (Note 4)				(14)
	Net expenses			3,217,842
Net investment income				5,283,981
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND                                                             FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investment transactions				31,050,561
Foreign currency transactions				(62)
Net realized gain				31,050,499
Net increase in unrealized appreciation				28,380,743
	Net realized and unrealized gain on investments and                                                        foreign currency transactions			59,431,242
Net increase in net assets resulting from operations			$	64,715,223
*Net of foreign taxes withheld as follows			$	121,773
See Notes to Financial Statements

13

DAVIS VALUE PORTFOLIO Statements of Changes in Net Assets

		Year ended December 31,
		2010		2009
OPERATIONS:
Net investment income		$	5,283,981	$	3,837,745
Net realized gain (loss) from investments and foreign currency transactions			31,050,499		(40,978,639)
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions			28,380,743		155,373,588
	Net increase in net assets resulting from operations		64,715,223		118,232,694
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income			(6,868,898)		(3,982,003)
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets resulting from capital share transactions (Note 5)			(104,516,079)		72,001,466
	Total increase (decrease) in net assets		(46,669,754)		186,252,157
NET ASSETS:
Beginning of year			519,403,964		333,151,807
End of year*		$	472,734,210	$	519,403,964
*Including undistributed (overdistributed) net investment income of		$	(1,425,334)	$	126,666
See Notes to Financial Statements

14

DAVIS VALUE PORTFOLIO	Notes to Financial Statements
	December 31, 2010

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, 2010

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

Value Measurements – (Continued)

The following is a summary of the inputs used as of December 31, 2010 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	$	26,030,242	$	–	$	–	$	26,030,242
Consumer staples		77,607,567		–		–		77,607,567
Energy		71,656,234		–		–		71,656,234
Financials		128,344,069		–		–		128,344,069
Health care		59,877,386		–		–		59,877,386
Industrials		28,813,289		–		–		28,813,289
Information technology		23,273,343		–		–		23,273,343
Materials		40,608,260		–		–		40,608,260
Telecommunication services		1,506,895		–		–		1,506,895
Convertible debt securities		–		1,444,980		–		1,444,980
Short-term securities		–		87,403,000		–		87,403,000
Total	$	457,717,285	$	88,847,980	$	–	$	546,565,265

Level 2 to Level 1 transfers*:
Consumer discretionary	$	1,073,358
Consumer staples		5,590,274
Energy		4,073,166
Financials		5,893,843
Industrials		12,184,155
Materials		7,437,176
Total	$	36,251,972

*Application of fair value procedures for securities traded on foreign exchanges triggered transfers between Level 1 and Level 2 assets during the year ended December 31, 2010.

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, 2010

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, 2010, 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 2007. The Fund has available for federal income tax purposes unused capital loss carryforwards as follows:

	Capital Loss Carryforwards
Expiring
12/31/2017	$	9,111,000
Utilized in 2010	$	21,334,000

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010.   The Act makes changes to several tax rules impacting the Fund. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Although the Act provides several benefits, including the unlimited carryforward of future capital losses, there may be a greater likelihood that all or a portion of the Fund’s pre-enactment capital loss carryforwards may expire without being utilized due to the fact that post-enactment capital losses get utilized before pre-enactment capital loss carryforwards. Relevant information regarding the impact of the Act on the Fund, if any, will be contained within the “Federal Income Taxes” section of the Notes to Financial Statements for the fiscal year ending December 31, 2011.

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, 2010

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 certain components of capital to reflect permanent differences between financial statement amounts and net income and realized gains/losses determined in accordance with income tax rules.  Accordingly, during the year ended December 31, 2010, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $32,917 and a corresponding increase in accumulated net realized losses from investments and foreign currency transactions. The Fund’s net assets have not been affected by this reclassification.

The tax character of distributions paid during the years ended December 31, 2010 and 2009 was as follows:

	2010		2009
Ordinary income	$	6,868,898	$	3,982,003

As of December 31, 2010, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

Overdistributed net investment income	$	(57,474)
Accumulated net realized losses from investments and
foreign currency transactions		(9,111,145)
Net unrealized appreciation on investments		165,228,729
Total	$	156,060,110

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.

Directors Fees and Expenses - The Fund set up a Rabbi Trust to provide for the deferred compensation plan for Independent Directors that enables them to elect to defer receipt of all or a portion of annual fees they are entitled to receive. The value of an eligible Director’s account is based upon years of service and fees paid to each Director during the years of service. The amount paid to the Director by the Trust under the plan will be determined based upon the performance of the Davis Funds in which the amounts are invested.

NOTE 2 - PURCHASES AND SALES OF SECURITIES

The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) during the year ended December 31, 2010 were $100,313,108 and $198,766,570, respectively.

18

DAVIS VALUE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser at an annual rate of 0.55% of the Fund’s 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, 2010 amounted to $6,750.  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 $14 during the year ended December 31, 2010.

NOTE 5 - CAPITAL STOCK

At December 31, 2010, 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, 2010			December 31, 2009
	Shares	Amount		Shares	Amount
Shares sold	5,615,497	$	58,765,835	16,029,614	$	142,471,775
Shares issued in reinvestment of distributions	573,843		6,868,898	368,022		3,982,003
	6,189,340		65,634,733	16,397,636		146,453,778
Shares redeemed	(14,994,784)		(170,150,812)	(8,410,774)		(74,452,312)
Net increase (decrease)	(8,805,444)	$	(104,516,079)	7,986,862	$	72,001,466

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, 2010.

19

DAVIS VALUE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

NOTE 7 - RESTRICTED SECURITIES

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 restricted securities amounted to $2,227,672 or 0.47% of the Fund’s net assets as of December 31, 2010.

Information regarding restricted securities is as follows:

Security	Acquisition Date	Principal	Shares/ Units	Cost per Share/Unit		Valuation per  Share/Unit as of December 31, 2010
Fairfax Financial Holdings Ltd., 144A	02/23/10	NA	2,490	$	355.00	$	411.33
Sino-Forest Corp., Conv. Sr. Notes, 5.00%, 08/01/13	07/17/08	$    736,000	7,360	$	100.00	$	135.19
Sino-Forest Corp., 144A	12/11/09	NA	8,900	$	15.85	$	23.42

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,
			2010			2009			2008			2007			2006
Net Asset Value, Beginning of Period			$	10.75		$	8.26		$	14.48		$	14.58		$	12.77
Income (Loss) from Investment Operations:
Net Investment Income			0.11			0.08			0.13			0.17			0.11
Net Realized and Unrealized Gains (Losses)			1.26			2.49			(6.00)			0.51			1.81
	Total from Investment Operations		1.37			2.57			(5.87)			0.68			1.92
Dividends and Distributions:
Dividends from Net Investment Income			(0.15)			(0.08)			(0.12)			(0.17)			(0.11)
Distributions from Realized Gains			–			–			(0.23)			(0.61)			–
	Total Dividends and Distributions		(0.15)			(0.08)			(0.35)			(0.78)			(0.11)
Net Asset Value, End of Period			$	11.97		$	10.75		$	8.26		$	14.48		$	14.58
Total Returna			12.76		%	31.16		%	(40.32)		%	4.64		%	15.00		%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)			$	472,734		$	519,404		$	333,152		$	658,699		$	771,828
Ratio of Expenses to Average Net Assets:
	Gross		0.63		%	0.71		%	0.82		%	0.81		%	0.81		%
	Netb		0.63		%	0.71		%	0.82		%	0.81		%	0.81		%
Ratio of Net Investment Income to Average Net Assets			1.03		%	0.97		%	0.98		%	1.11		%	0.83		%
Portfolio Turnover Ratec			21		%	20		%	17		%	9		%	19		%
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, 2010, 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, 2010, 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, 2010, 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, 2011

