Special Update

Because the COVID-19 outbreak and market volatility have created fear and uncertainty, we wanted to provide you with an update through this period.

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What advice do you have for investors and what are your thoughts on the market?

Our thoughts are with advisors and their clients during this challenging time. News of both the health and economic effects of COVID-19 are understandably unsettling and has led to a rapid drop in the equity markets. However, as an investment firm with over 50 years of history, we at Davis Advisors have experienced investing in numerous challenging circumstances. It is remarkable to think that over the 50 year period from 1969 through 2019, the market has returned a very healthy 10.6% per year, despite challenging periods such as the Vietnam War, the Oil Crisis, 9/11, and the Financial Crisis, to name a few.1

Businesses, importantly, have historically persevered, adapted, and eventually thrived as each crisis receded, as we expect the COVID-19 outbreak will as well. While we do not know the future, it is encouraging that we have already seen certain countries succeed at bringing the outbreak under control, and innovative healthcare companies are hard at work developing a long-term solution.

In fact, our founder Shelby Davis famously said, “You make most of your money in a bear market. You just don’t realize it at the time.” This has proven true over and over again. You succeed both by owning the right companies heading into a bear market and by taking advantage of the opportunities presented. We at Davis Advisors are convinced that on both fronts, investors are being well-served by the Davis Select International ETF's Portfolio of leading businesses from around the globe.

Could you provide an update on the Portfolio?

Whether in a bull or bear market, the three key areas of focus for our Portfolio companies remain the same:

  • Companies with durable competitive advantages
  • Excellent, experienced, and honest management teams
  • Attractive valuations

The focus on companies with durable competitive advantages served us very well as we navigated the market concerns surrounding the trade war in 2019 when we outperformed the MSCI ACWI ex US Index by a robust 7.52%.2 The strong balance sheets and cash generation of Davis Select International ETF’s companies are outpacing the Index so far in 2020. Our top holdings, including New Oriental Education, Alibaba Group, JD.com, Naspers, and Ferguson all have extremely strong balance sheets and competitive positions that may help them not only to ride out an economic downturn, but also to thrive when growth resumes.

While the market downturn over the past few weeks is certainly unpleasant, we believe it also means future returns from this point may have the opportunity for improvement. Valuations for our Portfolio companies at the end of 2019 were already attractive, which was particularly evident relative to both the market index and fixed income yields. Today, these same companies, as well as the ones we have been adding to in the market downturn, are particularly attractive, and we believe future returns will be good.

Putting aside how challenging things are for people on many levels, where do you see the best investment opportunities?

The largest area of significant outperformance in the Davis Select International ETF Portfolio year-to-date has been the Chinese consumer companies we own such as New Oriental Education, Alibaba Group, JD.com, and Meituan Dianping. Our largest holding, New Oriental Education adapted efficiently to the challenge of closed schools by shifting all their classes online. New Oriental Education had already been using its scale and profitability to invest $150 million a year in building the best online education offering and was well-prepared for the current health challenge and we believe it will be in an even stronger competitive position once the crisis has passed.

The one large sector in the Portfolio that has underperformed is financials, and we believe it is well-poised to make up ground and outperform in the future. Select international financials including DNB (a leading bank in Norway), Development Bank of Singapore, AIA Group (an Asia-focused life insurer), Danske Bank (a leading bank in Denmark) and Julius Baer (a Swiss wealth manager) are proven businesses we believe are among the best-capitalized financials globally and are trading at very attractive valuations. We have been adding to all of them in the latest market downturn.

Market distress is also a potential market opportunity, as long as you are invested in well-run durable franchises trading at attractive valuations. We believe this is an accurate description of Davis Select International ETF’s companies. We thank you for your trust and interest. If we can answer any questions about the Davis Select International ETF, please do not hesitate to reach out and contact us: 800-717-3477.

Danton G. Goei

Danton G. Goei is a portfolio manager for the Davis Select US Equity ETF, Select International ETF and Select Worldwide ETF. Mr. Goei joined Davis Advisors in 1998. He speaks multiple languages and has lived in Europe, Asia and currently resides in New York City.

The average annual total returns for Davis Select International ETF for period ending March 31, 2020, are: NAV price: 1 year, −14.53%; since inception (3/1/18), −11.40%; Market price: 1 year, −14.48%; since inception, −11.31%. The performance presented represents past performance and is not a guarantee of future results. Investment return and principal value will vary so that, when redeemed, an investor’s shares may be worth more or less than their original cost. NAV prices are used to calculate market price performance prior to the date when the Fund first traded on NASDAQ. Market performance is determined using the bid/ask midpoint at 4:00 pm Eastern time, when the NAV is typically calculated. Market performance does not represent the returns you would receive if you traded shares at other times. For the Fund’s most recent month end performance, please call 800-279-0279 or visit www.davisetfs.com. The total annual operating expense ratio may vary in future years. Current performance may be higher or lower than the performance quoted. The Fund recently experienced significant negative short-term performance due to market volatility associated with COVID-19 pandemic.