22

DAVIS VALUE PORTFOLIO Fund Information

Federal Income Tax Information (Unaudited)

During the calendar year ended December 31, 2010, $6,868,898 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 information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Matters Submitted to a Vote of Shareholders (Unaudited)

A special meeting of shareholders was held on November 18, 2010.  The number of votes necessary to conduct the meeting and approve the proposal was obtained.  The results of the votes of shareholders are listed below.

PROPOSAL Election of Directors		For	Withheld
	Marc Blum	471,572,527	17,026,929
	Christopher Davis	471,503,824	17,095,632
	Andrew Davis	471,616,486	16,982,970
	John Gates Jr.	471,843,570	16,755,886
	Thomas Gayner	471,757,049	16,842,407
	G. Bernard Hamilton	470,145,131	18,454,325
	Samuel Iapalucci	471,546,968	17,052,488
	Robert Morgenthau	471,485,673	17,113,783
	Christian Sonne	470,436,387	18,163,069
	Marsha Williams	471,821,964	16,777,492

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 (REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (REIT); Chairman, Regional Transportation Authority.
Thomas S. Gayner (12/16/61)	Director/ Chairman	Director since 2004	President and Chief Investment Officer, Markel Corporation (insurance company).	13	Director, Washington Post Co. (publishing company); 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 Companies, Ltd. (engineering).	13	Director, Trow Global Holdings Inc. (engineering & consulting).
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director (Retired 12/31/10)	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 (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*

Andrew A. Davis (06/25/63)	Director	Director since 1997	President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.	16	Director, the Selected Funds (consisting of three portfolios) since 1998.
Christopher C. Davis (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).	16	Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (publishing company).

*   Andrew A. Davis and Christopher C. Davis own partnership units (directly, indirectly, or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.

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). See description in the section on Inside Directors.

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 (law firm); counsel to the Independent Directors and the Davis Funds.

25

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.

26

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	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 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 11.10% for the year ended December 31, 2010.  Over the same time period, the Standard & Poor’s 500® Index(“Index”) returned 15.06%.The Portfolio’s financial sector holdings out-performed the corresponding sector1 holdings within the Index, but under-performed the Index as a whole.

Factors Impacting the Portfolio’s Performance

The Portfolio’s diversified financial companies were the most important contributor2 to the Portfolio’s performance. The Portfolio’s diversified financial companies out-performed the corresponding industry group within the Index (up 14% versus up 4% for the Index). Julius Baer Group3, Brookfield Asset Management, Oaktree, and American Express were among the most important contributors to performance. Bank of America, Charles Schwab, and Visa were among the most important detractors from performance.

The Portfolio’s insurance companies under-performed the corresponding industry group within the Index (up 5% versus up 16% for the Index). Loews, Progressive, and Markel were among the top contributors to performance. China Life Insurance was among the most important detractors from performance.

The Portfolio’s banking companies out-performed the corresponding industry group within the Index (up 25% versus up 20% for the Index). Wells Fargo and State Bank of India were among the most important contributors to performance.

The Portfolio had a limited amount of assets invested in other sectors. Overall, those sectors made positive contributions to performance, but detracted relative to the Index. Canadian Natural Resources was among the most important contributors to performance while Sealed Air and D&B Corp. were among the most important detractors from performance. The Portfolio no longer owns Sealed Air.

The Portfolio had approximately 31% of its assets invested in foreign companies at December 31, 2010. As a whole, those 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.  Davis Financial Portfolio’s principal risks are: market risk, company risk, concentrated financial services portfolio risk, foreign country risk, small- and medium-capitalization risk, fees and expenses risk, focused portfolio risk, and headline 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, 2000

Average Annual Total Return for periods ended December 31, 2010

Fund & Benchmark Index	1-Year	5-Year	10-Year	Since Fund’s Inception (07/01/99)	Gross Expense Ratio	Net Expense Ratio
Davis Financial Portfolio	11.10%	(1.30)%	0.99%	2.59%	0.69%	0.69%
Standard & Poor’s 500® Index	15.06%	2.29%	1.41%	0.99%

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, 2010

Portfolio Composition		Industry Weightings
(% of Fund’s 12/31/10 Net Assets)		(% of  12/31/10 Stock Holdings)
			Fund	S&P 500®
Common Stock (U.S.)	67.63%	Diversified Financials	41.41%	7.53%
Common Stock (Foreign)	30.70%	Insurance	31.71%	3.90%
Short Term Investments	1.21%	Banks	17.39%	3.10%
Other Assets & Liabilities	0.46%	Energy	6.77%	12.03%
	100.00%	Commercial & Professional Services	2.72%	0.60%
		Information Technology	–	18.65%
		Health Care	–	10.91%
		Capital Goods	–	8.33%
		Food, Beverage & Tobacco	–	5.87%
		Other	–	29.08%
			100.00%	100.00%

Top 10 Long Term Holdings

(% of Fund’s 12/31/10 Net Assets)

Transatlantic Holdings, Inc.	Reinsurance	8.82%
State Bank of India Ltd., GDR	Commercial Banks	8.01%
American Express Co.	Consumer Finance	7.80%
Loews Corp.	Multi-line Insurance	7.02%
Wells Fargo & Co.	Commercial Banks	6.68%
Canadian Natural Resources Ltd.	Energy	6.66%
Oaktree Capital Group LLC, Class A	Diversified Financial Services	5.46%
Julius Baer Group Ltd.	Capital Markets	5.34%
Bank of New York Mellon Corp.	Capital Markets	5.21%
Markel Corp.	Property & Casualty Insurance	4.91%

New Positions Added (01/01/10-12/31/10)

(Highlighted positions are those greater than 0.30% of Fund’s 12/31/10 net assets)

Security	Industry	Date of 1st Purchase	% of Fund’s 12/31/10 Net Assets
SKBHC Holdings LLC	Commercial Banks	11/08/10	0.48%
U.S. Bancorp	Commercial Banks	02/11/10	0.47%

Positions Closed (01/01/10-12/31/10)

(Gains greater than $500,000 are highlighted)

Security	Industry	Date of Final Sale			Realized            Gain
FPIC Insurance Group, Inc.	Property & Casualty Insurance	05/19/10	$	610,195
JPMorgan Chase & Co.	Diversified Financial Services	04/08/10		395,944
Sealed Air Corp.	Materials	02/01/10		250,135

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, 2010. 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*
	(07/01/2010)	(12/31/2010)	(07/01/2010-12/31/2010)
Actual	$1,000.00	$1,194.81	$3.82
Hypothetical	$1,000.00	$1,021.73	$3.52

Hypothetical assumes 5% annual return before expenses.

* Expenses are equal to the Fund’s annualized operating expense ratio (0.69%)**, 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, 2010

						Shares		Value (Note 1)
COMMON STOCK – (98.33%)
	ENERGY – (6.66%)
				Canadian Natural Resources Ltd.  (Canada)			123,500	$	5,485,870
					Total Energy				5,485,870
	FINANCIALS – (89.00%)
		Banks – (17.10%)
			Commercial Banks – (17.10%)
				Banco Santander Brasil S.A., ADS  (Brazil)			20,000		272,000
				ICICI Bank Ltd., ADR  (India)			18,400		931,776
				SKBHC Holdings LLC  * (a)			122		395,726
				State Bank of India Ltd., GDR  (India)			50,948		6,597,766
				U.S. Bancorp			14,500		391,065
				Wells Fargo & Co.			177,500		5,500,725
									14,089,058
		Diversified Financials – (40.72%)
			Capital Markets – (21.96%)
				Ameriprise Financial, Inc.			19,340		1,113,017
				Bank of New York Mellon Corp.			142,100		4,291,420
				Brookfield Asset Management Inc., Class A  (Canada)			96,700		3,219,143
				Charles Schwab Corp.			20,100		343,911
				GAM Holding Ltd.  (Switzerland)*			63,810		1,054,401
				Goldman Sachs Group, Inc.			19,520		3,282,483
				Julius Baer Group Ltd.  (Switzerland)			93,910		4,399,206
				T. Rowe Price Group Inc.			6,060		391,052
									18,094,633
			Consumer Finance – (8.31%)
				American Express Co. (b)			149,800		6,429,416
				First Marblehead Corp.  *			194,994		423,137
									6,852,553
			Diversified Financial Services – (10.45%)
				Bank of America Corp.			14,486		193,243
				Cielo S.A.  (Brazil)			69,500		563,117
				Moody's Corp.			47,100		1,250,034
				Oaktree Capital Group LLC, Class A  (a)			126,700		4,497,850
				RHJ International  (Belgium)*			62,000		513,674
				Visa Inc., Class A			22,600		1,590,588
									8,608,506
									33,555,692
		Insurance – (31.18%)
			Life & Health Insurance – (2.74%)
				China Life Insurance Co., Ltd., ADR  (China)			36,933		2,259,192
			Multi-line Insurance – (7.02%)
				Loews Corp. (b)			148,600		5,782,026
			Property & Casualty Insurance – (9.80%)
				ACE Ltd.			15,500		964,875
				Markel Corp.  *			10,700		4,045,991
				Progressive Corp. (Ohio)			154,100		3,061,967
									8,072,833

6

DAVIS FINANCIAL PORTFOLIO	Schedule of Investments - (Continued)
	December 31, 2010

										Shares/Principal			Value (Note 1)
COMMON STOCK – (CONTINUED)
	FINANCIALS – (CONTINUED)
		Insurance – (Continued)
			Reinsurance – (11.62%)
				Everest Re Group, Ltd.								27,300	$	2,315,586
				Transatlantic Holdings, Inc.								140,737		7,264,844
														9,580,430
														25,694,481
									Total Financials					73,339,231
	INDUSTRIALS – (2.67%)
		Commercial & Professional Services – (2.67%)
				D&B Corp.								26,800		2,200,012
									Total Industrials					2,200,012
							TOTAL COMMON STOCK – (Identified cost $58,783,844)							81,025,113
SHORT TERM INVESTMENTS – (1.21%)
				Banc of America Securities LLC Joint Repurchase Agreement, 0.25%, 01/03/11, dated 12/31/10, repurchase value of $191,004 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 2.104%-6.50%, 06/01/25-12/01/40, total market value $194,820)							$	191,000		191,000
				Goldman, Sachs & Co. Joint Repurchase Agreement, 0.16%, 01/03/11, dated 12/31/10, repurchase value of $230,003 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.50%-6.50%, 12/01/25-01/01/41, total market value $234,600)								230,000		230,000
				Mizuho Securities USA Inc. Joint Repurchase Agreement, 0.24%, 01/03/11, dated 12/31/10, repurchase value of $574,011 (collateralized by: U.S. Government agency obligations in a pooled cash account, 3.125%-7.50%, 01/31/12-05/15/37, total market value $585,480)								574,000		574,000
							TOTAL SHORT TERM INVESTMENTS – (Identified cost $995,000)							995,000
						Total Investments – (99.54%) – (Identified cost $59,778,844) – (c)								82,020,113
						Other Assets Less Liabilities – (0.46%)								382,458
								Net Assets – (100.00%)					$	82,402,571
	ADR: American Depositary Receipt
	ADS: American Depositary Share
	GDR: Global Depositary Receipt
	*				Non-Income producing security.
	(a)				Restricted Security – See Note 7 of the Notes to Financial Statements.
	(b)				A portion of these securities is pledged to cover unfunded capital commitments at December 31, 2010.
	(c)				Aggregate cost for federal income tax purposes is $60,471,943.  At December 31, 2010 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
						Unrealized appreciation							$	26,696,204
						Unrealized depreciation								(5,148,034)
								Net unrealized appreciation					$	21,548,170
See Notes to Financial Statements

7

DAVIS FINANCIAL PORTFOLIO	Statement of Assets and Liabilities
	At December 31, 2010

ASSETS:
Investments in securities at value* (see accompanying Schedule of Investments)			$	82,020,113
Cash				2,061
Receivables:
	Capital stock sold			4,968
	Dividends and interest			27,530
	Investment securities sold			455,691
Prepaid expenses				1,235
		Total assets		82,511,598
LIABILITIES:
Payables:
	Capital stock redeemed			43,757
Accrued audit fees				12,100
Accrued management fee				39,439
Other accrued expenses				13,731
		Total liabilities		109,027
NET ASSETS			$	82,402,571
SHARES OUTSTANDING				7,488,987
NET ASSET VALUE, offering, and redemption price per share (Net assets ÷ Shares outstanding)			$	11.00
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	7,489
Additional paid-in capital				71,670,142
Undistributed net investment income				853,377
Accumulated net realized losses from investments				(12,370,712)
Net unrealized appreciation on investments and foreign currency transactions				22,242,275
		Net Assets	$	82,402,571
*Including:
	Cost of Investments		$	59,778,844
See Notes to Financial Statements

8

DAVIS FINANCIAL PORTFOLIO	Statement of Operations
	For the year ended December 31, 2010