This report includes candid statements and observations regarding investment strategies, individual securities, and economic and market conditions; however, there is no guarantee that these statements, opinions or forecasts will prove to be correct. Equity markets are volatile and an investor may lose money. This is not a recommendation to buy, sell or hold any specific security. Past performance is not a guarantee of future results. There is no guarantee that the Fund performance will be positive as equity markets are volatile and an investor may lose money.

1

Performance is of the S&P 500 Index from 12/31/69 to 12/31/19. Past performance is not a guarantee of future results.

2

Past performance is not a guarantee of future results. The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund.

This report is authorized for use by existing shareholders. A current Davis Select International ETF prospectus must accompany or precede this material if it is distributed to prospective shareholders. You should carefully consider the Fund’s investment objective, risks, charges, and expenses before investing. Read the prospectus carefully before you invest or send money.

Shares of DINT are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. There can be no guarantee that an active trading market for ETF shares will develop or be maintained, or that their listing will continue or remain unchanged. Buying or selling ETF shares on an exchange may require the payment of brokerage commissions and frequent trading may incur brokerage costs that detract significantly from investment returns.

This report includes candid statements and observations regarding investment strategies, individual securities, and economic and market conditions; however, there is no guarantee that these statements, opinions or forecasts will prove to be correct. These comments may also include the expression of opinions that are speculative in nature and should not be relied on as statements of fact.

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

Objective and Risks. Davis Select International ETF’s investment objective is long-term growth of capital. There can be no assurance that the Fund will achieve its objective. Some important risks of an investment in the Fund are: stock market risk; common stock risk; market trading risk: includes the possibility of an inactive market for Fund shares, losses from trading in secondary markets, periods of high volatility, and disruptions in the creation/redemption process. ONE OR MORE OF THESE FACTORS, AMONG OTHERS, COULD LEAD TO THE FUND’S SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV; exchange-traded fund risk: the Fund is subject to the risks of owning the underlying securities as well as the risks of owning an exchange-traded fund generally; foreign country risk; headline risk; foreign market risk; large-capitalization companies risk; manager risk; authorized participant concentration risk: to the extent that Authorized Participants exit the business or are unable or unwilling to proceed with creation and/or redemption orders with respect to the Fund and no other Authorized Participant is able to step forward to create or redeem Creation Units, Fund shares may trade at a discount to NAV and could face delisting; cybersecurity risk; emerging market risk: securities of issuers in emerging and developing markets may present risks not found in more mature markets; depositary receipts risk: depositary receipts involve higher expenses and may trade at a discount (or premium) to the underlying security; fees and expenses risk; foreign currency risk; intraday indicative value risk: the Fund’s INAV agent intends to disseminate the approximate per share value of the Fund’s published basket of portfolio securities every 15 seconds. The IIV should not be viewed as a ‘‘real-time’’ update of the NAV per share of the Fund because the IIV may not be calculated in the same manner as the NAV, the calculation of NAV may be subject to fair valuation at different prices, the IIV does not take into account Fund expenses, and the IIV calculations are based on local market prices and may not reflect events that occur subsequent to the local market’s close; and mid- and small-capitalization companies risk. See the prospectus for a complete description of the principal risks.

The information provided in this material should not be considered a recommendation to buy, sell or hold any particular security. As of 3/31/20, the top ten holdings of Davis Select International ETF were: New Oriental Education & Technology, 11.49%; Alibaba Group Holding, 7.52%; Meituan Dianping, 5.96%; Naspers, 5.34%; Schneider Electric, 5.33%; JD.com, 4.95%; AIA Group, 4.83%; DNB, 4.77%; Danske Bank, 4.57%; DBS Group Holdings, 4.50%.

Davis Fundamental ETF Trust has adopted a Portfolio Holdings Disclosure policy that governs the release of non-public portfolio holding information. This policy is described in the prospectus. Holding percentages are subject to change. Visit davisetfs.com or call 800-279-0279 for the most current public portfolio holdings information.

We gather our index data from a combination of reputable sources, including, but not limited to, Thomson Financial, Lipper, Wilshire, and index websites.

The MSCI ACWI (All Country World Index) ex US is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. The index includes reinvestment of dividends, net of foreign withholding taxes. Investments cannot be made directly in an index.

After 7/31/20, this material must be accompanied by a supplement containing performance data for the most recent quarter end.

Shares of the Davis Fundamental ETF Trust 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.