INVESTMENT INCOME:
Income:
Dividends*			$	1,356,663
Interest				3,219
	Total income			1,359,882
Expenses:
Management fees (Note 3)		$                                                           445,386
Custodian fees		27,465
Transfer agent fees		8,350
Audit fees		18,000
Legal fees		2,384
Accounting fees (Note 3)		2,004
Reports to shareholders		24,150
Directors’ fees and expenses		20,397
Registration and filing fees		49
Miscellaneous				7,782
Total expenses				555,967
Expenses paid indirectly (Note 4)				(3)
	Net expenses			555,964
Net investment income				803,918
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND                                        FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investment transactions				1,263,561
Foreign currency transactions				(12,825)
Net realized gain				1,250,736
Net increase in unrealized appreciation				6,094,685
	Net realized and unrealized gain on investments and foreign currency transactions			7,345,421
Net increase in net assets resulting from operations			$	8,149,339
*Net of foreign taxes withheld as follows			$	27,900
See Notes to Financial Statements

9

DAVIS FINANCIAL PORTFOLIO Statements of Changes in Net Assets

		Year ended December 31,
		2010		2009
OPERATIONS:
Net investment income		$	803,918	$	489,320
Net realized gain (loss) from investments and foreign currency transactions			1,250,736		(8,123,742)
Net change in  unrealized appreciation (depreciation) on investments and foreign currency transactions			6,094,685		34,312,747
	Net increase in net assets resulting from operations		8,149,339		26,678,325
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income			(650,801)		(629,608)
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets resulting from capital share transactions (Note 5)			(12,933,188)		4,467,751
	Total increase (decrease) in net assets		(5,434,650)		30,516,468
NET ASSETS:
Beginning of year			87,837,221		57,320,753
End of year*		$	82,402,571	$	87,837,221
*Including undistributed net investment income of		$	853,377	$	478,082
See Notes to Financial Statements

10

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements
	December 31, 2010

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.

11

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

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

Value Measurements – (Continued)

The following is a summary of the inputs used as of December 31, 2010 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	$	5,485,870	$	–	$	–	$	5,485,870
Financials		68,445,655		4,497,850		395,726		73,339,231
Industrials		2,200,012		–		–		2,200,012
Short-term securities		–		995,000		–		995,000
Total	$	76,131,537	$	5,492,850	$	395,726	$	82,020,113

Level 2 to Level 1 transfers*:
Financials	$	8,165,841

*Application of fair value procedures for securities traded on foreign exchanges triggered transfers between Level 1 and Level 2 assets during the year ended December 31, 2010.

The following table reconciles the valuation of assets in which significant unobservable inputs (Level 3) were used in determining fair value for the year ended December 31, 2010:

Investment Securities:
Beginning balance	$	–
Unrealized depreciation		(213,086)
Net purchases (sales)		608,812
Ending balance	$	395,726

The cost of purchases and the proceeds from sales may include securities received or delivered through corporate actions or exchanges.  Realized and unrealized gains (losses) are included in the related amounts on investments in the Statement of Operations.

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.

12

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

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, 2010, 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 2007. The Fund has available for federal income tax purposes unused capital loss carryforwards as follows:

	Capital Loss Carryforwards
Expiring
12/31/2016	$	3,410,000
12/31/2017		8,268,000
Total	$	11,678,000
Utilized in 2010	$	1,329,000

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010.   The Act makes changes to several tax rules impacting the Fund. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Although the Act provides several benefits, including the unlimited carryforward of future capital losses, there may be a greater likelihood that all or a portion of the Fund’s pre-enactment capital loss carryforwards may expire without being utilized due to the fact that post-enactment capital losses get utilized before pre-enactment capital loss carryforwards. Relevant information regarding the impact of the Act on the Fund, if any, will be contained within the “Federal Income Taxes” section of the Notes to Financial Statements for the fiscal year ending December 31, 2011.

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.

13

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

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, partnership income, 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 certain components of capital to reflect permanent differences between financial statement amounts and net income and realized gains/losses determined in accordance with income tax rules.  Accordingly, during the year ended December 31, 2010, amounts have been reclassified to reflect an increase in undistributed net investment income of $222,178, an increase in accumulated net realized losses from investments and foreign currency transactions of 222,132, and a decrease in paid in capital of $46. The Fund’s net assets have not been affected by this reclassification.

The tax character of distributions paid during the years ended December 31, 2010 and 2009 was as follows:

	2010		2009
Ordinary income	$	650,801	$	629,608

As of December 31, 2010, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

Undistributed net investment income	$	857,441
Accumulated net realized losses from investments and
foreign currency transactions		(11,677,614)
Net unrealized appreciation on investments		21,549,176
Total	$	10,729,003

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.

Directors Fees and Expenses - The Fund set up a Rabbi Trust to provide for the deferred compensation plan for Independent Directors that enables them to elect to defer receipt of all or a portion of annual fees they are entitled to receive. The value of an eligible Director’s account is based upon years of service and fees paid to each Director during the years of service. The amount paid to the Director by the Trust under the plan will be determined based upon the performance of the Davis Funds in which the amounts are invested.

Unfunded Capital Commitments - Undfunded capital commitments represent agreements which obligate the Fund to meet captial calls in the future. Payment would be made when a capital call is requested. Capital calls can only be made if and when certain requirements have been fulfilled; thus, the timing and the amount of such capital calls cannot readily be determined. Unfunded capital commitments are recorded when capital calls are requested. As of December 31, 2010, unfunded capital commitments amounted to $1,291,188.

14

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

NOTE 2 - PURCHASES AND SALES OF SECURITIES

The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) during the year ended December 31, 2010 were $1,369,704 and $14,702,556, respectively.

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser at an annual rate of 0.55% of the Fund’s 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, 2010 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.  Such reductions amounted to $3 during the year ended December 31, 2010.

NOTE 5 - CAPITAL STOCK

At December 31, 2010, 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, 2010			December 31, 2009
	Shares	Amount		Shares	Amount
Shares sold	1,402,090	$	14,260,345	3,303,661	$	26,457,753
Shares issued in reinvestment of distributions	59,325		650,801	63,087		629,608
	1,461,415		14,911,146	3,366,748		27,087,361
Shares redeemed	(2,770,797)		(27,844,334)	(2,616,379)		(22,619,610)
Net increase (decrease)	(1,309,382)	$	(12,933,188)	750,369	$	4,467,751

15

DAVIS FINANCIAL PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

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, 2010.

NOTE 7 - RESTRICTED SECURITIES

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 restricted securities amounted to $4,893,576 or 5.94% of the Fund’s net assets as of December 31, 2010.

Information regarding restricted securities is as follows:

Security	Acquisition Date	Shares/ Units	Cost per Share/Unit		Valuation per  Share/ Unit as of December 31, 2010
Oaktree Capital Group LLC, Class A	05/21/07	126,700	$	23.84	$	35.50
SKBHC Holdings LLC	11/08/10	122	$	5,000.01	$	3,250.00

16

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,
			2010			2009			2008			2007			2006
Net Asset Value, Beginning of Period			$	9.98		$	7.12		$	14.27		$	16.29		$	13.83
Income (Loss) from Investment Operations:
Net Investment Income			0.12			0.05			0.08			0.17			0.09
Net Realized and Unrealized Gains (Losses)			0.99			2.88			(6.76)			(1.12)			2.47
	Total from Investment Operations		1.11			2.93			(6.68)			(0.95)			2.56
Dividends and Distributions:
Dividends from Net Investment Income			(0.09)			(0.07)			–			(0.17)			(0.09)
Distributions from Realized Gains			–			–			(0.47)			(0.90)			(0.01)
	Total Dividends and Distributions		(0.09)			(0.07)			(0.47)			(1.07)			(0.10)
Net Asset Value, End of Period			$	11.00		$	9.98		$	7.12		$	14.27		$	16.29
Total Returna			11.10		%	41.18		%b	(46.36)		%	(6.05)		%	18.50		%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)			$	82,403		$	87,837		$	57,321		$	116,725		$	155,807
Ratio of Expenses to Average Net Assets:
	Gross		0.69		%	0.78		%	0.88		%	0.85		%	0.84		%
	Netc		0.69		%	0.78		%	0.88		%	0.85		%	0.84		%
Ratio of Net Investment Income to Average Net Assets			0.99		%	0.67		%	0.73		%	0.97		%	0.66		%
Portfolio Turnover Rated			2		%	10		%	16		%	17		%	9		%
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

17

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, 2010, 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, 2010, 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, 2010, 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, 2011

18

DAVIS FINANCIAL PORTFOLIO Fund Information

Federal Income Tax Information (Unaudited)

During the calendar year ended December 31, 2010, $647,927 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 information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Matters Submitted to a Vote of Shareholders (Unaudited)

A special meeting of shareholders was held on November 18, 2010.  The number of votes necessary to conduct the meeting and approve the proposal was obtained.  The results of the votes of shareholders are listed below.

PROPOSAL Election of Directors		For	Withheld
	Marc Blum	73,449,515	2,034,846
	Christopher Davis	73,367,994	2,116,367
	Andrew Davis	73,365,995	2,118,366
	John Gates Jr.	73,377,445	2,106,916
	Thomas Gayner	73,516,253	1,968,108
	G. Bernard Hamilton	73,295,934	2,188,427
	Samuel Iapalucci	73,323,243	2,161,118
	Robert Morgenthau	73,435,705	2,048,656
	Christian Sonne	73,307,594	2,176,767
	Marsha Williams	73,362,265	2,122,096

19

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 (REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (REIT); Chairman, Regional Transportation Authority.
Thomas S. Gayner (12/16/61)	Director/ Chairman	Director since 2004	President and Chief Investment Officer, Markel Corporation (insurance company).	13	Director, Washington Post Co. (publishing company); 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 Companies, Ltd. (engineering).	13	Director, Trow Global Holdings Inc. (engineering & consulting).
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director (retired 12/31/10)	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 (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 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*

Andrew A. Davis (06/25/63)	Director	Director since 1997	President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.	16	Director, the Selected Funds (consisting of three portfolios) since 1998.
Christopher C. Davis (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).	16	Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (publishing company).

*   Andrew A. Davis and Christopher C. Davis own partnership units (directly, indirectly, or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.

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). See description in the section on Inside Directors.

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 (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 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 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 19.70% for the year ended December 31, 2010. Over the same time period, the Wilshire U.S. Real Estate Securities Index(“Index”) returned 29.12%. Every sub-industry1 within the Index delivered positive returns. Real estate operating companies, residential REITs, and retail REITs delivered the strongest performances while office REITs, industrial REITs, and diversified REITs delivered the weakest (but still positive) performances.

Factors Impacting the Portfolio’s Performance

Retail REITs were the most important contributor2 to performance. The Portfolio’s retail REITs under-performed the corresponding sub-industry within the Index (up 32% versus up 33% for the Index) and had a lower relative average weighting (13% versus 24% for the Index). Regency Centers3 and CBL & Associates were among the most important contributors to performance.

The Portfolio had more invested in office REITs than in any other sub-industry and they were an important contributor to the Portfolio’s absolute performance.  However, office REITs were the most important detractor relative to the Index. The Portfolio’s office REITs under-performed the corresponding sector within the Index (up 12% versus up 17% for the Index) and had a higher relative average weighting (31% versus 17% for the Index) in this weaker performing sub-industry. Boston Properties and Alexandria Real Estate were among the most important contributors to performance. DuPont Fabros Technology, Coresite Realty, and Corporate Office Properties were among the most important detractors from performance.

Residential REITs were also an important contributor to the Portfolio’s absolute performance, but similar to office REITs, were also an important detractor from performance relative to the Index. The Portfolio’s residential REITs under-performed the corresponding sub-industry within the Index (up 32% versus up 46% for the Index) and had a lower relative average weighting (11% versus 17% for the Index) in this stronger performing sub-industry. Essex Property Trust and American Campus were among the most important contributors to performance.

Forest City Enterprises was the single most important contributor to the Portfolio’s performance. The Portfolio benefited from both its large investment in Forest City Enterprises (approximately 8% at December 31, 2010) together with its strong investment performance (up 42%). Cousins Properties and ProLogis were among the most important detractors from performance. The Portfolio no longer owns Cousins Properties or ProLogis.

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.  Davis Real Estate Portfolio’s principal risks are: market risk, company risk, concentrated real estate services portfolio risk, focused portfolio risk, foreign country risk, small- and medium-capitalization risk, fees and expenses risk, and headline 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, 2000

Average Annual Total Return for periods ended December 31, 2010

Fund & Benchmark Indices	1-Year	5-Year	10-Year	Since Fund’s Inception (07/01/99)	Gross Expense Ratio	Net Expense Ratio
Davis Real Estate Portfolio	19.70%	(1.01)%	8.16%	7.95%	0.81%	0.81%
Standard & Poor’s 500® Index	15.06%	2.29%	1.41%	0.99%
Wilshire U.S. Real Estate Securities Index	29.12%	2.32%	10.34%	10.55%

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.  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, 2010

Portfolio Composition		Industry Weightings
(% of Fund’s 12/31/10 Net Assets)		(% of 12/31/10 Long Term Portfolio)
				Wilshire U.S. Real Estate          Securities Index
Common Stock	85.08%
Preferred Stock	7.86%		Fund
Convertible Bonds	2.68%	Office REITs	34.98%	15.55%
Short Term Investments	4.19%	Residential REITs	11.74%	17.14%
Other Assets & Liabilities	0.19%	Retail REITs	10.42%	24.36%
	100.00%	Real Estate Operating Companies	10.27%	2.24%
		Specialized REITs	9.96%	25.88%
		Telecommunication Services	8.71%	–
		Other	7.81%	8.83%
		Industrial REITs	6.11%	6.00%
			100.00%	100.00%

Top 10 Long Term Holdings

(% of Fund’s 12/31/10 Net Assets)

Forest City Enterprises, Inc., Class A	Real Estate Operating Companies	7.51%
American Campus Communities, Inc.	Residential REITs	5.73%
Alexandria Real Estate Equities, Inc.	Office REITs	5.39%
DuPont Fabros Technology Inc.	Office REITs	4.44%
Essex Property Trust, Inc.	Residential REITs	3.97%
Regency Centers Corp.	Retail REITs	3.94%
Alexander & Baldwin, Inc.	Transportation	3.44%
Ventas, Inc.	Specialized REITs	3.29%
Alexandria Real Estate Equities, Inc., 7.00%, Series D, Conv. Pfd.	Office REITs	3.26%
Crown Castle International Corp.	Telecommunication Services	3.01%

4

DAVIS REAL ESTATE PORTFOLIO	Fund Overview – (Continued)
	December 31, 2010

New Positions Added (01/01/10-12/31/10)

(Highlighted positions are those greater than 3.00% Fund’s of 12/31/10 net assets)

Security	Industry	Date of 1st Purchase	% of Fund’s  12/31/10     Net Assets
American Tower Corp., Class A	Telecommunication Services	01/11/10	2.52%
AvalonBay Communities, Inc.	Residential REITs	01/20/10	–
Brookdale Senior Living Inc.	Real Estate Operating Companies	10/22/10	1.86%
CB Richard Ellis Group, Inc., Class A	Real Estate Services	10/26/10	1.14%
Coresite Realty Corp.	Office REITs	09/22/10	2.93%
Crown Castle International Corp.	Telecommunication Services	01/11/10	3.01%
DuPont Fabros Technology Inc.	Office REITs	05/13/10	4.44%
EastGroup Properties, Inc.	Industrial REITs	09/13/10	2.19%
Entertainment Properties Trust	Specialized REITs	01/22/10	2.93%
Highwoods Properties, Inc.	Office REITs	04/22/10	2.65%
SBA Communications Corp., Class A	Telecommunication Services	01/11/10	2.80%
Toll Brothers, Inc.	Homebuilding	08/26/10	0.63%
UDR, Inc.	Residential REITs	04/22/10	1.52%

Positions Closed (01/01/10-12/31/10)

(Gains and losses greater than $200,000 are highlighted)

Security	Industry	Date of    Final Sale		Realized    Gain (Loss)
AvalonBay Communities, Inc.	Residential REITs	04/21/10	$	158,182
Brookfield Asset Management Inc., Class A	Capital Markets	03/03/10		(44,148)
CBL & Associates Properties, Inc.	Retail REITs	10/29/10		303,225
Cousins Properties, Inc.	Diversified REITs	07/19/10		(903,447)
Digital Realty Trust, Inc., 8.50%, Series A	Office REITs	08/24/10		53,750
Equity Residential	Residential REITs	12/17/10		52,251
Host Hotels & Resorts Inc.	Specialized REITs	04/15/10		132,235
Macerich Co.	Retail REITs	01/07/10		16,340
ProLogis	Industrial REITs	01/28/10		107,017
ProLogis, Conv. Sr. Notes, 2.25%, 04/01/37	Industrial REITs	05/26/10		213,214

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, 2010. 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*
	(07/01/10)	(12/31/10)	(07/01/10-12/31/10)
Actual	$1,000.00	$1,150.65	$4.28
Hypothetical	$1,000.00	$1,021.22	$4.02

Hypothetical assumes 5% annual return before expenses.

* Expenses are equal to the Fund’s annualized operating expense ratio (0.79%)**, 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, 2010

						Shares		Value (Note 1)
COMMON STOCK – (85.08%)
	CONSUMER DISCRETIONARY – (0.63%)
		Consumer Durables & Apparel – (0.63%)
				Homebuilding – (0.63%)
				Toll Brothers, Inc.  *			8,400	$	159,600
					Total Consumer Discretionary				159,600
	FINANCIALS – (72.68%)
		Real Estate – (72.68%)
			Real Estate Investment Trusts (REITs) – (62.18%)
				Diversified REITs – (2.27%)
				Vornado Realty Trust			6,870		572,477
				Industrial REITs – (4.72%)
				DCT Industrial Trust Inc.			120,000		637,200
				EastGroup Properties, Inc.			13,100		554,392
									1,191,592
				Office REITs – (25.26%)
				Alexandria Real Estate Equities, Inc.			18,600		1,362,636
				Boston Properties, Inc.			6,500		559,650
				Coresite Realty Corp.			54,200		739,288
				Corporate Office Properties Trust			17,490		611,276
				Digital Realty Trust, Inc.			11,800		608,172
				Douglas Emmett, Inc.			42,800		710,480
				DuPont Fabros Technology Inc.			52,800		1,123,056
				Highwoods Properties, Inc.			21,000		668,850
									6,383,408
				Residential REITs – (11.22%)
				American Campus Communities, Inc.			45,600		1,448,256
				Essex Property Trust, Inc.			8,790		1,003,994
				UDR, Inc.			16,300		383,376
									2,835,626
				Retail REITs – (9.19%)
				Federal Realty Investment Trust			4,150		323,409
				Regency Centers Corp.			23,600		996,864
				Simon Property Group, Inc.			6,292		625,991
				Taubman Centers, Inc.			7,460		376,581
									2,322,845
				Specialized REITs – (9.52%)
				Cogdell Spencer, Inc.			69,583		403,581
				Entertainment Properties Trust			16,000		740,000
				LaSalle Hotel Properties			16,400		432,960
				Ventas, Inc.			15,820		830,234
									2,406,775
									15,712,723
			Real Estate Management & Development – (10.50%)
				Real Estate Operating Companies – (9.36%)
				Brookdale Senior Living Inc.  *			21,900		468,879
				Forest City Enterprises, Inc., Class A  *			113,680		1,897,319
									2,366,198

7

DAVIS REAL ESTATE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2010

							Shares/Principal		Value (Note 1)
COMMON STOCK – (CONTINUED)
	FINANCIALS – (CONTINUED)
		Real Estate – (Continued)
			Real Estate Management & Development – (Continued)
				Real Estate Services – (1.14%)
				CB Richard Ellis Group, Inc., Class A  *				14,000	$	286,720
										2,652,918
										18,365,641
						Total Financials				18,365,641
	INDUSTRIALS – (3.44%)
		Transportation – (3.44%)
				Alexander & Baldwin, Inc.				21,700		868,651
						Total Industrials				868,651
	TELECOMMUNICATION SERVICES – (8.33%)
				American Tower Corp., Class A  *				12,300		635,172
				Crown Castle International Corp.  *				17,350		760,450
				SBA Communications Corp., Class A  *				17,300		708,435
						Total Telecommunication Services				2,104,057
					TOTAL COMMON STOCK – (Identified cost $17,692,295)					21,497,949
PREFERRED STOCK – (7.86%)
	FINANCIALS – (7.86%)
		Real Estate – (7.86%)
			Real Estate Investment Trusts (REITs) – (7.86%)
				Industrial REITs – (1.13%)
				AMB Property Corp., 6.75%, Series M				11,900		285,243
				Office REITs – (5.95%)
				Alexandria Real Estate Equities, Inc., 7.00%, Series D, Conv. Pfd.				33,272		823,482
				Digital Realty Trust, Inc., 5.50%, Series D, Cum. Conv. Pfd.				5,700		181,510
				SL Green Realty Corp., 7.625%, Series C				19,930		499,495
										1,504,487
				Retail REITs – (0.78%)
				CBL & Associates Properties, Inc., 7.375%, Series D				8,280		195,843
						Total Financials				1,985,573
					TOTAL PREFERRED STOCK – (Identified cost $940,569)					1,985,573

CONVERTIBLE BONDS – (2.68%)
	FINANCIALS – (2.68%)
		Real Estate – (2.68%)
			Real Estate Investment Trusts (REITs) – (2.23%)
				Office REITs – (2.23%)
				Digital Realty Trust, Inc., 144A Conv. Sr. Notes, 5.50%, 04/15/29   (a)			$	344,000	$	461,820
				SL Green Realty Corp., 144A Conv. Sr. Notes, 3.00%, 03/30/27    (a)				104,000		102,180
										564,000
			Real Estate Management & Development – (0.45%)
				Real Estate Operating Companies – (0.45%)
				Forest City Enterprises, Inc., Conv. Sr. Notes, 5.00%, 10/15/16				80,000		114,100
						Total Financials				678,100
					TOTAL CONVERTIBLE BONDS – (Identified cost $526,554)					678,100

8

DAVIS REAL ESTATE PORTFOLIO	Schedule of Investments – (Continued)
	December 31, 2010

							Principal			Value (Note 1)
SHORT TERM INVESTMENTS – (4.19%)
		Banc of America Securities LLC Joint Repurchase Agreement, 0.25%, 01/03/11, dated 12/31/10, repurchase value of $203,004 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 2.104%-6.50%, 06/01/25-12/01/40, total market value $207,060)						$	203,000	$	203,000
		Goldman, Sachs & Co. Joint Repurchase Agreement, 0.16%, 01/03/11, dated 12/31/10, repurchase value of $245,003 (collateralized by: U.S. Government agency mortgages in a pooled cash account, 3.50%-6.50%, 12/01/25-01/01/41, total market value $249,900)							245,000		245,000
		Mizuho Securities USA Inc. Joint Repurchase Agreement, 0.24%, 01/03/11, dated 12/31/10, repurchase value of $612,012 (collateralized by: U.S. Government agency obligations in a pooled cash account, 3.125%-7.50%, 01/31/12-05/15/37, total market value $624,240)							612,000		612,000
					TOTAL SHORT TERM INVESTMENTS – (Identified cost $1,060,000)						1,060,000
				Total Investments – (99.81%) – (Identified cost $20,219,418) – (b)							25,221,622
				Other Assets Less Liabilities – (0.19%)							47,664
						Net Assets – (100.00%)				$	25,269,286
	*		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 $564,000 or 2.23% of the Fund's net assets as of December 31, 2010.
	(b)		Aggregate cost for federal income tax purposes is $21,614,504 At December 31, 2010 unrealized appreciation (depreciation) of securities for federal income tax purposes is as follows:
				Unrealized appreciation						$	4,821,698
				Unrealized depreciation							(1,214,580)
						Net unrealized appreciation				$	3,607,118
See Notes to Financial Statements

9

DAVIS REAL ESTATE PORTFOLIO	Statement of Assets and Liabilities
	At December 31, 2010

ASSETS:
Investments in securities at value* (see accompanying Schedule of Investments)			$	25,221,622
Cash				3,922
Receivables:
	Capital stock sold			15,397
	Dividends and interest			118,423
Prepaid expenses				466
		Total assets		25,359,830
LIABILITIES:
Payables:
	Capital stock redeemed			51,460
Accrued audit fees				12,100
Accrued management fee				13,924
Other accrued expenses				13,060
		Total liabilities		90,544
NET ASSETS			$	25,269,286
SHARES OUTSTANDING				2,908,309
NET ASSET VALUE, offering, and redemption price per share (Net assets ÷ Shares outstanding)			$	8.69
NET ASSETS CONSIST OF:
Par value of shares of capital stock			$	2,908
Additional paid-in capital				35,769,746
Overdistributed net investment income				(1,276)
Accumulated net realized losses from investments				(15,503,918)
Net unrealized appreciation on investments and foreign currency transactions				5,001,826
		Net Assets	$	25,269,286
*Including:
	Cost of Investments		$	20,219,418
See Notes to Financial Statements

10

DAVIS REAL ESTATE PORTFOLIO	Statement of Operations
	For the year ended December 31, 2010

INVESTMENT INCOME:
Income:
Dividends*			$	559,207
Interest				33,745
	Total income			592,952
Expenses:
Management fees (Note 3)		$           136,388
Custodian fees		18,305
Transfer agent fees		5,651
Audit fees		18,000
Legal fees		720
Accounting fees (Note 3)		2,004
Reports to shareholders		5,800
Directors’ fees and expenses		8,410
Registration and filing fees		15
Miscellaneous		6,761
Total expenses				202,054
Expenses paid indirectly (Note 4)				(2)
	Net expenses			202,052
Net investment income				390,900
REALIZED & UNREALIZED GAIN ON INVESTMENTS AND                                                                           FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from investment transactions				167,089
Net increase in unrealized appreciation				3,843,814
	Net realized and unrealized gain on investments and                                                            foreign currency transactions			4,010,903
Net increase in net assets resulting from operations			$	4,401,803
*Net of foreign taxes withheld as follows			$	395
See Notes to Financial Statements

11

DAVIS REAL ESTATE PORTFOLIO Statements of Changes in Net Assets

		Year ended December 31,
		2010		2009
OPERATIONS:
Net investment income		$	390,900	$	523,044
Net realized gain (loss) from investments and foreign currency transactions			167,089		(12,772,190)
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions			3,843,814		17,711,950
	Net increase in net assets resulting from operations		4,401,803		5,462,804
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income			(470,072)		(513,936)
CAPITAL SHARE TRANSACTIONS:
Net decrease in net assets resulting from capital share transactions (Note 5)			(2,228,798)		(713,924)
	Total increase in net assets		1,702,933		4,234,944
NET ASSETS:
Beginning of year			23,566,353		19,331,409
End of year*		$	25,269,286	$	23,566,353
*Including undistributed (overdistributed) net investment income of		$	(1,276)	$	7,288
See Notes to Financial Statements

12

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements
	December 31, 2010

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, 2010 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	$	159,600	$	–	$	–	$	159,600
Financials		20,169,704		181,510		–		20,351,214
Industrials		868,651		–		–		868,651
Telecommunication services		2,104,057		–		–		2,104,057
Convertible debt securities		–		678,100		–		678,100
Short-term securities		–		1,060,000		–		1,060,000
Total	$	23,302,012	$	1,919,610	$	–	$	25,221,622

13

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

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, 2010, 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 2007. The Fund has available for federal income tax purposes unused capital loss carryforwards as follows:

	Capital Loss Carryforwards
Expiring
12/31/2016	$	2,447,000
12/31/2017		11,662,000
Total	$	14,109,000
Utilized in 2010	$	138,000

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010.   The Act makes changes to several tax rules impacting the Fund. In general, the provisions of the Act will be effective for the Fund’s fiscal year ending December 31, 2011. Although the Act provides several benefits, including the unlimited carryforward of future capital losses, there may be a greater likelihood that all or a portion of the Fund’s pre-enactment capital loss carryforwards may expire without being utilized due to the fact that post-enactment capital losses get utilized before pre-enactment capital loss carryforwards. Relevant information regarding the impact of the Act on the Fund, if any, will be contained within the “Federal Income Taxes” section of the Notes to Financial Statements for the fiscal year ending December 31, 2011.

14

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

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.  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.

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 certain components of capital to reflect permanent differences between financial statement amounts and net income and realized gains/losses determined in accordance with income tax rules. Accordingly, during the year ended December 31, 2010, amounts have been reclassified to reflect a decrease in overdistributed net investment income of $70,608 and a corresponding decrease in paid in capital. The Fund’s net assets have not been affected by this reclassification.

The tax character of distributions paid during the years ended December 31, 2010 and 2009 was as follows:

	2010		2009
Ordinary income	$	470,072	$	513,936

As of December 31, 2010, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

Undistributed net investment income	$	–
Accumulated net realized losses from investments and
foreign currency transactions		(14,108,832)
Net unrealized appreciation (depreciation) on investments		3,606,740
Total	$	(10,502,092)

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.

Directors Fees and Expenses - The Fund set up a Rabbi Trust to provide for the deferred compensation plan for Independent Directors that enables them to elect to defer receipt of all or a portion of annual fees they are entitled to receive. The value of an eligible Director’s account is based upon years of service and fees paid to each Director during the years of service. The amount paid to the Director by the Trust under the plan will be determined based upon the performance of the Davis Funds in which the amounts are invested.

15

DAVIS REAL ESTATE PORTFOLIO	Notes to Financial Statements – (Continued)
	December 31, 2010

NOTE 2 - PURCHASES AND SALES OF SECURITIES

The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) during the year ended December 31, 2010 were $9,875,366 and $10,533,846, respectively.

NOTE 3 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Advisory fees are paid monthly to the Adviser at an annual rate of 0.55% of the Fund’s 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, 2010 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.  Such reductions amounted to $2 during the year ended December 31, 2010.

NOTE 5 - CAPITAL STOCK

At December 31, 2010, 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, 2010			December 31, 2009
	Shares	Amount		Shares	Amount
Shares sold	352,772	$	2,867,737	708,612	$	4,050,873
Shares issued in reinvestment of distributions	58,913		470,072	102,105		513,936
	411,685		3,337,809	810,717		4,564,809
Shares redeemed	(690,084)		(5,566,607)	(956,040)		(5,278,733)
Net decrease	(278,399)	$	(2,228,798)	(145,323)	$	(713,924)

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, 2010.

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,
			2010			2009			2008			2007			2006
Net Asset Value, Beginning of Period			$	7.40		$	5.80		$	11.45		$	20.43		$	17.33
Income (Loss) from Investment Operations:
Net Investment Income			0.13			0.16			0.19			0.42			0.34
Net Realized and Unrealized Gains (Losses)			1.31			1.60			(5.50)			(3.40)			5.58
	Total from Investment Operations		1.44			1.76			(5.31)			(2.98)			5.92
Dividends and Distributions:
Dividends from Net Investment Income			(0.15)			(0.16)			(0.22)			(0.64)			(0.60)
Distributions from Realized Gains			–			–			(0.11)			(5.36)			(2.22)
Return of Capital			–			–			(0.01)			–			–
	Total Dividends and Distributions		(0.15)			(0.16)			(0.34)			(6.00)			(2.82)
Net Asset Value, End of Period			$	8.69		$	7.40		$	5.80		$	11.45		$	20.43
Total Returna			19.70		%	31.73		%	(46.91)		%	(15.48)		%	34.37		%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)			$	25,269		$	23,566		$	19,331		$	49,548		$	89,738
Ratio of Expenses to Average Net Assets:
	Gross		0.81		%	0.98		%	0.98		%	0.88		%	0.86		%
	Netb		0.81		%	0.98		%	0.98		%	0.87		%	0.86		%
Ratio of Net Investment Income to Average Net Assets			1.58		%	2.81		%	1.84		%	1.92		%	1.63		%
Portfolio Turnover Ratec			43		%	70		%	41		%	49		%	38		%
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, 2010, 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, 2010, 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, 2010, 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, 2011

18

DAVIS REAL ESTATE PORTFOLIO Fund Information

Federal Income Tax Information (Unaudited)

During the calendar year ended December 31, 2010, $32,799 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 information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Matters Submitted to a Vote of Shareholders (Unaudited)

A special meeting of shareholders was held on November 18, 2010.  The number of votes necessary to conduct the meeting and approve the proposal was obtained.  The results of the votes of shareholders are listed below.

PROPOSAL Election of Directors		For	Withheld
	Marc Blum	23,958,514	1,628,294
	Christopher Davis	24,332,566	1,254,242
	Andrew Davis	24,164,567	1,422,241
	John Gates Jr.	24,319,928	1,266,880
	Thomas Gayner	24,332,566	1,254,242
	G. Bernard Hamilton	24,038,919	1,547,889
	Samuel Iapalucci	24,164,567	1,422,241
	Robert Morgenthau	24,240,888	1,345,920
	Christian Sonne	24,026,281	1,560,527
	Marsha Williams	24,268,899	1,317,909

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 (REIT); Co-chairman and Chief Executive Officer for 22 years (until 2006).	13	Director, DCT Industrial Trust (REIT); Chairman, Regional Transportation Authority.
Thomas S. Gayner (12/16/61)	Director/ Chairman	Director since 2004	President and Chief Investment Officer, Markel Corporation (insurance company).	13	Director, Washington Post Co. (publishing company); 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 Companies, Ltd. (engineering).	13	Director, Trow Global Holdings Inc. (engineering & consulting).
Robert P. Morgenthau (03/22/57)	Director	Director since 2002	Chairman, NorthRoad Capital Management, LLC (investment management firm) since June 2002.	13	none
Christian R. Sonne (05/06/36)	Director (Retired 12/31/10)	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 (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*

Andrew A. Davis (06/25/63)	Director	Director since 1997	President or Vice President of each Davis Fund and Selected Fund; President, Davis Selected Advisers, L.P., and also serves as an executive officer in certain companies affiliated with the Adviser.	16	Director, the Selected Funds (consisting of three portfolios) since 1998.
Christopher C. Davis (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).	16	Director, the Selected Funds (consisting of three portfolios) since 1998; Director, Washington Post Co. (publishing company).

*   Andrew A. Davis and Christopher C. Davis own partnership units (directly, indirectly, or both) of the Adviser and are considered to be “interested persons” of the Funds as defined in the Investment Company Act of 1940. Andrew A. Davis and Christopher C. Davis are brothers.

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). See description in the section on Inside Directors.

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 (law firm); counsel to the Independent Directors and the Davis Funds.

21

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 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

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, 2010 and December 31, 2009 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, 2010 and December 31, 2009 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, 2010 and December 31, 2009 were $18,426 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, 2010 and December 31, 2009 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, 2010 and December 31, 2009.  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 25, 2011

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 25, 2011

By           /s/ Douglas A. Haines

Douglas A. Haines

Principal Financial Officer

Date:  February 25, 2011